CoBank’s annual Knowledge Exchange Division outlook underscores a period of mounting uncertainty for rural America, as structural economic shifts collide with policy volatility in Washington, D.C.
From the perspective of CEO Thomas Halverson, the most pressing concern is the prolonged downturn in the crop sector and whether it signals a fundamental change rather than a temporary cycle. Export demand has been eroded by tariffs and broader trade headwinds, particularly in China, while Brazil has emerged as a peer competitor in soybeans and corn. At the same time, clear new sources of demand growth remain elusive, and persistent federal deficits may constrain future farm assistance.
According to Brian Cavey, CoBank’s senior vice president of government affairs, tariffs have yet to fully work their way through the economy. Still, their effects are already uneven, prompting businesses to alter purchasing decisions to reduce exposure. Potential Supreme Court action limiting presidential emergency authority could further complicate matters, raising questions about how existing tariffs would be handled and pushing the administration toward alternative legal strategies. As a result, Cavey said trade debates are likely to dominate the policy landscape through next year, particularly as Congress works to renegotiate agreements such as the U.S.-Mexico-Canada Agreement.
The farm economy, especially row crops, remains under sustained strain from low prices, large harvests, weakened exports and elevated input costs.
Cavey noted that while federal relief has been announced, many producers view it as insufficient. With farm bill programs extended through September 2026, pressure to pass a new bill has eased slightly, but crafting a bipartisan agreement that reflects today’s marketplace realities and provides meaningful certainty for farmers may prove increasingly difficult in a divided Congress.
Animal protein
Strong consumer demand for protein continues to build optimism across the animal protein sector, according to Brian Earnest, CoBank’s lead economist for animal protein. Earnest notes that protein’s growing prominence in the American diet appears far more durable than a passing fad.
That demand strength, combined with a more favorable feeding environment, is supporting producer margins, though Earnest cautions that widespread herd and flock expansion is likely to remain measured. Historically, high grain prices have restrained meat production, but falling corn and soybean prices are now allowing animals to stay on feed longer and convert higher-quality rations into additional weight gain.
CoBank analysis shows livestock supplies have tightened sharply over the past two years, making feeding efficiency increasingly critical. Cattle weights jumped 27 pounds in 2024 and another 24 lbs. through September 2025, averaging more than 870 lbs. per head. Modern steer carcasses are about 130 lbs. heavier than in 2005, testing biological limits, while tight supplies and strong demand pushed retail beef prices to records and lifted producers’ share to 54 cents per dollar, the highest since 2014.
Earnest and CoBank also flag significant headwinds ahead, including disease risks, trade barriers and persistent labor shortages. Still, falling feed costs and sustained consumer enthusiasm suggest protein demand is poised to reshape purchasing behavior for years to come.
Grains and dairy
Global grain and oilseed markets remain oversupplied, but Tanner Ehmke, CoBank’s lead economist for grains and oilseeds, sees signs that prices may have moved past their cyclical lows.
Ehmke notes that rising biofuel production and slowly improving export conditions are helping restore producer confidence, even as Brazil’s cost advantage continues to limit a full recovery in U.S. soybean exports to China. Instead, CoBank expects demand growth to be driven by markets such as Mexico, sub-Saharan Africa, the Middle East and Southeast Asia, where low prices are stimulating greater consumption of U.S. grains and oilseeds. Expanding global biofuel blending mandates should further tighten vegetable oil supplies and provide clearer demand signals, while soybeans’ relative price strength and high input costs are likely to influence acreage shifts this spring.
U.S. dairy farmers have repeatedly shown they can respond quickly to market signals, and Corey Geiger, CoBank’s lead economist for dairy, says that responsiveness has created a new challenge.
Strong butterfat premiums have driven year-over-year butterfat growth of 5% to more than 6%, creating oversupplies that have prompted some processors to cap butterfat payments. Protein, however, remains a bright spot. CoBank analysis shows sustained domestic and global demand for dairy protein. With whey now treated as a high-value protein stream and beef-on-dairy programs expanding, Geiger notes U.S. dairy cow numbers have climbed to 30-year highs as producers capitalize on strong calf values.
Looking beyond core production sectors, CoBank sees several additional forces shaping rural America in 2026. Crop growers will face mounting pressure to replenish depleted potash and phosphate levels to protect yields, even as constrained global fertilizer supplies continue to limit availability and influence near-term demand. On the consumer side, restaurants are expected to contend with continued erosion in foot traffic as higher prices weigh on discretionary spending.
Retail food and beverage companies, meanwhile, must navigate not only cost-sensitive consumers but growing expectations for less-processed products without artificial ingredients. At the same time, CoBank highlights artificial intelligence as a powerful rural opportunity, with surging data center investment driving demand for land and electricity. Rural communities offer strategic advantages, though local leaders will face difficult tradeoffs as decisions today could shape generational economic outcomes. — Charles Wallace, WLJ contributing editor
