U.S. agriculture is heading into 2027 with a financial warning flashing across the balance sheet: farm profits are expected to fall, production costs are surging and farm debt is climbing to a record.
USDA’s latest farm income forecast shows net farm income is projected at $158.4 billion in 2026, down $4.3 billion, or 2.6%, from 2025.
But the inflation-adjusted picture is considerably tougher.
After accounting for inflation, USDA forecasts net farm income will fall $9.1 billion, or 5.5%, from last year.
And while the nation’s farms are still expected to generate more income than the long-term average, the latest numbers underscore a growing problem confronting producers: stronger revenues are being swallowed by higher costs.
USDA now projects total farm production expenses will reach $492.8 billion in 2026, a $21.2 billion increase from 2025.
That is a 4.5% jump — and $15.1 billion higher than USDA anticipated in February.
Input costs are biting
Some of the biggest increases are coming in expenses farmers cannot easily avoid.
USDA forecasts fertilizer, lime and soil conditioner expenses to rise 15.3% to $39.6 billion.
Fuel and oil expenses are projected to jump an even more dramatic 28.8% to $21.6 billion.
Livestock and poultry purchases are expected to increase 11.4% to $71.9 billion.
Marketing, storage and transportation expenses are projected to rise 12%, while interest expenses are expected to increase 2.8%.
For farmers already operating on thin margins, those increases could quickly erase gains from stronger commodity sales.
The result is a farm economy that may look relatively healthy from the top line while becoming increasingly difficult to navigate from the tractor seat.
Government payments surge
Perhaps the clearest indication of the financial pressure facing producers is the expected increase in federal support.
USDA projects $47.4 billion in direct government payments in 2026, nearly 70% above the $27.9 billion recorded in 2025.
That includes traditional farm safety-net payments as well as supplemental and disaster assistance.
The payments provide an important financial bridge for producers, but their sheer size also highlights the widening gap between what agriculture earns in the marketplace and what it costs to produce food, fuel and fiber.
In other words, farm income is being propped up even as profitability remains under pressure.
Corn and soybeans offer brighter outlook
The picture isn’t uniformly negative.
USDA expects crop cash receipts to reach $253 billion in 2026, up 6.1% from 2025 and significantly higher than the agency’s February projection.
Corn receipts are forecast at $67.3 billion, an increase of $6.8 billion, or 11.3%.
Soybean receipts are projected at $47.9 billion, up $4.3 billion, or 10%.
Cotton and vegetable receipts are also expected to improve.
Those gains provide some relief for crop producers, but higher receipts don’t necessarily translate into higher profits when fertilizer, fuel, transportation and other expenses are rising at the same time.
Livestock faces a different reality
Livestock producers are confronting a more uneven financial landscape.
Cattle and calf receipts are forecast to rise $7 billion, or 5.2%, to $140.7 billion in 2026.
But that strength is largely a reflection of historically tight cattle supplies and high cattle prices — not expanding production.
Milk receipts are forecast to fall 4.3%, while hog receipts are expected to decline 4%.
The poultry sector is especially volatile. USDA projects egg receipts will plunge 66.3%, while broiler receipts fall 2.8%. Turkey receipts, meanwhile, are expected to increase 35.1%.
Overall, livestock and animal-product receipts are forecast to decline 5.4% from 2025 to $287.3 billion.
Debt reaches record territory
The pressure also is showing up on farm balance sheets.
USDA projects farm-sector debt will climb to a record $605.1 billion in 2026, an increase of $26.4 billion, or 4.6%.
The debt-to-asset ratio is expected to rise from 13.34% to 13.54%.
Farm assets are projected to reach $4.47 trillion, largely reflecting higher farm real estate values. But after adjusting for inflation, total assets are expected to remain nearly unchanged.
That means farmers are carrying more debt without seeing a corresponding inflation-adjusted increase in the value of the overall farm balance sheet.
Working capital offers one positive sign. USDA expects it to increase 3.5% in 2026 after plunging 15% in 2025.
Still, the broader financial picture remains one of caution.
2025 was stronger than expected
The latest USDA forecast also rewrites the story of the previous year.
USDA now estimates 2025 net farm income at approximately $162.7 billion, $8.1 billion higher than its February estimate.
Net cash farm income was revised nearly $22 billion higher, to approximately $175.7 billion.
Much of the improvement came from livestock markets, particularly cattle.
That stronger 2025 performance, however, makes the projected decline in 2026 more pronounced.
Rather than simply stabilizing, farm income is now expected to move lower from a stronger starting point.
Farmers enter 2027 with little room for error
For farm families, the numbers point to a difficult balancing act.
USDA expects median total farm household income to reach $108,460 in 2026, up 1.2% after inflation.
But the median farm income earned by farm households is projected to remain negative at -$467.
That means off-farm income continues to play a critical role for many farm families.
The latest forecast does not paint a picture of an agriculture industry in collapse. Net farm income remains above its 20-year average, and several major crop sectors are expected to see stronger receipts.
But it does paint a picture of an industry under pressure.
Costs are climbing. Debt is rising. Government payments are surging. And inflation-adjusted profits are falling.
For farmers making planting, purchasing, borrowing and expansion decisions now, the message from USDA is difficult to ignore:
Higher revenue alone won’t be enough. The battle for farm profitability in 2027 will come down to how much of that revenue producers can keep after the bills are paid.
