Capstone expects US agriculture to face a difficult 2026 as farmers grapple with weak crop prices, elevated input costs, and persistent trade uncertainty. The Trump administration’s push to narrow Supplemental Nutrition Assistance Program (SNAP) eligibility—including new work requirements—introduces fresh risks for major grocers and packaged-food companies. With limited federal relief expected, producers and food retailers should prepare for tighter margins, uneven demand, and policy headwinds that will shape the sector’s performance in the year ahead.
Outlook at a Glance
- Row-Crop Farmers Will Face Mounting Pressure from Weak Commodity Prices and Inflation, While Beef Prices Will Continue to Soar Due to Decimated Supply
- Row-Crop Farmers Wait Anxiously for Trade Bailouts as USDA Prepares Funds; Expect More Relief Payments to Producers in 2026
- Trump’s Proposed SNAP Restrictions and USDA Messaging Will Create Risks for Grocers and Food Producers in 2026
Row-Crop Farmers Will Face Mounting Pressure from Weak Commodity Prices and Inflation, While Beef Prices Will Continue to Soar Due to Decimated Supply
| Winners | Crop insurance brokers and underwriters, such as Chubb Ltd. (CB), QBE Insurance Group (QBE on the Australian exchange), Sompo Holdings Inc. (8630 on the Tokyo exchange), and beef producers, including JBS NV (JBS), Cargill Inc., Tyson Foods Inc. (TSN), National Beef |
| Losers | Agricultural lenders; equipment manufacturers, including Deere & Co. (DE), CNH Industrial NV (CNH), The Mosaic Co. (MOS) |
Low Farmer Income Likely to Continue into 2026 as Labor, Trade, and Inflation Headwinds Persist
As tough as 2025 was for row-crop farmers—with prices for many of their products reaching their lowest levels in four years while costs increased for labor, machinery, fertilizer, and energy—Capstone believes 2026 is shaping up to be worse. Trade volatility with China and worldwide tariffs on agricultural products have led to a decline in US crop exports, particularly soybeans. Crop insurance underwriters and brokers are likely to be the only beneficiaries of the headwinds; we expect farmers to increase purchases of margin- and yield-protection policies.
Despite row-crop farmers achieving relatively high yields, many of them are concerned that, given the economic and political unpredictability of President Trump’s second term, their operations will not make money. An August 2025 survey by the American Bankers Association, in partnership with Farmer Mac, found that only 52% of farm borrowers expect to be profitable in 2025, signaling a period of significant financial distress. Liquidity, farm income levels, and inflation were the top concerns for producers.
Trump’s focus on illegal immigration threatens farms, as the US Immigration and Customs Enforcement (ICE) has targeted the agricultural sector. Farm work, particularly during the harvesting season, is incredibly labor-intensive, and producers often rely on undocumented immigrants to do the job. Trump’s Labor Department has only recently admitted that US food production requires foreign workers, but not before ICE deported over half a million people in 2025 and another 1.6 million voluntarily self-deported, leaving producers struggling to hire adequate staff.
To combat labor shortages, the Trump administration in October rolled out alterations to the federal H-2A visa program, which allows producers to hire foreign laborers for temporary farm work. The changes direct the Department of Homeland Security (DHS) to approve H-2A visas more quickly. The new rules also reduce the minimum wage required to pay temporary farm workers. Though these changes will undoubtedly help producers, we expect labor issues to continue into 2026 as undocumented immigrants wait for their chance to return to work.
Another burden for producers, price increases for farm equipment, is expected to persist in 2026. The US Department of Agriculture (USDA) tractor price index increased 25% between 2021 and 2024. Now, producers are ordering less new equipment, distributors are sitting on significant excess inventory, manufacturers are cutting back production due to weak demand, and many farmers have poor credit histories. That mix makes it difficult to finance the purchase of new equipment, even if producers want to buy. Equipment manufacturer Deere has reported higher-than-expected losses in its agricultural accounts, citing rising delinquencies and poor economic conditions, including high interest rates. Management at both Deere and CNH has scaled back farm machinery production and announced multiple rounds of layoffs. CNH has also declared its intent to close its Burlington, Iowa, tractor plant by Q2 2026.
Fertilizer is one of the major operating costs for farmers. It can represent as much as 30%-40% of operating costs for row crops like wheat and corn that require both phosphate and nitrogen-based fertilizers. Much of the fertilizer in the US, and the raw materials used to make it, is imported. The recent volatility in trade policy has led to a meaningful increase in fertilizer prices. Phosphates have seen the biggest price increases, with products like gulf diammonium phosphate (DAP) rising from $583 per ton in January 2025 to $800 in August. Since phosphate is mostly extracted from finite geological deposits in Morocco, China, and Algeria (unlike nitrogen-based fertilizers, which are made from ammonia derived from natural gas), soybean farmers have been hit especially hard by rising costs.
China’s refusal to import US soybeans for several months in 2025 caused prices to collapse. The sale of soybeans to China only recently resumed after trade negotiations held at the APEX summit in South Korea at the end of October.
Soybean farmers, like other row-crop producers, were also hit by a combination of high interest rates, rising utility costs, and climbing rent and property taxes in 2025, forcing farmers to make critical budgeting decisions that will likely have lasting negative effects in 2026.
One opportunity for reprieve from the economic challenges is the One Bill Beautiful Bill Act (OBBBA), which included several provisions designed to modestly help row-crop farmers by strengthening the USDA’s commodity support programs. The law expands the federal crop insurance program (FCIP), increases insurance subsidies for new farmers, and raises coverage levels on many crop insurance policies. Unfortunately, the changes are not scheduled to take effect until October 2026, leaving our overall outlook for the agriculture sector unfavorable for the coming year.
Cattle Shortage Continues Driving Up Beef Prices While Meatpackers Face Antitrust Scrutiny
While row-crop farmers are going through a rough patch, cattle ranchers are also experiencing disruptions that will persist into 2026.
Years of severe drought that swept across the western half of the US starting in 2021 reduced feed-grain yields and rendered water supplies inadequate to support cattle. Ranchers were forced to sell their valuable breeding cattle to generate cash, thereby reducing the number of calves born in subsequent years. Calf supply is down 8% from 2020, and the US has the lowest cattle inventory since 1951. That is helping to boost margins for beef and dairy operations. Since February 2020, steak prices have increased 54% and ground beef prices 52%, with no sign they will stabilize anytime soon.
It will take a long time for ranchers to rebuild their herds to more normalized levels. On average, it takes two full years for a heifer to produce a calf, followed by another 18 months for the calf to reach market weight. We believe that beef ranchers will enjoy elevated pricing and margins for the foreseeable future as livestock producers hesitate to replenish their herds and US demand for beef keeps prices elevated.
The limited supply of cattle has hurt the meatpacking industry. For example, Tyson Foods announced in November it would close its plant in Lexington, Nebraska. Tyson is one of the “Big Four” meatpacking companies that process 85% of beef in the US. It reported a $426 million loss from its beef business in 2025.
Labor is another issue for meatpacking companies, as rising costs are pushing beef prices higher. The industry has traditionally relied heavily on immigrant labor, but with the administration’s enforcement of immigration laws and the increased removal of undocumented immigrants, the available workforce has diminished. Larger facilities in rural areas, in particular, are struggling, as there are not enough workers to produce the necessary inventory to make a profit. With illegal immigrant enforcement and a shortage of available workers, meatpacking companies have had to raise wages to attract new workers, adding additional financial pressure.
On November 7, 2025, Trump directed the Department of Justice (DOJ) to investigate meatpacking companies that, he said, “are driving up the price of Beef through Illicit Collusion, Price Fixing, and Price Manipulation.” He singled out “Majority Foreign Owned Meat Packers” for jeopardizing “the security of our Nation’s food supply.” While it is true that the “Big Four” meatpackers—JBS, Cargill, Tyson, and National Beef—combine for 85% of the US beef-processing market, and JBS and National Beef are based in Brazil, we believe any DOJ investigation will provide no material evidence that the meatpacking companies are colluding or price fixing.
Agricultural reciprocal tariffs have also been a concern for the meatpacking industry. On November 14th, Trump issued an executive order (EO) removing the reciprocal tariff on certain agricultural products, including beef, negatively impacting US cattle ranchers while providing relief to retailers through 2026.
The EO poses a risk to meatpacking companies that have relied on the reciprocal tariffs to protect them from foreign competitors, who now have greater access to the US meatpacking markets. This is beneficial for US retailers, as they no longer have to pay the reciprocal tariff on beef imports from countries such as Brazil. The price impact of removing the reciprocal tariffs for U.S. beef consumers remains to be seen.
Row-Crop Farmers Wait Anxiously for Trade Bailouts as USDA Prepares Funds; Expect More Relief Payments to Producers in 2026
| Winners | Large Row-Crop Farmers, including Archer-Daniels-Midland Co. (ADM) and Cargill Inc.; Crop Insurance Brokers, and Underwriters |
| Losers | Small-Scale Farms |
For years, US soybean farmers have relied on China purchasing more than half of US soybean exports. Trump’s trade war put an abrupt halt to that. China opted to cease purchasing US soybeans and instead turned to Brazil. China recently agreed to resume buying US soybeans, but the damage has largely been done. The significant drop in demand from China in 2025 led to a collapse in US soybean prices. Experts estimate that farmers will lose $44 billion in income in the 2025-2026 crop year due to low prices for crops such as soybeans, corn, and wheat. This collapse in farm incomes is where the potential for bailouts from the Trump administration comes in.
The USDA’s Farm Service Agency (FSA) formerly issued trade- or tariff-related bailouts through the Market Facilitation Program (MFP). The MFP sets a precedent for USDA spending without congressional approval, tapping into the agency’s Credit Commodity Corporation (CCC) fund, which takes out loans from the US Treasury but must be replenished through appropriations. During the 2018-2019 trade war with China, the CCC issued $28 billion in MFP payments to farmers to offset trade losses. Trade bailout funds disproportionately benefited large-scale farming operations.
As part of Congress’ November 10th passage of the Continuing Resolution (CR), the CCC was replenished with $30 billion. However, as far as we are aware, no money was released in 2025, with USDA blaming the 43-day government shutdown for the delay in releasing funds to farmers.
According to reports, the USDA is teeing up another wave of trade-related bailouts. However, the exact amount and timing remain to be seen. Experts speculate the so-called second wave of bailouts may be as high as $15 billion and begin as early as December 2025, though this will certainly not make up for all the losses that farmers experienced. Crop insurance providers stand to benefit from the bailout payments, as producers often use bailout funds to purchase insurance policies to further limit their risk in the upcoming crop year.
We expect several more waves of trade-related bailouts to be issued in 2026 as the Trump administration tries to rebuild the farm economy to sustainable levels.
Trump’s Proposed SNAP Restrictions and USDA Messaging Will Create Risks for Grocers and Food Producers in 2026
| Winners | N/A |
| Losers | PepsiCo Inc. (PEP), Coca-Cola Co. (KO), Keurig Dr Pepper Inc. (KDP), Hershey Co. (HSY), Archer-Daniels-Midland, Mondelez, Cargill, Nestlé SA (NESN on the Swiss exchange), Walmart, Kroger Co. (KR), Dollar General Corp. (DG), Dollar Tree Inc. (DLTR), 7-Eleven |
Expanded Work Requirements Make It Challenging for SNAP Participants to Receive Benefits
Capstone believes that Trump’s USDA will use administrative actions in 2026 to continue to push to reduce spending on the Supplemental Nutrition Assistance Program (SNAP). The goal appears to be limiting federal SNAP spending by reducing the number of enrolled beneficiaries. USDA will also likely continue to support states’ prohibitions on beneficiaries using SNAP dollars to buy junk food and sugary drinks. These changes pose risks to grocers and food manufacturers who rely on SNAP dollars.
Some of the structural changes we expect to see in 2026 include implementing SNAP changes in the OBBBA, expanding state SNAP food restriction waivers, and reforming broad-based categorical eligibility (BBCE). We also expect federal policymakers to require states to require beneficiaries to reapply for SNAP benefits, a proposal originally floated to reduce SNAP fraud but quickly abandoned, likely because it would be expensive for state governments to implement.
Another SNAP provision in the OBBBA is the imposition of expanded work requirements. Starting November 1, 2025, the population of Able-Bodied Adults Without Dependents (ABAWDS) subject to work requirements expanded, lowering the age requirement to 54 and the dependent age to 14. Individuals are given a 3-month grace period to find work; if the requirements are not met after three months, they may not receive benefits. This would decrease the number of people eligible for SNAP, posing a risk that food spending at grocery stores and other retailers would fall in 2026.
12 States with Food Restriction Waivers to Limit Grocery Store Spending on Non-nutritious Food
Along with newly added work requirements, grocers and food manufacturers face risks as 12 states have been approved for food restriction waivers under the larger Make America Healthy Again (MAHA) initiative, and an additional seven states are seeking USDA waivers to impose similar restrictions. The approved waivers prohibit SNAP benefits from being spent on non-nutritious food items (e.g., candy, soda, prepared cakes). These changes start as early as January 1, 2026, for eight states and could result in fewer junk food sales, negatively impacting grocers and the manufacturers of products on the no-buy list.
SNAP Will Lose Participants Due to a Proposal Removing Broad-Based Categorical Eligibility
In addition to expanded work requirements and food restriction waivers, the USDA submitted a proposed rule on October 24, 2025, to reduce SNAP participation through reforming broad-based categorical eligibility (BBCE). BBCE is a state policy adopted in 40+ states that makes it easier to qualify for SNAP. The Trump administration views BBCE as a workaround that allows states to expand SNAP coverage beyond what Congress intended.
Historically, under BBCE, households that receive benefits from the federal Temporary Assistance for Needy Families (TANF) program are “categorically eligible” for SNAP without having to meet SNAP’s income or asset tests. For example, under normal SNAP rules, income must be at or below 130% of the poverty line, and assets must be under $2,250. If you receive TANF benefits, which could be as little as receiving a brochure, states waive the income and assets requirements.
States adopted BBCE to help working families who earn slightly above SNAP eligibility and to prevent the “benefit cliff,” ensuring that families do not lose benefits after earning a small raise. USDA’s proposed rule would alter TANF’s categorical eligibility for SNAP to include only households that receive cash or substantial assistance from TANF. This ensures that “categorical eligibility” is extended only to households that receive substantial, ongoing assistance from TANF.
Of the more than 42 million individuals currently receiving SNAP benefits, roughly 6 million are categorically eligible for SNAP through TANF. If USDA’s proposed rule becomes law, it could cause most, if not all, of these individuals to lose their SNAP benefits, decrease USDA SNAP spending by as much as 14%, and, consequently, reduce grocery store spending, putting retailers and food manufacturers at considerable risk in 2026. It is important to remember that 12% of all grocery spending by US households is funded by SNAP.
The USDA proposed the same rule in 2019 during Trump’s first administration. It was ultimately withdrawn under President Biden in 2021. The withdrawal of the rule in 2021 and the lengthy timeline lead us to lower the likelihood of this rule coming to fruition in 2026; however, if it does, it would be highly impactful, decreasing SNAP participants by almost 14%.
SNAP Participants at Risk of Losing Eligibility as USDA Discusses Reapplication
The USDA has issued messaging about several changes that could have occurred in 2025 but were not formalized, including initiating a reapplication process for SNAP participants. On November 13th, Secretary of Agriculture Brooke Rollins announced that the 42 million SNAP beneficiaries will need to reapply for SNAP benefits to eliminate suspected fraud by individuals receiving improper amounts. Rollins has argued that USDA data from 29 states showed that 186,000 deceased enrollees still receive benefits, and 500,000 enrollees have received benefits twice.
On November 20th, Rollins reversed direction. Currently, individual SNAP participants or SNAP households are required to report their income and basic information every 4 to 6 months to be fully recertified for SNAP at least every 12 months.
Although USDA’s reapplication plan has been put on hold for now, there is still a possibility that it will return to its previous position and establish a uniform reapplication process in 2026. This would target individuals who have incorrectly reported information and could remove them from the program, aligning with the Trump administration’s efforts to cut federal SNAP spending in 2026.
More formalized changes to SNAP, including expanded work requirements, food restriction waivers, and a proposed rule reforming BBCE, along with informal, back-and-forth messaging from USDA about fraud and reapplication measures, signal the administration’s intent to structurally change SNAP. This would align with the administration’s goals to reduce federal spending, limit participation, and promote a healthier diet for Americans, negatively impacting grocers and manufacturers and posing a substantial risk in 2026.
