AI and Trade Shape Farm Economy

Lower trade uncertainty AI growth and steady demand shape 2026 outlook

Economic uncertainty tied to US trade policy has eased compared to last year, creating a steadier outlook for 2026. Market volatility remains historically low across equity, bond, and currency markets, reflecting reduced investor anxiety. While tariff rates remain elevated, the actual import taxes paid are lower and are expected to decline further as new trade agreements take effect. 

With tariffs fading as a dominant concern, artificial intelligence has emerged as a major economic driver. Investment in AI infrastructure and rising stock market wealth have added noticeable strength to the economy. While concerns exist about a possible market correction, strong corporate earnings and low debt levels suggest the economy remains resilient. Over time, AI is expected to boost productivity across sectors, similar to past energy booms. 

"That's one possibility but it's not the most likely scenario," said Rob Fox, vice president of CoBank's Knowledge Exchange. "Corporate earnings remain extremely strong and aggregate corporate debt levels are historically low. Most of the stock market gains in the second half of 2025 were attributable to continually improving earnings expectations, not irrational exuberance." 

Looking ahead, the US economy is expected to remain stable in 2026. Cooling inflation and a normalized labor market may allow continued interest rate cuts. Wage growth and employment levels remain supportive of expansion, while federal tax incentives could further strengthen economic growth. 

For agriculture, global grain supplies remain ample, placing pressure on prices. However, stronger export demand and expanded biofuels production suggest prices may be near cyclical lows. Farmers face difficult planting decisions as many crops remain priced below production costs. Soybeans are expected to gain acreage due to lower input costs, while corn faces pressure from high fertilizer prices. 

Animal protein markets remain a bright spot. Strong consumer demand, improving feed costs, and tighter livestock supplies are supporting producer optimism. Growth will likely focus on efficiency rather than expansion, with heavier carcasses and improved feeding practices remaining priorities. 

In dairy, milk protein is expected to be the main driver of farm income. While butterfat supplies have grown excessive, protein demand continues to rise due to consumer interest in high-protein foods. 

Other sectors face challenges. Restaurants continue to struggle with higher prices, while food manufacturers face rising costs and pressure to reformulate products. Meanwhile, rising electricity demand and data-center expansion are placing new importance on rural energy and digital infrastructure planning. 

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