#160 2026 4rd Quarter Ag Outlook
SW Financial Literacy
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I had an awesome conversation with Jim Rothermich on real estate, finances, and buying dirt. If you are ever in the market to buy farm ground, you need to take a listen:
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2026 4rd Quarter Ag Outlook
It is time for our quarterly ag outlook. Enjoy!
Interest Rates
Should we get the bad news out of the way first?
The target rate is currently 375-400. The chart above shows the CME Group odds for the interest rate after the March 17, 2027 meeting which is a new target rate of 425-450. That would mean two rate hikes in the next 5 months, with the first expected in the December 9, 2026 meeting.
Remember: The CME Group has been wrong on interest rate expectations for the better part of 3 out of the last 4 years. They have been drifting on the side of lower interest rates than reality.
But a few things are different, and I actually agree with them on their forecast for a few reasons.
We have a new fed chair in Kevin Warsh. With uncertainty in how he will approach interest rates, conservative middle ground usually wins.
While rates aren't low right now, they aren't that high either. They are closer to Goldie Locks, just right.
The most interesting thing to track: Iran and our mid-term elections.
Iran has their most leverage over the next several weeks while Trump plays it safe (is that even possible?) until we get through mid-term elections. I wouldn't be surprised if there is an escalation in the Straight of Hormuz before a resolution is found.
Of course, an escalation means even higher fuel prices. Fuels is one of if not the biggest drivers of inflation in this country. To fight inflation, higher interest rates are needed.
Iran escalation -> Higher fuel prices -> Higher interest rates in 2027
What we have here is the 10-year Treasury composite on the left and the 20-year on the right. The 10-year Treasury is the best way to monitor the direction of interest rates on long term borrowed money (think home mortgages, commercial properties, and land notes).
The 10-years started 2026 at 4.78%. The high we have seen this year?
September 30, 2026 at 5.64%. Almost a full 1% higher.
Interest rates aren't in a good spot, and they are still heading in the wrong direction. It isn't a great time to be running high balances on operating notes or for buying ground, as interest expense has doubled in the last half decade.
Land Prices
There is dirt for sale all over the place. Listings. Auctions. Estates. Private deals. You name it and the land is being swapped.
I haven't seen much of a dip in prices at the moment. If there is a weaker sale, it is typically going to show in the weaker properties first (weaker meaning the property is expected to generate less income). Investor involvement is still out there.
When considering cash availability on land sales, I find this the most interesting aspect to monitor. While there are still some operations positioned to buy the premium farm in the county, there are FEWER farmers in a position to do this.
Remember: it takes two potential buyers to drive up a sale price.
Are there enough deep pockets to have two bidders at every sale?
Don't get me wrong, there is A LOT of equity out there with the older generations. Plenty of equity to gobble up all the ground. But as you know I teach, if there isn't the CASH to make the purchase or keep you in a stable position, using only equity to make the purchase when cash flow already stinks can be a very bad idea.
I haven't heard much on land rent price trends going into 2027. Public talk of government payments is low hanging fruit for landlords to demand higher rent.
There are more absentee landlords out there. Remember, as the landlord becomes further removed from the operation, their understanding of how a farm is run disappears. I’ve heard of a share rent landlord moving on from a tenant due to poor yields and giving the farm to another grower, not realizing there was a hail event on the farm to cause the lower yield that year.
Yields
It hurts me to say this, but higher prices are probably the result of a smaller crop. Excessive rain out east. Too dry out west.
Disease pressure settled in really late for Nebraska, which made the typical timing of fungicide application a lost cause and ineffective. We need a good dry spell with no wind to avoid half the state from blowing flat as root rot is now taking hold.
Equipment Prices
After some tough years from dealerships, I'm sure they are hopeful $5 corn is the remedy for their woes. More below.
Operation Improvements
Equipment purchases and operational improvements have been down for 3 years. Many operations still have 1 payment left on equipment bought from record high 2022 earnings and are struggling to stay above water. Cash flow relief from lower debt servicing won't come until 2028.
Let's be realistic. We can't wait for forever to make operational upgrades. If you wait too long, everything breaks down and needs upgraded at the same time.
My recommendation: Get in to your banker or lender early to update financials. That means to meet with them before your CPA for your end of year appointment.
Update your balance sheet to get a true picture of your 2026 earnings. See if there were Net Worth gains. Did you hold Working Capital together or even grow it some. Have a 5-year purchase plan for replacing equipment and don't believe the dealership when they tell you they have the last combine on sale in the country.
(Update YOUR balance sheet each year at www.farmbalancesheet.com)
Plan your operation upgrades with your banker based of your balance sheet and financial goals.
Don't plan your operation upgrades with your CPA based on taxes, this will keep you forever cash poor.
Don't plan your operation upgrades with your equipment dealer, this will keep you forever in debt with depreciating assets.
Commodity Price Direction and Marketing
Technicals didn't look good before the September 30th report as we were trading sideways to lower on limited headlines. With the report resulting in a higher-than-expected carryout, funds exited and we closed an earlier gap.
Don't forget what your January 2026 cash flow projection looked like. Many of you were using $4.50/bu corn. If we can maintain a decent basis and hold $4.80/bu cash sales, that should be more than enough to cover the higher fuel expense.
I like where prices are today. And I like where Dec '27 prices are too. If you are sniffing around for next year's inputs and get anything booked, take some risk off your statement by pricing in some $5/bu corn for 2027.
Just for fun, I booked some $5/bu Dec 2028 corn as well! I (unofficially) have 3 straight years of $5/bu corn sales.
Don't let greed stop you from making a profit today.
Weather
I get my weather updates from Eric Snodgrass with Nutrien Ag Solutions, you should sign up for his e-mail, eric.snodgrass@nutrien.com, and check out his videos here: Oct 2, 2026: Much Drier Next 7-Days (Except Gulf Coast / Southeast) | Atlantic is Dead | FROST North
Dry, I hope it is dry.
Working Capital Trend
Factors to consider:
Early spring government payments weren't on a lot of balance sheets = +1 for WC
Prices rallied to breakeven price in May, then above breakeven price over the summer = +1 for WC
Many producers were able to snag a HUGE ECO payment over the summer from their 2025 crop = +1 for WC
Still too much debt to service on the balance sheet from past purchases = -1 for WC
Smaller than expected crop = -1 for WC
Higher expenses (including fertilizer) = -.5 for WC
I am optimistic the majority of producers will have a small Working Capital gain from their 2026 production cycle. Before you go buy anything, please update your balance sheet FIRST!
Overall Financial Picture
Reactive farmers continued to spiral lower as input volatility has made for an expensive 2026 crop. Farm bankruptcies are on the rise, and the number of questionable finance strategies from banks are occurring as well. Unfortunately, too often I see operational restructurings from farmers and their lenders at the wrong time. Poor managers will continue to find losses, while the year has provided the potential for strong managers to realize a profit.
Cash flows were negative going into planting, but the opportunity to forward contract at strong prices has brought these projections closer to or above breakeven. With late winter government payments, many producers receiving an ECO check over the summer, and the expectation of ARC payments this fall, a lot of outside money is flowing in to prop up the farmer. Can the producer keep this money, or will it go straight out the door to all-around higher inputs for the 2027 crop?
Final Summary
There is your 4rd Quarter Ag Outlook. Every operation is different and needs alternative advice compared to their neighbor. Nothing mentioned above is a one size fits all approach. While I hope this is helpful, what is better for your operation’s well-being is to update your own financials, run them by a trusted financial advisor, make your own plan for the upcoming year, and adjust that plan when necessary.
If you want that financial advisor to be me, shoot me an email and we will see how I can help.
Have a great week!
Grant
