Editor's Note: This story, originally posted 11:51 a.m. CST on Feb. 5, was updated at 3:57 p.m.

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ALTOONA, Iowa (DTN) -- USDA projects net farm income, adjusted for inflation, will fall by $4.1 billion in 2026 to $153.6 billion.

While projecting lower farm income for 2026, USDA also dramatically cut its earlier 2025 net farm income projections by $25 billion. That adjustment reflects the farm economy is facing greater challenges than the numbers show.

Net farm income, defined by USDA as "a broad measure of profits," is expected to decline by $4.1 billion, when adjusted for inflation, or about 2.6% lower in 2026 compared to last year. Without that inflation factor, net farm income would come in about 0.7% lower than in 2025.

USDA's Economic Research Service on Thursday released new net farm income projections for 2026.

Lower projected farm income for 2026 reflects four years of largely stagnant income moves after net farm income hit a record $210 billion in 2022.

USDA reports both "net farm income" and "net cash farm income." Net cash farm income encompasses cash receipts from farming, as well as cash farm-related income, including government support, minus cash expenses.

Net cash farm income is projected at $158.5 billion for 2026, an increase of $1.7 billion, or 1.1% higher, than 2025, adjusted for inflation.

LOWERING 2025 INCOME NUMBERS

The American Farm Bureau Federation, in a Market Intel report, highlighted USDA's farm income forecast also cut the 2025 net farm income by $25 billion from USDA's September estimate. That was not specifically spelled out in Thursday's report.

"Because USDA did not release its customary December farm income update, this February report marks the first update since September, and the changes are substantial," Farm Bureau stated.

USDA now estimates that 2025 net farm income totaled about $154.6 billion, down roughly $25 billion from the $179.8 billion forecast in September. Net cash farm income for 2025 was similarly revised down to about $153.9 billion, nearly $27 billion below the $180.7 billion previously projected.

At the same time, USDA also revised 2025 production expenses higher, to $473.1 billion, while also lowering direct government payments about $10 billion to about $30.5 billion.

Combined, Farm Bureau stated all of these changes to the 2025 income projections reflect bigger struggles in the farm economy. "Together, these revisions suggest the farm economy is experiencing a generational downturn rather than a temporary slowdown. Outside of the cattle sector, most commodity markets are weakening."

The updated forecast further cements that the expectations of a strong income rebound for 2025 did not come to fruition and this reinforces that farm profitability last year was more fragile than previously believed, Farm Bureau stated.

GOVERNMENT AID A DRIVER

The biggest increase in income for crop producers will come from an injection of government payments.

Direct government payments are forecast at $44.3 billion for 2026, a $13.8 billion increase, or 45.2% higher than the $30.5 billion total for 2025.

This overall increase reflects higher anticipated payments from the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs that trigger payments when commodity prices fall. ARC and PLC payments, which would be paid next fall, are expected to increase $13.1 billion from 2025, USDA stated.

Farmers right now are waiting for the release of $12 billion in Farmer Bridge Assistance (FBA) payments from USDA.

Not included in USDA's forecast is the possibility Congress could pass another ad-hoc aid package, which lawmakers have said could be $15 billion.

Conservation program payments to farmers are projected at $5.3 billion for 2026.

CROP RECEIPTS

Cash receipts for crop producers will be slightly higher until inflation is factored in.

Crop cash receipts are forecast at $240.8 billion in 2026, an increase of $2.8 billion, or 1.2% higher than 2025 in nominal terms. USDA also noted, "However, the 2026 forecast represents a decline in real inflation-adjusted terms."

Corn receipts are expected to grow $2 billion, or 3.3%, in 2026 to $63.67 billion, mainly due to higher quantities sold, given corn farmers produced a projected 17-billion-bushel (bb) crop last fall.

Soybean receipts are expected to remain at prior year levels in 2026 at $44.5 billion.

But wheat receipts are projected to fall $200 million or 2.4%, or $9.5 billion, due to lower quantities sold.

Rice receipts are forecast to decline by $400 million, or 12.5%, in 2026 to $12.1 billion, because of falling prices and smaller quantities sold.

Receipts for hay are expected to increase $400 million, or 5.5%, in 2026.

Cotton receipts are expected to remain near 2025 levels at $5.38 billion.

LIVESTOCK RECEIPTS

While the prices of cattle and calves are projected to grow again, USDA projects total animal/animal product cash receipts are forecast at $273.9 billion in 2026, a decrease of $17 billion, or about 5.8% in nominal terms from 2025. Falling receipts for chicken eggs and milk, due to lower prices, are expected to drive the overall decline.

Receipts for cattle and calves are projected at $133.1 billion, up $5.2 billion, or 4.1%, as cattle prices are expected to continue to rise in 2026.

Cash receipts for dairy farmers are expected to fall by $6.2 billion, to $42.5 billion in 2026, a 12.8% decline.

Eggs saw two years of soaring prices in 2024 and 2025 because of the impacts of avian influenza. Cash receipts for eggs are projected to come crashing down in 2026 to $8.9 billion, down from $26.2 billion in 2025.

For hogs, cash receipts are projected at $29.3 billion, a $200 million decline from 2025.

PRODUCTION EXPENSES

Despite significant concerns raised by crop producers over production costs, USDA actually forecasts a slight decline when adjusted for inflation.

USDA forecasts farm sector production expenses at $477.7 billion in 2026, up from the 2025 forecast of $473.1 billion -- an increase of $4.6 billion, or 1%, in nominal terms. When adjusted for inflation, USDA stated the expenses are projected to decline by $4.5 billion (0.9 percent) from their 2025 levels.

In crops, USDA also projects slightly lower fertilizer, pesticide and seed costs for crop producers in 2026. Fertilizer costs, for instance, are projected at $35.8 billion, down about $523 million from last year.

Livestock expenses are projected to rise. Livestock/poultry purchases, feed, and labor are expected to be the three largest production expense categories. In 2026, livestock and poultry purchases are projected at $66.3 billion, up $5.9 billion, or 9.7% compared with 2025.

Livestock producers are expected to see lower feed costs, which have declined since 2023. In 2026, feed spending is projected at $65.6 billion, down $4.8 billion, or 6.8% lower than 2025.

Cash labor expenses are forecast at $53.9 billion, up $1.2 billion, or 2.2% from the expected 2025 level, which is roughly in line with inflation.

To read the full Farm Sector Income report, go to https://www.ers.usda.gov/….

Also see, "Ag Leaders Issue a Dire Warning: Agriculture Could Face Widespread Collapse," https://www.dtnpf.com/….

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN

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