After a turbulent 2025, U.S. farmers are entering the new year facing a more disciplined but riskier economic landscape, according to Terrain’s quarterly outlook, which examines market conditions across several commodities and in relation to interest rates.
The central theme is that prices in several sectors have stabilized or rebounded, but sharply higher costs and financing pressures have fundamentally altered profitability and risk tolerance.
In almonds, prices have climbed steadily as excess inventories have cleared, rising from a low of $1.40 per pound in 2022 to $2.57 per pound late last year. Yet Terrain’s analysis shows operating costs have surged nearly 70% since 2016, pushing break-even prices for existing orchards to $1.73 per pound and $2.10 per pound for growers carrying land debt. As a result, new plantings have fallen dramatically, extending payback periods for new orchards into the second decade of production.
Winegrape growers face a different adjustment cycle. Wine sales continued to decline across most channels in 2025, contributing to what Terrain projects will be California’s smallest grape crush in at least 25 years. Vineyard removals accelerated as demand softened, cutting statewide acreage by 7.5% in less than a year. While near-term price improvement appears limited, analysts say the sharp supply contraction could help rebalance the market this year, especially if consumption stabilizes.
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California avocado producers experienced some of the most dramatic swings. Prices surged early in 2025 amid tight Mexican supplies and strong demand, only to collapse midyear as volumes from Mexico, Peru and California peaked simultaneously. Terrain says the experience reinforced the importance of harvest timing and closely tracking volume flows in a highly globalized market.
In dairy, global milk supplies expanded faster than demand, pressuring prices heading into 2026. Still, strong beef-on-dairy revenues have effectively added $4 to $5 per hundredweight to milk checks, cushioning margins and delaying production cutbacks. Terrain forecasts modest price improvement later in the year but warns that surplus conditions will dominate early 2026.
Overlaying all sectors is a financing environment that remains tight. While the Federal Reserve cut rates modestly in late 2025, Terrain expects only limited further easing, with long-term borrowing costs likely to stay elevated. Analysts caution that producers should base investment decisions on current rates rather than betting on significant relief.
Together, the reports suggest that fewer acres, tighter capital and sharper cost discipline are defining the new economics of agriculture heading into 2026.
