The United States recently passed a bill to move past the longest government shutdown on record. Late on the night of November 12, the house passed the bill with a 222-209 vote to overcome budgetary disagreement and fund the government after 43 days.
Points of contention existed between republicans and democrats regarding premium tax credits issued under the Affordable Care Act to reduce health care premiums which were enacted as an emergency during the pandemic. The inability to come to an agreement led to air travel delays, SNAP benefit issues, and federal office closures, including at the USDA.
The bill passed and extended the 2018 Farm Bill for another year. Many farm families depend on the Farm Bill and the USDA for farm loan programs. The USDA had limited staffing during the shutdown which stopped direct loan funding and guarantee agreements and severely limited Commodity Credit Corporation (CCC) loan approval. The bill approval included funding for the USDA through 2025 and 2026.
Although the legislature continued to meet during the government shutdown, policymaking was more difficult following the recent closures of governmental statistical agencies, such as the Bureau of Labor Statistics, which the Fed relies on for key economic data. Despite the delays, recent indicators have shown the U.S. economy is slowing. Private sector layoffs increased and job growth slowed in July and August with just 68,000 jobs added between the two months. The September jobs report did deliver good news with 119,000 jobs added, but July and August’s figures were revised downward with the new data. In total, the unemployment rate ticked higher to 4.4% based on the new information.
During the most recent December 9 and 10 meeting, the Fed elected to cut its target range for the federal funds rate by 25 basis points to 3.50% to 3.75%. This followed similar cuts of 25 basis points in September and October which brought total cuts to 1.75% since the Fed started cutting rates in September 2024. The rate cuts were attributable to a combination of a weakening labor market and concerns about a slowing economy.
While most media coverage was devoted to the government shutdown, key changes in tariff negotiations tested commodity prices through U.S. and China negotiations. Soybeans are the United States’ largest agricultural export, with China being the main buyer. As President Trump worked through trade negotiations, China elected to forego all soybean purchases up until the end of October. As of October 30, China agreed to a 12 million metric ton purchase by the end of 2025 and at least 25 million tons annually for the next three years. Soybean futures markets did respond positively to the news with a rally of more than one dollar, but the net result remains an overall decrease in exports to China of roughly 30% with continued trade negotiations needed between the two countries.
Corn & Soybeans
The most recent 2025/26 soybean outlook was unchanged from the November WASDE report with lower beginning stocks and production, reduced crush, slightly higher exports, and lower ending stocks. Production is forecast at 53 bushels per acre, down .5 bushels, for total production of 4.3 billion bushels. This is down 48 million bushels based on lower yields. Futures price for soybeans did increase to $11 per bushel after the agreement with China was established, however the resulting cash price is still below break-even for many U.S. producers.
Based on the December WASDE report, the 2025/26 U.S. corn outlook is for greater exports and lower ending stocks. During November, data shows strong foreign demand and implies total shipments during September-November will likely exceed 800 million bushels. The season average corn price received by producers remains unchanged at $4 per bushel.
President Trump announced the new Farmer Bridge Assistance (FBA) Program on December 8, which is intended to provide much needed financial assistance to U.S. row crop farmers. This $12 billion program will provide producers with a one-time payment to be paid out in February of 2026. Farmers will be able to apply for aid within the next month.
Dairy
Above average profitability in 2024 and through most of 2025 have led to an increase in dairy production, both in terms of increased yields and an increase in the national herd size. Through October, total milk production was up 3.7% year-over-year, and the total herd size was up 208,000 head from the same time in 2024, up to 9,575,000 cows. Despite a 6,000 head drop in total cow numbers from September to October, cow numbers are at their highest levels since 1993, despite scarce replacement heifers. Slaughter volume is rising, but rates remain 4.2%, or 98,000 head, below 2024 and 16.2%, or 434,000 head, under the three-year average. Strong cattle markets are driving the decision for producers to breed for crossbred calves. The additional profits from these calf sales are driving the decision to keep cows another lactation that may not break even based solely on milk production. According to the Pennsylvania weekly cattle auction summary in mid-November, one day old dairy-beef calf prices averaged $1,388 per head.
In addition to the increased production in the U.S., Europe and New Zealand have also increased their total milk production, resulting in more competition for exports and pushing dairy prices lower. Throughout a good portion of 2025, the U.S. was able to clear record amounts of cheese and butter products through export markets. Lower U.S. prices for both are expected to keep the US competitive in the export market, which will continue to play a large role in moving the large milk supply.
After another year of positive margins in 2025, milk production is expected to continue to grow. This increased production will likely push prices lower, and U.S. dairy margins are forecast to contract going into 2026. As of the beginning of December, Class III milk futures for 2026 average $16.75 and Class IV milk futures average $15. Producers are well positioned for a downturn in milk prices with historically strong balance sheets and working capital positions. New facilities, low feed costs, high beef revenue, and risk management programs will likely slow the transition from expansion to contraction.
Pork
The typical fall trend for market hog prices is a strong seasonal downtrend and often resulting in operating losses, with fourth quarter of 2024 being a recent notable exception. However, truer to form, fourth quarter of 2025 negotiated cash market hog prices have fallen sharply during the quarter, and to levels below 2024 and closer to the prior five-year average. Increasing live market hog weights this quarter are also typical due to cooler weather and new crop corn, but fourth quarter sale weights have been significantly above year-ago and five-year average weights and are putting downward pressure on market hog prices. In contrast, while the CME Lean Hog Index has fallen steadily since its strong run throughout the second and third quarters, and 2025 peak at over $112 per lean hundredweight, it remains much closer (within 3%) of year-ago levels as of early December but very near its 12-month low of just over $80 per lean hundredweight. While also falling from its summer highs, the Pork Cut-Out wholesale pork composite value is the most stable performing of the price measures. As of early December, the Cut-Out price is roughly $94 per lean hundredweight.
As producer contracts may be based upon various price indices including the above and near-by futures contract prices, or weighted-average combinations thereof, there is now a wide range of prices received by farmers per head and fourth quarter expected profits or losses along with the increasing feed cost trend. While producer profit margin opportunities for the fourth quarter in 2025 and into 2026 have diminished during this quarter, for most producers that experienced good herd health in 2025, 2025 should be a period of strong earnings and replenishment of working capital. The outlook for profits in 2026 is still historically good at prevailing commodity futures prices as well. The latest USDA Hog and Pigs report shows the U.S. sow herd down 2% from a year ago, farrowing intentions slightly lower, and no significant expansion expected in pork production for next year, which is supportive to producer prices and margins outlook.
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