FAPRI: Weak Crop Margins, Strong Cattle Returns Amid Policy and Input Uncertainty

Ukraine strikes Russian oil export hubs, adding new layer to global energy risk | Trump signals doubt on Iran deal as war enters fourth week

LINKS

Link: Updates, March 26, Part 1
Link: Video: Wiesemeyer’s Perspectives, March 21

Link: Audio: Wiesemeyer’s Perspectives, March 21

Updates: Policy/News/Markets, March 26, 2026, Part 2

TOP STORIES—FAPRI baseline warns of weak crop margins, strong cattle returns amid policy and input uncertaintyMarch 2026 outlook highlights diverging farm economics, rising government support, and sensitivity to energy-driven input shocks The U.S. agricultural outlook shows a widening divide between struggling crop producers and highly profitable livestock operators, with policy support and volatile input costs shaping the near-term trajectory, according to the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri’s March 2026 baseline report (link). ( Crop producers continue to face compressed margins, as commodity prices have retreated from recent highs while input costs — including labor, land, and fertilizer — remain elevated. In contrast, the cattle sector is experiencing record profitability, driven by tight herd supplies and strong demand, though that cycle is expected to begin reversing after 2026. Diverging sector economics • Net returns for major row crops remain weak, roughly half of peak 2021/22 levels, reflecting persistent cost pressures despite modest price stabilization.•Livestock profitability is supported by lower feed costs and constrained supply, with cow-calf returns reaching record highs before an expected downturn beginning in 2027.•Overall net farm income rebounded in 2025–2026, largely due to increased government payments, but is projected to decline again beyond 2026 as livestock receipts soften. Crop prices and acreage shifts. Grain and oilseed prices are expected to recover modestly in 2026 but remain below decade averages. FAPRI projects:•Corn at $4.21/bushel for 2026•Soybeans at $10.39/bushel•Wheat at $5.58/bushel Acreage is shifting back toward soybeans after a 2025 move into corn, with 2026 plantings projected at 94.9 million corn acres and 83.3 million soybean acres. Policy support and government outlays•Government payments play a central role in stabilizing farm income, with outlays elevated by provisions in the One Big Beautiful Bill Act (OBBBA) and Commodity Credit Corporation (CCC) transfers.•Total government outlays are projected to remain near recent decade averages after a spike in 2025–2026, sustaining income levels despite weak crop returns.•ARC and PLC payments rise sharply due to lower commodity prices and higher reference prices, with expanded base acres amplifying future payments. Biofuels and demand drivers•Biofuel demand — particularly renewable diesel — continues to support oilseed markets, increasing domestic crush capacity and vegetable oil demand.•Ethanol production remains relatively stable, while biomass-based diesel output grows modestly under current policy assumptions.Macro pressures and input risks•The outlook assumes slowing global economic growth and moderating inflation, with U.S. GDP growth easing below 2% beyond 2026.• Interest rates are expected to decline but remain above pre-pandemic levels, increasing borrowing costs for producers.•Notably, the report flags heightened uncertainty tied to Middle East tensions, particularly disruptions in the Strait of Hormuz that have already triggered spikes in fertilizer prices ahead of the U.S. planting season. Food prices and consumer impact• Food price inflation is projected to ease to 2.5% in 2026, as declining egg and stabilizing beef prices offset continued increases in food-away-from-home costs driven by labor. Bottom Line: The baseline underscores a policy-dependent farm economy, where government payments and livestock strength are offsetting weak crop margins — but with significant downside risks tied to input costs, trade policy, and geopolitical disruptions. FAPRI emphasizes that the projections are not forecasts but a current-policy baseline, with outcomes highly sensitive to changes in markets, policy, and global events.—RFS “Set 2” nears finish line as market braces for policy impactUncertainty on mandates, RIN structure, and market consequences ahead of White House/EPA rollout The Trump administration’s pending Renewable Fuel Standard (RFS) “Set 2” rule is poised to be a major inflection point for U.S. fuel markets — with key uncertainty still centered on blending mandates, compliance costs, and how refiners and biofuel producers adapt. RFS policy remains one of the most powerful drivers of U.S. fuel economics, directly influencing gasoline blending decisions, ethanol demand, and Renewable Identification Number (RIN) credit prices. These credits function as the compliance mechanism for refiners and can significantly impact margins depending on mandate levels. A central tension highlighted is the divide between refiners and biofuel producers: ethanol and biofuel groups generally push for higher blending volumes, while refiners warn that mandates beyond infrastructure capacity — the so-called “blend wall” — can distort markets and raise costs. There is growing complexity in the program, particularly around how different categories of biofuels (e.g., conventional ethanol vs. advanced fuels) interact, and how credit values (D4 vs. D6 RINs) shift depending on policy design and supply-demand balances. Another key: policy decisions under “Set 2” will ripple beyond biofuels — shaping gasoline prices, refinery operations, and investment decisions across the broader energy sector. Argus frames the rule as a structural market driver, not just a regulatory update. The timing is critical: with the rule expected imminently, market participants are positioning around scenarios involving higher biomass-based diesel targets, potential changes to small refinery exemption (SRE) treatment, and debated proposals such as reduced credit values for imported feedstocks. Bottom Line: The “Set 2” is less about incremental tweaks and more about resetting the balance between refiners and biofuel producers — with meaningful implications for fuel prices, RIN markets, and agricultural demand tied to ethanol and biodiesel feedstocks. —Ukraine strikes Russian oil export hubs, adding new layer to global energy riskDrone attacks disrupt key Baltic terminals as Iran war continues to drive broader oil market volatility Ukraine’s stepped-up drone campaign against Russian energy infrastructure is beginning to materially disrupt Moscow’s oil export system, compounding an already fragile global market strained by the ongoing Iran war. According to Reuters, recent strikes have forced shutdowns or operational disruptions at major Baltic export terminals, including Ust-Luga and Primorsk, knocking out a significant share of Russia’s seaborne crude capacity. Estimates cited by Reuters indicate that as much as 40% of Russia’s oil export capacity — roughly 2 million barrels per day — has been affected by the attacks, marking one of the most consequential hits to Russian energy logistics since the start of the war. The strikes are part of a deliberate Ukrainian strategy to target the Kremlin’s primary revenue stream, with oil and gas historically accounting for roughly a quarter of Russia’s federal budget. The escalation comes at a critical moment for global energy markets. The war involving Iran has already pushed crude prices above $100 per barrel, tightening supply through disruptions tied to the Strait of Hormuz — a chokepoint that handles roughly one-fifth of global oil flows. In that context, Ukrainian attacks are not the primary driver of market stress but are adding a second, reinforcing supply risk. Russia, meanwhile, has benefited from the broader geopolitical backdrop. Higher global prices have boosted per-barrel revenues, and the Trump administration has eased enforcement of certain sanctions to keep Russian barrels flowing and stabilize global supply. That combination has allowed Moscow to sustain export volumes — particularly to buyers in Asia — even as Western restrictions remain formally in place. However, Ukraine’s latest strikes aim to undercut that advantage. By targeting export infrastructure rather than production itself, Kyiv is attempting to create bottlenecks that limit Russia’s ability to move crude to market. Early indications suggest Moscow is working to reroute flows through alternative ports and pipeline systems, particularly toward China and India, but those adjustments come with logistical constraints and potential delays. For markets, the result is a shift from a single-source disruption to a multi-theater supply risk environment. The Iran conflict continues to anchor the global risk premium, but damage to Russian export capacity introduces additional uncertainty — particularly if attacks persist or expand. Still, analysts caution against overstating the immediate impact. The Russian disruptions, while significant, do not yet represent a full loss of supply, and global markets have thus far absorbed the shock. The larger concern lies in the cumulative effect: overlapping geopolitical disruptions that reduce spare capacity and increase the likelihood of sharper price swings. In that sense, Ukraine’s campaign is as much about shaping the broader energy battlefield as it is about degrading Russia’s war economy. By tightening supply at the margins, the strikes could contribute to higher global prices — but also limit the financial windfall Moscow has enjoyed from the Iran-driven rally. The net effect is a more structurally fragile oil market, where multiple conflict zones are now directly influencing supply flows, raising the risk of further volatility in the weeks ahead.—Trump signals doubt on Iran deal as war enters fourth weekPresident warns of escalation while questioning whether diplomacy is achievable, citing stalled talks and strategic risks around the Strait of Hormuz President Donald Trump on Thursday expressed growing uncertainty about the prospects for a diplomatic breakthrough with Iran, underscoring widening divisions as the conflict approaches its fourth week. Speaking during a Cabinet meeting at the White House, Trump said Tehran is “begging” for a deal but cast doubt on whether an agreement is within reach. “I don’t know if we’ll be able to do that. I don’t know if we’re willing to do that,” he said, signaling hesitation on both sides despite ongoing pressure to negotiate. The remarks came alongside renewed threats of escalation. Earlier in the day, Trump warned that the U.S. could intensify military action if Iran fails to engage, cautioning that once a tipping point is reached, “there is no turning back.” Iran, however, appears to be holding firm. According to reports cited by Bloomberg Government, Tehran has attached multiple preconditions to any ceasefire agreement, complicating efforts to initiate formal talks and reinforcing the current diplomatic stalemate. Trump framed the conflict as a narrowing window for a broader strategic outcome, urging Iran to abandon its nuclear ambitions in exchange for a potential deal. “We’ll see if they want to do it. If they don’t, we’re their worst nightmare,” he said. The president also pointed to the importance of reopening the Strait of Hormuz — a critical artery for global oil shipments — suggesting that a successful agreement could stabilize energy flows. However, he acknowledged ongoing risks, noting uncertainty over whether the waterway has been mined. Trump has set a four- to six-week timeline for U.S. military operations, claiming the campaign is ahead of schedule. Still, his comments reflect a shifting tone — from earlier confidence in forcing negotiations to a more cautious outlook as both sides remain entrenched.