California farmers just topped the national rankings for income again. They also topped the rankings for what it cost to earn it.

New state-level estimates from the USDA Economic Research Service (ERS) put California first in the nation for 2025 gross farm income, first for net farm income, and first for farm production expenses. And USDA’s outlook for 2026 says the gap between bringing money in and keeping it is about to get wider.

If you’ve looked at a strong revenue line this year and wondered why the bank account doesn’t agree, this is the data behind that feeling.

The scoreboard: number one in everything, including the bills

USDA’s September forecast included the first state-level estimates for 2025, covering gross farm income, production expenses, and net farm income. In inflation-adjusted dollars, here is how the top states compare, as tallied by American Farm Bureau Federation economists from the ERS data:

State	2025 gross farm income	2025 net farm income
California	$72 billion	$26 billion
Iowa	$47 billion	$10 billion
Texas	$43 billion	$15 billion

California also had the highest inflation-adjusted production expenses of any state. Nationally, those expenses totaled $486 billion in 2025.

Do the simple math on California’s two numbers and roughly 36 cents of every gross farm-income dollar ended up as net farm income. The rest went to inputs, labor, interest, depreciation, and everything else it takes to grow a crop here.

For context, the California Department of Food and Agriculture reports the state’s farms and ranches took in $61.2 billion in cash receipts in 2024, the first time production value topped $60 billion. Milk ($8.61 billion), almonds ($5.66 billion) and grapes ($5.64 billion) led the list. Gross farm income is a broader measure than cash receipts, which is why the USDA figure runs higher.

2026: costs up, profits down

USDA’s September 3 farm income forecast projects U.S. net farm income at $158.4 billion for 2026. That is down 2.6% from 2025 before inflation, and down 5.5% once inflation is counted.

The driver is the expense side. Total production expenses are forecast to climb $21.2 billion, or 4.5%, to $492.8 billion. Here is where USDA expects the biggest national moves:

Expense category	Change from 2025	Percent change
Fuel and oils	+$4.8 billion	+28.8%
Fertilizer, lime and soil conditioners	+$5.3 billion	+15.3%
Livestock and poultry purchases	+$7.4 billion	+11.4%
Cash labor	-$0.4 billion	-0.8%
Feed	-$1.5 billion	-2.1%
Pesticides	-$1.4 billion	-6.6%

Source: USDA ERS, Farm Sector Income Forecast, September 3, 2026. Full category detail is in the ERS production expenses data.

For California growers, fuel and fertilizer are the lines to watch. Nearly every specialty crop operation runs diesel for tractors, pumps and hauling, and nitrogen programs in orchards, vineyards and vegetables don’t get smaller because prices go up.

The flat national labor number deserves a caution flag. It reflects the whole country, and California’s labor costs run on their own track. The state’s AB 2646 sets a $19.75 hourly wage floor for H-2A workers and comparable California workers starting January 1, 2027.

What’s happening on the revenue side

USDA’s commodity forecasts are mixed for California’s mix of crops:

• Vegetables and melons: receipts forecast up $3.8 billion (15.0%) nationally, on higher prices.
• Fruits and nuts: receipts forecast essentially flat, down $0.1 billion (0.4%).
• Milk: receipts forecast down $2.1 billion (4.3%) on lower prices.
• Cattle and calves: receipts forecast up $7.0 billion (5.2%) as prices keep rising.

Flat tree-nut and fruit revenue against rising fuel and fertilizer bills is the squeeze many San Joaquin Valley operations will feel first.

The national number has a cushion California mostly doesn’t get

One reason the national profit picture isn’t worse: Washington. USDA forecasts direct government farm payments at $47.4 billion for 2026, up $19.5 billion (69.8%) from 2025. Divide that by the $158.4 billion net farm income forecast, and federal payments equal roughly 30% of it.

Where that money comes from matters for California:

• $26.5 billion in supplemental and ad hoc disaster assistance, mainly the Farmer Bridge Assistance Program and Supplemental Disaster Assistance.
• $15.6 billion in Farm Bill payments tied to commodity prices or revenue, largely through the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs.
• $5.3 billion in conservation payments through FSA and NRCS programs.

ARC and PLC only pay on 22 “covered commodities,” including wheat, corn, barley, rice, seed cotton, soybeans and safflower, according to the USDA Farm Service Agency. California’s rice, cotton and grain growers can participate. But almonds, pistachios, walnuts, grapes, citrus, berries and fresh vegetables are not on the list. That means the largest share of California’s farm economy sits outside the fastest-growing slice of federal support.

If you do farm a covered commodity, note the timing. FSA’s ARC/PLC fact sheet says triggered 2025 program-year payments are issued after October 1, 2026. For 2025 only, producers receive the higher of the PLC or ARC-CO payment regardless of which program they elected.

Farmers are feeling it

The mood is following the math. The Purdue University-CME Group Ag Economy Barometer, a monthly survey of 400 U.S. producers, fell 12 points in September to 123, after reaching 135 in August.

Both halves of the index dropped. The Index of Current Conditions fell 18 points, and the Index of Future Expectations fell 9. For the first time since July, more farmers expected their finances to get worse over the next year than expected them to get better.

High input costs have been the top concern in the barometer for months. Purdue’s July report named them the most important factor limiting improvement in farm financial performance.

What to do with this information

National and statewide numbers won’t tell you whether your own operation is making money. They do tell you where the pressure is coming from, and these free public tools can help you measure it on your ground:

1. Benchmark your costs per acre. The UC Davis Cost and Return Studies break down operating, establishment and overhead costs for dozens of California crops by region, built with UC Cooperative Extension farm advisors and growers. Compare your fuel, fertilizer and labor lines against the study for your crop and county.
2. Look up your state’s expense mix. ERS publishes production expenses by type with state rankings, so you can see where California’s costs concentrate compared with other states.
3. Track your commodity’s value. CDFA’s agricultural statistics page links to the annual California Agricultural Statistics Review, exports report and organics report.
4. Price out a tree or vine decision. The same UC Davis site offers tree and vine loss calculators that estimate the value of a single lost tree or vine, with or without replacement. They’re useful when weighing whether to push out a block.
5. Watch the barometer monthly. Purdue releases the Ag Economy Barometer on the first Tuesday of each month.

California agriculture is still the largest farm economy in the country by every income measure USDA tracks. The 2026 forecast is a reminder that size and margin are two different things, and the growers who know their cost per acre will be the ones best positioned to protect it.