MANKATO — Minnesota’s agricultural economy has entered 2026 in a position of resilience, but under growing strain as industry leaders point to rising costs, policy pressure and workforce gaps.
That was the central message delivered Tuesday — notably National Ag Day — at the State of the Agricultural Ecosystem Report release event, held at the Maverick Innovation Gateway on the Minnesota State University campus. The annual report, produced by local agricultural organization GreenSeam in partnership with university researchers, offers a broad snapshot of how agricultural businesses across the state are performing and planning for the year ahead.
Opening the event, Della Schmidt, president and CEO of Greater Mankato Growth, described the report as a key resource for stakeholders across the business, education and public sectors. Leaders from the Minnesota Department of Agriculture and USDA Farm Service Agency underscored the importance of agriculture to Minnesota’s economy, highlighting the sector’s $105 billion economic impact.
Presenting the findings, GreenSeam economic development specialist Holly Callaghan said the report points to a shift in mindset across the sector. Rather than pursuing aggressive expansion, more businesses are prioritizing stability, maintaining current capacity and making targeted, efficiency-driven investments. A growing share of respondents indicated plans to hold steady rather than expand, reflecting caution amid ongoing economic uncertainty.
Drawing on survey responses from more than 300 industry leaders representing a majority of Minnesota counties, the 2026 report shows a noticeable decline in overall sentiment. 15% of respondents rated the direction of the state’s agricultural economy as positive, down significantly from 43% a year earlier. Even so, expectations for growth remain steady, with 57% of businesses anticipating some level of growth in 2026 — the same share that reported growth in 2025.
“The real shift that we’re seeing is an increase in the number of businesses who are saying, ‘I’m just trying to maintain,’” she said, adding many feel they don’t have the luxury of thinking long-term this year.
The report emphasizes that agriculture’s impact extends far beyond the farm. While production accounts for roughly 1.6% to 2% of Minnesota’s GDP, the broader agricultural ecosystem — including processing, manufacturing, transportation, services, research and energy — represents about 15% of the state’s economy and supports approximately 388,000 jobs. That interconnected system, Callaghan said, plays a critical role in overall economic resilience, particularly in rural communities.
“The value of taking an ecosystem approach is that we can target growth strategies that address the overall sustainable growth of the ecosystem and Minnesota’s agricultural economy as a whole,” she said.
Looking back at 2025, performance across the sector was uneven. More than half of surveyed businesses reported growth, with the strongest gains concentrated among business-to-business service providers. In contrast, nearly half of production and manufacturing operations reported either no growth or declines. Larger businesses were more likely to experience growth, while small and mid-sized operations faced tighter constraints.
The report identifies three primary forces shaping the outlook for 2026 — rising costs, policy and tax pressures and workforce challenges.
Callaghan said a majority of respondents identified rising expenses as the top threat to their business, with increases reported across key categories such as insurance, fertilizer and energy. Interest rates and borrowing costs have also climbed, limiting access to capital, particularly for producers and manufacturers that rely heavily on financing for land, equipment and operations.
“Input costs outranked every other cost challenge that are facing businesses, more than taxes, more than health insurance premiums, more than interest rates or interest costs,” she said.
Interest expenses for Minnesota farmers have risen sharply since 2024, contributing to delayed or scaled-back investment plans. Despite these pressures, nearly six in ten businesses indicated they still plan to invest in the coming year, most commonly in equipment upgrades, technology and workforce development. However, the scale of those investments has shifted, with fewer organizations pursuing major expansions,
Policy and tax burdens were identified as another major challenge. More than half of respondents cited taxes as a leading barrier, while many pointed specifically to rising property taxes on agricultural land in recent years.
Tariffs can be a major burden, especially for small businesses with limited supply chains that can’t absorb costs easily, yet despite this uneven impact, Callaghan noted that broader tax concerns like property taxes dominated attention, making the response in the survey somewhat surprising given the uncertainty at the time.
Businesses also reported that regulatory complexity, compliance requirements and lengthy permitting timelines are adding uncertainty and influencing decisions about where to locate or expand operations.
Callaghan noted the Paid Family Medical Leave program as a stressor for many small businesses and a key intent behind this year’s report is to send it to state lawmakers and leaders who have a hand in writing legislation that is impacting rural areas.
“They felt that the application of many of the regulations that they’re coming toe-to-toe with every day were applied in a way that didn’t take into account their realities as a business owner or their industry,” she said of survey respondents on lawmakers who are based in the Twin Cities metro area.
Callaghan reported workforce constraints remain a persistent issue across the agricultural ecosystem. About 30% of businesses reported being understaffed, with shortages particularly among mid-sized employers.
At the same time, workforce development continues to be a priority. About half of businesses planning investments in 2026 said they intend to direct resources toward hiring or training. However, the report also notes a decline in engagement with students through internships and similar programs, raising concerns about the long-term talent pipeline for the industry.
Although high school agricultural education is growing in the area, not enough students continue on to South Central College or MSU, in fact many are leaving the state, said Kelcey Woods-Nord from SCC.
“Part of that is all of us telling the story of ag careers and how far they reach in our community, and encouraging students to look at those opportunities,” Woods-Nord said.
“What I’m finding a lot with students and in my peers, is that it’s not so much about the salary anymore. It’s about finding a company whose values align with your own,” said attendee and MSU Agriculture Club President Megan Cumming. “So for all the employers in the room, just getting your mission out and getting who you are and your personal story out to students, I think is going to be really beneficial.”
Overall, the report portrays an industry navigating a complex and evolving economic environment. While financial pressures, policy concerns and labor challenges continue to weigh on the sector, Callaghan said businesses are adapting by focusing on efficiency, preserving capital and making strategic investments. The findings suggest that while confidence has softened, the long-term outlook for Minnesota’s agricultural economy remains grounded in its scale, diversity and continued demand for its products and services.
“Sometimes the costs we’re talking about magnify when you’re a small business, because some of that is disproportional if you can’t have a large enough economy of scale,” attendee Jerry Kopel of Hertz Farm Management. “We can’t just maintain, we have to grow. So anytime we can coordinate, communicate, advocate and GreenSeam being a conduit for that, I think we all need to work together on that as a region.”