Duration of global oil market disruption will determine if the economic burden is a short-lived price spike or a broader cost-of-living shock
DENVER, April 08, 2026 (GLOBE NEWSWIRE) — The U.S. economy has continued to perform reasonably well despite a growing constellation of warning signs. Buoyed by an escalating stock market in January and February and massive investments in artificial intelligence, U.S. GDP likely grew above 2% in the first quarter as the unemployment rate held around 4.3% and consumers maintained spending growth above 2%. However, surging energy costs and extreme volatility in oil markets resulting from the ongoing Middle East conflict could shift the trajectory of the U.S. economy for the remainder of the year.
Despite historic levels of domestic oil production, U.S. fuel prices still react quickly to disruptions abroad, especially in the Middle East, the world’s leading region for proven oil reserves and spare production capacity. Increased exports of premium-priced U.S. light, sweet crude oil has created tight domestic links to the global market, meaning jumps in global replacement costs quickly flow through to U.S. pump prices.
According to a new quarterly report from CoBank’s Knowledge Exchange, rural communities are hit harder by rising gasoline and diesel prices because fuel is a larger and less flexible part of daily life and the local economy. Longer driving distances, limited public transportation and heavy reliance on diesel intensive activities like farming, freight and construction mean price spikes show up quickly in household budgets and business costs.
“Higher diesel prices also raise the cost of moving food and goods into rural areas, pushing up local prices and amplifying the economic hit compared with urban areas that have more alternatives and competition,” said Teri Viswanath, lead power, energy and water economist with CoBank. “More broadly, the effects of the closure of the Strait of Hormuz and the stepped-up attacks on energy infrastructure in the Persian Gulf could be long-lasting and have probably not been fully priced into U.S. consumer markets.”
U.S. Economy
Despite persistent signs of a weakening labor market — declining job openings, weak wage growth and minimal job creation — the broader economy has continued to trudge forward like a tractor in low gear. But rising energy costs will boost headline inflation by about 1% in the coming few months. The longer-term effects of higher energy costs will be felt throughout the year as higher transportation and input costs work their way into every segment of the economy. While higher income and asset-rich households can absorb higher energy costs, the bottom half of earners with less savings are caught between rising inflation and shrinking wage growth. Many consumers will have no choice but to reduce discretionary spending, particularly in the retail goods, food service and hospitality categories.
U.S. Government Affairs
Farm and rural advocates continue their calls for swift and urgent action on a new farm bill, more aid and trade certainty. The 2026 Farm Bill passed the House Agriculture Committee on a bipartisan vote in March after over 20 hours of debate. Committee Chairman Glenn “GT” Thompson, R-Pa., hopes to continue to secure support from his most conservative Republicans, and to increase the number of House Democrats supporting the bill to ensure House passage when Congress reconvenes in mid-April. The so-called “skinny” farm bill contains over 800 pages of program and policy improvements that will be of assistance in the current agriculture economy. These programs were last updated in 2018, when the last farm bill was written.
Grains, Farm Supply & Biofuels
Volatility in the energy markets provided grain farmers with new marketing opportunities, driving grain and oilseed prices up late last quarter. Soybean prices rose 11.8%, driven by the soybean oil rally. Corn prices climbed 4% and wheat prices rose 21.5%. USDA’s Prospective Plantings report indicated farmers will increase soybean acres by 4% compared to last year while slashing corn and spring wheat acres. Corn demand remains resilient, but planted acreage is set to fall to 95.3 million acres, down 3.8% year-over-year as farmers eye more profitability with soybeans. U.S. farmers plan to drastically cut wheat acres, which are projected to fall to the lowest since recordkeeping began in 1919.
Improved commodity prices are not anticipated to offset higher input and production costs. Fuel and fertilizer prices have increased 20% to 40% since the Iran conflict began, leaving buyers who delayed decisions more exposed. Ongoing supply chain disruptions for urea could re-create 2022-level fertilizer prices without 2022 crop price support. USDA had expected fuel, lube and electricity expenses to ease, but the sharp increase in diesel prices following the onset of the Iran war could add $2,000 in fuel costs per farmer and hundreds of thousands more for grain elevators.
The long-awaited renewable volume obligations under the Renewable Fuel Standard were announced on March 27, clearing an outlook that had been clouded in uncertainty for months. Biomass-based diesel was the biggest winner with a 62% increase over last year’s mandated level, although nuances of the final rule will limit the upside potential for domestic feedstocks, particularly soy oil. The EPA also adjusted its RVO to account for a 70% reallocation of previous small refinery exemptions. While the EPA issued E15 summertime waivers starting May 1, legislative action on a permanent solution remains stalled.
Animal Protein & Dairy
Meat and poultry products continue to resonate with consumers. Strong demand, especially for beef, is prompting optimism for the protein sector. Lower feed costs remain a favorable tailwind for livestock producers. However, cattle feeders are beginning to feel an outsized impact of further herd contraction. Cattle supplies remain limited and any herd growth over the next few years will occur slowly. U.S. hog margins remain firmly in the black. Iowa State University estimates indicate February marked the 23rd consecutive month of profitability for farrow-to-finish margins. Broiler markets are under pressure as ample supplies of meat and slow-moving markets form a headwind to margins nearby. However, more chicken features and promotions in the months ahead should boost disappearance.
For decades, U.S. dairy markets have been balanced for butterfat with excess protein destined for the export market. But the tide has turned and America may be structurally short on dairy protein moving forward. The changing dynamics between U.S. butterfat and protein production will cause more price fluctuation as dairy processors look to balance products in both domestic and international markets. As the transition unfolds, there will be more market volatility ahead. Dairy farmers and processors should consider hedging opportunities when market prices look favorable and cover expenses because small product movements could significantly move prices.
Cotton, Rice & Sugar
Cotton prices forged a mild recovery last quarter rising 8.9% alongside price recoveries in other commodities driven largely by speculators hedging against inflation following the tumult in Iran. U.S. farmers indicated they plan to increase cotton acreage in 2026, defying expectations for reductions as cotton farmers struggle with profitability versus other crops. Cotton acres in the U.S. are expected to rise to 9.64 million, up 3.9% year-over-year. Cotton demand remains soft as consumers pull back on apparel spending with a rebound in inflation threatening to further erode disposable income.
Total U.S. rice acreage is set to plunge to its lowest level in five years as farmers struggle with exceedingly high production costs. Rice prices have floundered compared to other commodities as Indian supplies flood the world market. Rough rice prices managed to rebound last quarter, rising 14.6% on expectations of reduced acreage in the U.S. and around the world while speculative money flow brought additional price support. USDA forecasts long-grain rice acreage in the U.S. will drop 22% from last year, falling to the lowest since 1983 as farmers in the southern U.S. shift acres primarily to soybeans.
Sugar prices continue to struggle under the weight of global oversupply and eroding consumer demand. Widespread use of GLP-1 medications for weight loss is contributing to reduced sugar consumption. U.S. raw sugar prices ended the quarter 4.5% higher, lagging the recovery in other commodities. Midwest refined white sugar prices remain at multi-year lows. World sugar prices continue to be pressured by higher exports from India and Brazil as both countries divert sugar from ethanol production to the export market. U.S. sugarbeet acreage is expected to see a modest reduction in 2026, falling 1.5% year-over-year and dropping to the lowest level since 1982 with sugar prices at multi-year lows.
Food & Beverage
Higher prices and increasingly cost-conscious consumers continue to take a toll on restaurant and retail grocery sales. The sagging numbers have prompted activist investors to play a more prominent role in corporate decision making. In packaged food and beverage, activists have emphasized structural efficiency and simplification, targeting reductions in overhead, SKUs and brands through divestitures. The restaurant sector has also seen considerable activism, most often encouraging closures or divestitures. These efforts come as consumers adjust to higher prices for gas and other goods and services amidst moderate wage growth, which has prompted a shift away from dining out to more at-home meals.
Power & Digital Infrastructure
The U.S. natural gas market is entering a fundamentally different era defined by global integration, structurally higher price floors and increased exposure to geopolitical and infrastructure risk. While domestic supply remains abundant, the forces shaping future U.S. prices extend far beyond North American natural gas-directed production and weather. At the core of this shift is the growing role of LNG exports in domestic price formation. The U.S. has become the world’s largest LNG exporter, effectively importing global volatility into what was once a largely domestic market. For utilities and large gas consumers, long term planning, hedging strategies and rate design must adapt to this new reality — one in which U.S. natural gas is no longer insulated, predictable or cheap by default.
AI-related capital expenditures are reaching unfathomable levels as Amazon, Microsoft, Meta and Google race to build next-generation technologies. U.S. hyperscalers spent an estimated $400 billion in 2025 and expectations are that close to $700 billion will be spent this year. The highly concentrated nature of this capital spend — and the outsized impact it’s having on financial markets — is fueling concerns that any slowdown could burst the proverbial AI bubble. Those concerns have merit, but a closer look at the profitability of this spend and the shareholder value it’s creating suggests this cycle has yet to play out. And while risks exist, today’s market lacks the excess capacity and frothy valuations of the dot-com era.
Read The Quarterly. Each CoBank Quarterly provides updates and an outlook for the Macro Economy and U.S. Agricultural Markets; Grains, Biofuels and Farm Supply; Animal Protein; Dairy; Cotton and Rice; Specialty Crops; Food & Beverage industries and Rural Infrastructure.
About CoBank
CoBank is a cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving almost 80,000 farmers, ranchers and other rural borrowers in 23 states around the country. CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.
CONTACT: Corporate Communications CoBank 800-542-8072 [email protected]
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