Why Specialty Crop Economics Has Become an Endurance Game

Mon, 02 Feb 2026 14:08:02 GMT

Editor’s Note: This is the first story in a series that will explore the shifting economic landscape of the specialty crop industry.

Washington State Tree Fruit Association President Jon DeVaney was recently in Olympia, Wash., for Tree Fruit Day, which is a time for growers to discuss the issues impacting the industry with state officials. While those in attendance discussed the dire situation growers find themselves in, he says, a major challenge to having these conversations with elected officials has been how the economics of modern specialty crop farming have taken a turn for the worse.

“Some elected officials think you’re like those carpet stores in big cities that have been going out of business for 30 years, but they’re still there,” DeVaney says. “There is a little bit of that boy who cried wolf danger, from the perspective of talking to some of those folks.”

But much of the conversation stems from the data from the most recent census of ag in which the state of Washington lost more than 3,700 farms from 2017 to 2022, he says.

“Part of it is making sure that they have the stats to see that, yes indeed, this is a particularly rough time throughout the ag economy, especially for specialty crops, and that we’re losing farms,” DeVaney says. “A lot of my growers say, ‘Well, it certainly hasn’t gotten better since 2022, and it has gotten a lot worse.’ So, the aggregate statistics may not be updated, but we know that that trend line, unfortunately, is still continuing.”

Federal Funding Gap

And the sentiment DeVaney shared from his growers seems to be a pulse running through the specialty crop industry. The American Farm Bureau Federation’s figures show $3.6 billion in economic losses for almonds, $1.4 billion for apples, $763 million for lettuce and $717 million for potatoes in 2025. Many specialty crop leaders have pushed for economic support from the federal government .

The Specialty Crops Farm Bill Alliance says specialty crops contribute more than $75 billion annually in U.S. agricultural cash receipts and make up more than one-third of all U.S. crop sales. Yet, under the current USDA Farmer Bridge Assistance program, only $1 billion has been reserved for specialty crops and other commodities while $11 billion has been set aside for row crops.

So, where does that leave the economics of specialty crop farming in 2026? David Magaña, Rabobank senior analyst for horticulture, says a common theme might be unpredictability.

“There have been a lot of moving pieces, but overall, if we want just to characterize the current economic outlook for specialty crops, for growers in ‘26 the climate remains challenging, and tight margins continue to be one of the biggest challenges as the costs remain high, while demand is holding steady,” he says.

Labor and Price Squeeze

And for those in the specialty crop industry, it will likely come as no surprise that labor is the highest cost in specialty crops “by a country mile,” says Michael Swanson, Wells Fargo Agri-Food Institute chief agricultural economist. Swanson says this labor cost extends far beyond the field but even to the cashier at the supermarket.

“The producer can’t change the economy’s wage inflation, but they can work to get the best labor force for their spending,” he says. “This will make the human resource manager a key player in 2026.”

Magaña says crop performance also plays a hand in the economic picture of 2026 with tree nuts, including almonds, pistachios and walnuts, performing better thanks to a better balance with supply and demand. He says this is likely due to the crops’ less labor-intensive production.

While tree nuts faced some challenging seasons from 2021 to 2023, they began to improve in 2024 and 2025.

“Prices for almonds, for example, should be profitable for most growers depending on the cost structure that they have,” he says. “The vegetables and the fruits that are more labor-intensive are facing more cost pressure compared to others.”

Magaña says what’s interesting is that growers often get excited about lower yields because it could mean more returns. But, he says, revenue equals price and quality. With the current walnut crop, it doesn’t always translate to higher prices, which further compresses margins.

The Consumer Paradox

“When we take a look at all this revenue compared to the cost, you need to be looking also, obviously, [at] how inflation is moving, both on your cost side and on your final price side. … To the point of the consumer, we’re seeing inflation has been stabilizing with the Consumer Price Index, but that doesn’t mean that prices are declining. They’re just increasing at a lower rate,” Magaña explains.

He says fresh produce prices have stabilized when compared to other food categories, which is a good thing for consumers but perhaps not so much for growers.

“The fresh produce aisle has become a healthy alternative, and also from a budget perspective,” he says. “So, that’s good news for the consumer, but for the grower, just stabilizing or flat prices and increasing costs, that’s just more pressure on markets.”

Swanson says that while retailers look to price, it’s also important to secure consistency and reliability in fresh produce contracts.

“It does not do them any good to get a good price on nonexistent or below-average quality product,” he says. “A buyer will always prioritize a supplier who does not let them down.”

Swanson says also of note in 2026 will be the impact of GLP-1 drugs on consumers’ buying habits.

“At the moment, they are trying to add protein to their diet to make up for the lower number of calories they are consuming,” Swanson says. “This pressures the fruits and vegetable categories as they make these trade-offs.”

Global Competition and Currency

Swanson says imports will be another economic challenge in 2026, with imports continuing to put a ceiling on domestic prices for specialty crop commodities that go head-to-head against them.

“U.S. producers certainly know that they have to match or beat import prices,” he says. “That is a tall order with higher land costs, labor costs and stricter environmental regulations, but the U.S. producer also has better local logistics, financing and productivity to compete in this market.”

Magaña, though, says that as the dollar weakens, it helps U.S. growers in the export market. He says the dollar depreciated almost 10% in 2025.

“That has improved the competitiveness of U.S. exports in international markets, and at the same time, when you look at that, that serves in practice in the same way as a tariff does for imports,” he says. “All exporters of fresh produce from Latin America, exporting to the U.S., when the dollar is weakening, they lose competitiveness.”

On the market, Magaña says the weakening dollar has had beneficial impacts. Western Europe has begun to import more California almonds and walnuts, which has also helped improve prices.

Wholesale Disconnect

DeVaney says a lot of his conversations in the Washington statehouse stemmed from prices, showing the upward trend line of retail pricing and the downward trend of wholesale fruit prices. He says it was difficult for those officials to understand.

“We had to explain to them that, yes, you’re hearing consumers say that prices are too high, but we’re not seeing any of that,” he says. “And quite the opposite, our growers are seeing less income and are trying to figure out how to survive in that environment. ... We don’t really have the ability to affect directly what we get from retailers.”

Tree fruit growers also raised the issue that they put up-front costs and investments into a crop for which they might not get paid until eight to 14 months later.

“It’s still the growers’ fruit as it goes into storage, and it’s only when it comes out of long-term storage and is packed and sold that they eventually get the net proceeds,” DeVaney says. “And so, that’s the other decision-making challenge, because the grower doesn’t know what the price will be at the time they’re selling it.”

For many tree fruit growers, certain expenses — such as labor costs — are determined by government policy. When asked to identify the most burdensome piece of legislation, policy or economic factor, DeVaney says it’s hard to do. He likens the current state of economics and policy to being attacked by a swarm of bees.

“There’s so many things coming at you that it’s overwhelming, and potentially fatal,” he says. “But you say, ‘Which bee is the worst in that environment?’ Well, they’re all bad, and they’re all coming at me at once. So, it’s the swarm. It’s not the individual bee.”

Capital Strategy and Survival

In terms of inputs, Swanson says this year growers will look to competitive bids on inputs and technology due to the added constraints.

“The entire crop production sector is asking for value with their compressed margins,” he says. “The old saying ‘you don’t get if you don’t ask’ will ring especially true in 2026.”

Magaña also says growers will likely delay investments and upgrades with a challenging financial picture. This includes orchard development, irrigation upgrades or even automation or mechanization. However, the potential for lower interest rates this year before an expected climb in 2027 and 2028 might mean it’s a good time for growers to secure financing and lock in rates.

The biggest risk in a high-volatility market is illiquidity, Swanson says. The key will be for growers to control growth or financing to avoid being asset-rich but cash-poor.

“Debt is not the problem, but the dosage is the problem,” he says. “The old saying ‘the dosage makes the poison’ is true for debt as well. Oftentimes, illiquidity and impatience are two sides of the same coin. Companies should be growing, but making sure it’s a controlled growth is the key.”

Endurance Game

DeVaney says another challenge facing growers is the notion of an appropriate supply, which fluctuates based on current market conditions.

“We do not calibrate supply and demand that finally, especially in fresh produce,” he says. “Because if there’s an abundance of table grapes one year, then that sort of puts downward pressure on all the competing fresh fruits that people might grab for lunch. It’s not just our own crops, it’s the aggregated produce sector, in a lot of ways.”

DeVaney says it’s not so easy to simply make a quick reduction in production for permanent crops, especially if growers are unsure that what they’re seeing is a short-term blip or a larger trend.

“Once you’ve already made that investment, the bias is toward sticking with it until you’re absolutely certain it’s not a good long-term prospect,” he says. “And some of those decisions have been drawn out as well, because the grower doesn’t want to walk away from that investment. And if they have revenue insurance, they have sort of a cushion to keep them hanging on longer to decide: Is that the decision they have to make or not?”

When asked to give a snapshot of his growers’ outlook, DeVaney says there’s a lot of frustration, as growers want to be the masters of their own fate. While agriculture has always had inherent risks, it seems even riskier now.

“It doesn’t feel like there’s a single action they can take to determine the outcome with this variety of global market forces and public policy issues at the state and federal level that are influencing their costs and their returns, and so their profitability feels outside of their control — that when they make good farming decisions that affects their potential, but it doesn’t determine their success or not, which is a frustrating place to be,” he says.

While growers might see choices that need to be made to recalibrate with current market and demands, it’s difficult for growers to be the first or second one to make that decision. It’s easy for the industry to say production needs to decrease, but it’s in the execution that becomes more of a challenge.

“It’s like people in a lifeboat together, with a limited amount of food, who want to jump overboard and not save the others,” he says. “That’s a terrible request to make of anyone, and so everyone is dealing with the starvation rations, looking at each other: ‘Will I outlast you and be able to then survive going forward?’ It feels like an endurance game with your industry peers to see who will come out the other side. And that’s a terrible place to be. People know maybe what needs to happen, but it can’t be decided on. And so, you just buckle down and see if you can survive through the point at which the market forces that correction upon us.”

Swanson says since labor will be the No. 1 cost driver, it will also need to be the specialty crop industry’s No. 1 focus.

“Employers cannot hire at below-average wages without getting below-average productivity,” he says. “However, they can hire at average wage rates and get above-average labor productivity.”

Swanson says there will be opportunities for specialty crop growers to share growth and cost control.

“Converting new customers allows them to outgrow conventional crop performance,” he says. “Their challenge is seeking a higher price to match their premium product offerings. If consumers are looking to save money on food spending, it will be harder to convince them to switch to the premium category.”

Swanson also says overproduction pressuring down prices is the biggest risk to crop profitability in 2026, which could come in the form of aggressive plantings or excellent weather.

“Let’s hope that producers stay in their lane plantingwise and the weather is average,” he says. “The flip side is underplanting or a weather event reducing supply. Let’s not hope for that either. It’s not bad when someone else gets hit by bad weather, but it might be you.”

Fresh Produce Economics