USDA Reports Review

USDA finally gave us some updated crop production and demand data on Friday, having decided to do so even before the vote to end the government shutdown. This was important, as many transactions were being made with little understanding of the true value of the commodities. Given the market reaction, some producers are likely saying that they would have preferred to keep the buyers in the dark a little longer! My own view is that what goes around comes around. Bid/ask spreads (particularly in the cash market) should narrow with less uncertainty about crop size.

USDA also released a list of export sales that were large enough to have qualified for the daily reporting system. That is sort of a down payment on reporting weekly export sales numbers, which will not be caught up to the current week before the year's end.

Corn sold off after the USDA numbers came out. The futures rally this week was anticipating smaller U.S. corn production and tightening ending stocks. The average trade guess had corn average yield at 184 bushels per acre (bpa) and production at 16.557 billion bushels (according to the LSEG/Reuters pre-report survey of analysts' estimates). Ending stocks were expected to creep 26 million bushels higher due to the big "known" increase in old-crop carryover from Sept. 30. Traders had convinced themselves that disease problems would shrink yields from the September version.

USDA did trim the U.S. average corn yield to 186.0 bpa, down 0.7 bpa, and cut production 62 million bushels (mb). Obviously, that is less of a reduction than the trade expected. What happened? Ears per acre in the objective yield plot states were the lowest in three years, but only slightly lower than the previous estimate. Implied grain per ear is hanging in there at record-high levels. Record yields were reported for Indiana, Illinois, Iowa, South Dakota, Wisconsin, Georgia, South Carolina and Virginia. The three "I" states in that list account for a lot of weighting in the national average because of acreage.

The above sounds sort of gloom and doomish, with record production and record yield to go with huge, harvested acreage. However, the market axiom says that "low prices cure low prices." USDA raised projected ending stocks to 2.154 billion bushels (bb). While up 622 mb from last year, that's not too bad, considering U.S. farmers boosted production by 1.86 bb via the huge increase in 2025 corn plantings and the record yield.

It is a good time, globally speaking, to have a big U.S. corn crop. Why do I say that? Look at the chart accompanying this column. Projected world corn ending stocks (next Sept. 1) as a percentage of use are expected to be the tightest since 2012-13. While China accounts for nearly 62% of the expected world surplus stocks, those are food security reserves. It will likely be another three to four years before their yields are raised enough by GMO varieties to enable significant exports. The rest of the world is a net importer, and the stocks-to-use ratio ex-China is currently projected to be 11%. That would be up slightly from last year's 10.6% but still very close to the 2012-2013 era.

There is a giant sucking sound for corn exports, and the U.S. is in a position to deliver. Export inspections, the closest thing we have to real-time data at the moment, are up 56% from last year at this time. Availability and slightly lower prices are fueling the sales, along with the need. The lack of soybean export sales to China, now starting to improve, was a benefit to U.S. corn exports because port facilities normally dedicated to soybeans could be used to load out corn. USDA raised projected exports another 100 mb Friday morning to recognize this rapid early season start and the tight stocks-to-use situation globally.

The bottom line? I don't want to sugarcoat things. A 2.154-bb corn carryover and a 13.3% projected U.S. stocks-to-use ratio are kind of like dragging a boat anchor. It's going to slow you down. The front-month futures high in 2019-20 with a similar stocks to use was $4.52. Given inflation since then, the marketing-year ceiling is a bit higher in 2025-26 for equivalent scarcity, but statistical models suggest anything over $5 is going to need a big assist from the 2026-27 crop (lower acres, early season planting problems, that kind of stuff).

For you technical traders, the 61.8% Fibonacci retracement from the April-August decline stopped the rally this week. Rising regression channel support on the continuation charts is around $4.23, and of course, there is a chart gap at roughly $4.03-4.09 on some chart types. These numbers apply to December futures. Others may look at the 40- or 50-day moving averages.

Alan Brugler may be reached at alanb@bruglermktg.com

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