Decoding World Crop Balances

USDA released its monthly Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports Friday morning. The pre-report focus was on U.S. yields, with traders expecting USDA would trim the corn and soybean numbers from those reported in August (leaving wheat alone until the Sept. 30 Small Grains Summary report). There were good reasons for that expectation, such as: 1. Many private tours had suggested lower corn yields; 2. there was rust, dryness and other late-season issues popping up; and 3. USDA was due to incorporate objective yield plot data for the first time.

The yield numbers were, in fact, lower, but that isn't the primary focus of this column. I want to draw your attention to the world numbers, specifically the projected world stocks-to-use ratios, as shown in the chart accompanying this column. Those are measures of relative tightness, or how much a prospective buyer might have to pay to get the next bushel. For corn, soybeans and wheat, one of these is not like the others!

One can argue that world numbers are most important for export estimates and that we have very little clarity for those because of the rapidly changing tariff environment. Tariffs add a tax between trading partners and give potential price advantages to other trading partners that don't have the same tax structure. In the most extreme example, China has still purchased no new-crop soybeans from the United States. A quick look at the WASDE estimates from Friday shows USDA has China receiving 112 million metric tons (mmt) of imports from all sources this year, up from 106.5 mmt a year ago and matching 112 mmt from two years ago (i.e., before the current round of the trade wars).

It would appear there has been no impact on China's consumption. However, this is just an illustration of my PET (Planet Earth Theory). More properly, it is a Planet Earth Observation. It goes like this: With the exception of the occasional spacecraft to the moon or Mars, neither supply nor demand leaves the planet. Like a balloon, if you push or pull on one part, there is corresponding movement on another part, aka displacement. If the U.S. doesn't sell to China, somebody else does, but the U.S. then sells to whoever the winner of the Chinese sale was previously selling to. The fight becomes over who is left paying to store the leftover ending stocks, and the size of those stocks is very relevant.

In the case of soybeans, world export trade volume is growing. USDA shows 177.81 mmt for 2023-24, 183.47 mmt for 2024-25 and an estimated 187.78 mmt for 2025-26. Much of this global growth may be attributed to consumption for biofuels, but it is also obvious from our original graphic accompanying this column that soybean supplies globally are ample at a projected stocks-to-use ratio of 29.25%. The USDA cash average price estimate of $10 per bushel for 2025-26 reflects this easy availability.

This situation in soybeans doesn't prevent a rally and, in fact, we saw a quick 20-cent-per-bushel rebound from the initial post report lows. The average annual trading range for beans in a marketing year is $3 per bushel from low to high. The loose stocks-to-use ratio lowers the "centering" of the price range for the year until the supply and demand balance changes.

In my chart accompanying this column, I pointed out one of these markets is not like the others. USDA trimmed the projected world corn ending stocks to 281.40 mmt on Friday (2025-26). That's down from a revised 284.18 mmt for 2024-25. That's a 21.8% stocks-to-use ratio versus 22.54% in the marketing year that just ended. World stocks ex-China (not yet a net exporter) are still thought to be very snug at 104.38 mmt. That's a 10.8% stocks-to-use ratio versus ex-China total use and justifies USDA's record-large corn export estimate of 2.975 billion bushels for the just-begun marketing year.

Where does wheat fit in all this? The world numbers were running a little bit the wrong way Friday, with USDA bumping up Russian production to 85 mmt from 83.5 mmt and agreeing with ABARES that Aussie production was bigger at 34.5 mmt versus the previous 31 mmt. World use numbers rose to reflect the increased supply, but ending stocks were bumped up to 264.06 mmt from 260.08 mmt. The new stocks-to-use ratio would be 32.4%, the same as last year's current estimate. Ex-China for 2025-26 would be a much tighter 20.8%, however, as that country is believed to hold huge food security reserve wheat stocks while the rest of the world inventory is more limited.

So, what is the bottom line? The U.S. corn balance sheet looks very comfortable on paper with projected ending stocks over 2.1 billion bushels for August 2026. However, the yield numbers are still in flux, and in terms of world stocks-to-use tightness, corn has the best leverage if the crop shrinks. Soybeans are kind of in the opposite situation, with fairly snug projected U.S. ending stocks but very comfortable world supplies compared to projected use. Both corn and beans are, of course, within one South American crop failure of a big rally. For wheat, the 2025-26 stocks-to-use ratio is projected to be tighter than at the previous 9-year-cycle low (2016-17 at 38.8%). That, plus inflation, both suggest prices don't have to go down to pre-COVID levels, but tightening below 30% would be much more likely to confirm a cycle low in prices. Russia is the wild card, as the world's largest (and one of the cheapest) wheat exporter.

Alan Brugler may be reached at alanb@bruglermktg.com

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