Grain markets ended lower on Monday after the bearish USDA reports. Cattle recovered and lean hogs were also lower.
Corn Tanks After USDA Raises Corn Yield and Production
March corn futures ended 24 cents lower on Monday after USDA shocked the market by raising yield .5 bu. per acre to a record 186.5 bu. per acre, after the trade was expecting a yield cut of 2 bu. The agency also raised corn production to a record 17 billion bu. Arlan Suderman, chief commodities economist with StoneX says the move surprised him, the market and many farmers who were expecting a yield cut following heavy Southern rust and other disease pressure that trimmed corn yields last fall.
“Well on the first hand I didn’t necessarily believe my yield model last July either when it said 186.9 bu. and that’s where we ended up pretty close to that. Then you talk about the disease problems, the dryness as we finished the season. So I was somewhat surprised as well. But 186 is what our customer survey said Nov. 1. and that’s thousands of data points across primarily the Midwest, with some very good areas, some very bad areas.”
Suderman adds that he has never seen USDA do so many revisions of the prior year’s crop in the January report.
USDA Increases Corn Ending Stocks Above 2 Billion
Final U.S. ending stocks were raised 200 million to 2.27 billion bu. even with record total corn usage of 16.4 billion bu. Suderman disagrees with how the agency derived those numbers as they raised feed and residual another 100 million bu. to 6.2 billion while exports were left unchanged at 3.2 billion. Suderman says USDA could have made a much better case for raising exports as inspections are running 61% of last year.
“I expected USDA to raise the export target. If you look at marketing year to date export inspections over 333 million bu. above the seasonal pace needed to hit USDA’s record target of 3.2 billion, so they could have justified going higher on that. Instead, they went higher on feed usage.” In fact, he says its over 700 million bu. higher than last year. “With fewer animals on feed this year. That just doesn’t make sense whatsoever.” He thinks the agency was just trying to the ending stocks number from getting up to 2.4 to 2.5 billion. bu. which would be possible if USDA had a reasonable feed usage number.
How Far Will Corn Prices Fall?
Corn futures took out the bottom side of the sideways range the market had been trading in so how much farther will prices fall? Suderman says, “They did most of the damage in the first minute of trade as the algos put these numbers through and automatically put in sell orders. So big liquidation there as more speculative longs liquidated in this market. The question is now will they go short or not?”
He says the long term charts have some gaps below the market that should be supportive. “But the question I think now is this wasn’t such a surprise to the basis market as it was to the futures market, but will the algos go ahead and chase those chart objectives around $4.05 and $4.10 or will they or will we see enough end user buying come in here on the break to give us some stability as we move through the week?” He says there’s a big corn crop in the country. “Just look at the basis in the spreads that’s been indicating that this was a big crop.”
Soybean Yield Unchanged, Ending Stocks Raised
On soybeans USDA left yield at 53 bu. per acre, with final production up slightly at 4.26 billion bu. However, USDA raised ending stocks to 350 million bu.
as exports were lowered 60 million bu. and Brazil’s soybean crop was raised 3 MMT to 178 MMT. Suderman says he was surprised USDA lowered exports that much already in January even though he thinks total exports may still be too high at 1.575 billion bu. as export sales are running 30% behind last year.
“I’m still around 20 to 25 million bu. below USDA. I agree with the decrease in exports but I was surprised that USDA went that far this early in the year. I thought they would give more time to see what China did. I still expect China to buy the 12 MMT, although there are questions of whether they’ll take shipment of all of it in this marketing year. I think they could have gone higher with the crush number. So they were conservative on timing of that, but not on the cut in the exports,” he says.
October Lows Hold in Soybeans
Soybeans ended off of session lows with the March down only 13 cents and so Suderman says it was encouraging that the October lows held. “Yeah I think that was a positive. Now we need to be able to stabilize things going into the rest of the week and and get a Friday stabilization to this week overall. And does corn pull soybeans lower? I think that’s a big question. And of course, the other thing that could change the dynamics at any point, if we would hear that the EPA has sent their final guidelines to the OMB, the Office of Management and Budget for approval, I think that would bring some enthusiasm back to the soy complex, that we could hear those final regulations sooner rather than later.”
Winter Wheat Seedings Only Down 1%?
U.S. wheat ending stocks were raised 25 million bu. to 926 million. While winter wheat seedings were at 33 million acres, only 163,000 below a year ago. Suderman says that does not match up with their customer/farmer surveys and is a bit of a head scratcher considering the low prices for wheat. “We were looking for a much larger overall drop in wheat winter wheat acres this year. So it really surprised me. I think maybe if USDA is right, it may be some areas that got some rain quickly put in a crop in the Plains.”
He says the Plains have turned dry so he wouldn’t be surprised to see a downward adjustment in March. He admits there could be some acres that were planted to graze cattle on. “Yeah, absolutely. But there’s, you know, there’s fewer cattle in the Southern Plains anyway to put on that wheat. So, uh, I’m not sure how much that was.”
Will Farmers Give up Acres in 2026?
So with most grain prices below the cost of production will farmers give up some acres in 2026 because they can’t make a profit? Suderman says farmers are eternal optimists and so he doesn’t think they will leave any acres idle. “Farmers like to plant,” he says.
Cattle Recover
Live and feeder cattle futures recovered on Monday with a boost from the lower corn prices but also getting help from higher boxed beef values at noon and last week’s higher cash trade. However, the weekly kill was only 553,000 which was down 38,000 from a year ago a function of tight supplies but also packers cutting kills to prop up their margins. He thinks the market is in good shape with only periodic corrections.
“The numbers of cattle are down. The cheap corn is going to continue to keep demand for feeder cattle there, and they’re going to feed probably to heavier weights. Packer margins have been pretty compressed. Packers trying to tighten things up a little bit in the meat supply to help their margins. But overall, cheap corn prices should continue to help stimulate demand for these cattle.”
