Grains ended higher Tuesday with limit up moves in winter wheat, livestock were mostly lower.
Wheat Limit Up as USDA Slashes Production
Both classes of winter wheat ended limit up on the day as USDA shocked the market with their aggressive production cuts in the May WASDE according to Arlan Suderman, chief commodities economist, StoneX.
USDA lowered wheat yield by 5.8 bu. per acre to 47.5 bu. and lowered all wheat production to 1.561 billion bu. which is below last year by 424 million bu.
Total winter wheat production was pegged at 1.048 billion bu. down 25% from 2025 drug down by a 36% cut to the hard red winter wheat crop.
He thinks production could be cut even further in the future. “I think we’ve seen quite a bit of deterioration here over the last couple of weeks. These are May 1 numbers, so we may see a little bit lower number. Industry tour this week should give us a bigger idea on that.”
Plus, his experience is when USDA makes a big jump on its first estimate, that typically means that there could be more moves coming. “Because they tend to be fairly conservative and don’t want to overshoot. They don’t like correcting back the other way.”
Abandonment is the Key
Suderman says the key is the percent abandonment of winter wheat acres.
“Now, the USDA’s abandonment number is pretty close to what we modeled, but how might high diesel prices affect that? Because as diesel prices increase, they increase the cost of running the combine over those acres, raising the break-even level at which you decide, is it worth actually taking the combine into the field? So we may push that abandonment a little bit higher.”
He thinks for Kansas a 17% abandonment rate is pretty reasonable but it may be much higher in Texas and Oklahoma, maybe Colorado than it will be elsewhere.
How High Do Wheat Prices Rally?
Hard red winter wheat made new highs on Tuesday and closed limit up but how high will prices run? Can futures get above $7.50?
Suderman explains, “Well, the interesting thing about wheat is it doesn’t necessarily trade supply and demand fundamentals so much as it trades headlines and emotions. We saw back in 2010 when there were headlines of fires and drought-stricken Russia, and we doubled the price of Chicago wheat in five weeks and then it came collapsing down. We realized, oh, we traded that story. The fundamentals aren’t that tight after all. So you can just run with emotions and the funds can go with it.”
Plus, he says funds can take wheat prices too far in either direction. “If you get a headline out of Iran saying the war is over type of a thing, you could see a collapse of crude oil really suck the air out of these grain and oil seed markets as well.”
Global Wheat Stocks Fall
Global wheat stocks also fell 4.2 MMT to 275 MMT but could those supplies shrink further with the talk of lower production and yield due to higher fertilizer prices and lower use?
“I think some of it comes down to do we actually see reductions in fertilizer application. One of the things we are seeing is a reduction in area because of high fertilizer and fuel prices. As we go into Argentina and Australia in the Southern hemisphere, we’re there in the middle of planting now. It looks like a 5% to 6% reduction in area.”
Corn Ending Stocks Down Slightly
USDA lowered corn production nearly 1 billion bu. to just under 16 billion bu.
New crop ending stocks were estimated at 1.957 billion bu. which is down 185 million bu. from last season and under the psychological 2.0 billion bu. mark. Still it was above trade estimates.
Suderman says his estimate was lower than that, “I was at 1.833 billion bushels. So I do think there’s some downside to this. But regardless, once you slip below 1.5 billion, that’s when the market starts caring, it wouldn’t take much of a yield drop in order to do that with this acreage.
I do think there’s a chance that we could see a little bit more of an acreage shift from corn to soybeans, maybe another million acres or so, helping to bring that down,”
He also thinks exports could get stronger moving ahead unless Brazil’s crop is further increased and cut U.S. exports.
Global Corn Stocks Fall
The bigger bullish factor is the huge draw down in global supplies in the new crop marketing year.
USDA estimates 277.5 MMT carryout for 2026-27 which is down 19.4 MMT from last season and could continue to decline next year.
“I think this is a pattern that we’re going to see more of the next year is drawing down supplies with high fuel, high fertilizer, increased uses for biofuels. The biofuel story, I think, is one that we’re just starting to tell now, going to use more feedstock,” he explains.
Brazil and Argentina Corn Production Hike
The impressive part was global corn stocks fell despite an increase in the Brazilian and Argentine crop by a total of 10 MMT.
Suderman says, “I think the market’s already priced a lot of that in. USDA just hasn’t put it into its balance sheet yet. So you look at Argentina,
USDA was holding down at 52 million metric tons or far too long. Many private estimates are 64 to 65 million metric tons. I think it’s probably closer to 60 million metric tons. USDA is now at 57. We’re at 58. Brazil could go a little bit higher as well.”
He stresses that Brazil is using a lot more corn for ethanol and is increasing its blend from 30% to 32%.
USDA Cuts Soybean Ending Stocks
USDA lowered old crop ending stocks for soybeans down to 340 million bu. with new crop down to 310 million bu. despite 3.5 million more acres.
Suderman says biofuels demand helped to push the crush figure up to 2.730 billion bushels for 2026-27 and there is a possibility that number could go higher.
“The question is going to be exports. As I said, USDA went up on their exports, so 1.603 billion bushels for exports next year, up 100 million bushels.”
He thinks that’s a stretch. “China only buys about 12 million metric tons. I don’t see them buying the 25 million metric tons because A, these numbers show that we don’t have it and they don’t have the room in their reserve for it. As high prices our beans are relative to Brazil beans, that’s where they would go is in their reserve and they don’t have the room for it.”
So, Suderman predicts China will buy soybeans but 12 MMT or less. “How much less is the question.”
China to Buy Corn and Wheat, Not Soybeans?
USDA in the May WASDE pegged China’s soybean stocks nearly steady, but other crops are expected to see draw downs.
“When you look at their wheat stocks at about a 10-year low, their corn stocks at about 13-year low, could we possibly see wheat and corn in the trade deal rather than all the soybeans everybody’s talking about? I think that’s a real possibility. We should learn that in a couple of days.”
If China only buys 12-13 MMT that is half of what they said they would purchase and that would be a disappointment to the market. So could it weigh on prices?
Suderman says, “I think with a strong biofuel program in the end, we would end up with ending stocks similar to where they are now. And I think domestic demand is what’s really going to be driving it. If they didn’t buy anything, then that would be a problem. If they buy 12 million metric tons, I think that keeps us well balanced in here, particularly with fuel prices staying high, the demand for biofuels.”
He doesn’t expect China to buy cotton as part of the deal because they are able to source those needs from Brazil.
Beef may also be off the table as President Trump wants to keep U.S. prices down especially ahead of the mid term elections.
Cattle Market Fears Imports
The cattle market has been down the last couple of sessions on fears of increased beef imports.
President Trump has backed off his executive order to eliminate the tariff rate quotas on beef imports but the market is not convinced.
He says, “A little over a 26% tariff that Brazil has to pay on what it exports to the United States right now. If you wipe that out, that suddenly drops their beef prices well below where we’re at currently here in the United States and would be expected to significantly increase exports to the United States.”
Suderman says President Trump is focused on bringing down food prices and the CPI data Tuesday did not support that goal.
“We once again saw those food prices being a significant significant contributor to inflation and beef is right at the top of the list there. And so he’s trying to do that ahead of the elections. I wouldn’t be surprised if we see that at all,” he says.
Cattle Market Top?
The administration has also announced stepped up efforts on anti-competitive practices with a DOJ investigation of the big four meat packers.
So is that going to top the market like it did back in October of 2025 and cause fund liquidation?
“I’ve been wrong on that so many times this year. I hate to say it again. It certainly does suggest maybe a near-term top. But every time we expect that, we come back to the reality of tight domestic supplies,” he says.
The consumer is still spending, and the data has really been supporting the consumer continuing to spend he says.
” The question is, is how much we are effectively able to increase the supply with those increased imports. We’re already importing record levels. What’s our capacity for further adding to that? Because it looks like the consumer’s going to continue to buy if we can. significantly increases imports. Then we can see those beef prices come down and we start to see the reduction then in the prices for the live cattle.”
The key is cash and after record prices last week for cattle the packers are already paying $260 and $400 already this week.
