“It’s easier to be skeptical.” Is that true? Is it easier to be skeptical of usage estimates and trade agreements, or is it just the more popular thing to do? It’s important to question USDA’s estimates, but it’s also important to question consensus. And if consensus in the current market is skepticism, it might make sense to add optimism to your outlook.
No. 1 on the hit list for market skeptics is USDA’s estimate of 6.1 billion bushels of corn in the feed and residual category. The residual component of that category is exceptionally difficult to predict. It’s got more to do with supply than it does with any actual use. Big total supplies means bigger residual use. Small total supplies means smaller residual use.
Total corn supplies in December’s S&D were a record 16.75 billion bushels. Record total supplies should equal record residual use. Combine that with a bigger fourth-quarter 2025 hog slaughter pace, and still-heavy carcass weights on cattle and hogs, and feed and residual use should be a record.
Many analysts expect USDA to eventually trim 250 million bushels from feed and residual corn use. That might happen, but it will be driven by a much lower total supply. If supplies remain at 16.75 billion bushels or more, I’m optimistic feed and residual use can hold at 6.1 billion bushels.
The bottom line is corn’s stocks-to-use ratio is not likely to change much from 12.5%. That’s not a bullish stocks-to-use ratio, but it doesn’t suggest the need for lower prices to build demand.
Long-Term Game Changer
The trade agreement with China is clearly the No. 2 item on skeptics’ list. I don’t know if China will buy 12 MMT of U.S. beans in the 2025-26 marketing year, but I do know that’s only half of what they’d normally buy. I’m optimistic they will get that done.
I’m also optimistic China will find a way to purchase 25 MMT in each of the next three years. I see China’s bean buys as grease on the skids of heavier issues between the U.S. and China. Before the agreement, my longer term outlook included greatly reduced exports to China over the next three years as China invested in Brazil. They will invest more in
Brazil and, after a three-year pause, Brazil’s share of the Chinese bean market will increase again.
But there is a three-year window of opportunity. New markets in Asia, Africa, Europe and Central America are possible. Increased domestic consumption of soybean oil in biofuels and more meal consumption and exports would also be demand-positive shifts.
I’ll admit the clock is ticking on my optimism. Without market development outside of China, I’ll be running with the skeptics in three years.
