USDA’s Jan. 12 Annual Crop Summary and World Ag Supply & Demand Estimates featured a corn crop estimate that was so large it left me wondering if the country’s grain-handling system could handle it. Total corn use for 2025-26 is estimated at 16.4 billion bushels, and in the short time since the report, there is evidence the system can handle it. A record corn supply should put pressure on the national average corn basis, but basis so far this year is (on average) above the three-year average. The cash market is doing what it should to attract supplies to move to end users.
Corn exports are already estimated at a record for the current marketing year, and most do not expect the estimate to change much from January’s 3.2 billion bushels. Corn sales and export inspections through the end of January were on pace to get to USDA’s estimate but not strong enough to suggest exports of more than 3.2 billion.
The “What If” Scenario
But what if demand in importing countries suddenly expands? Not a sudden increase in feed consumption or biofuels production, but a surge of geopolitical uncertainty where countries that rely on imports suddenly feel the anxiety of food insecurity.
The Jan. 31 issue of Pro Farmer included an item the editors first saw in The Financial Times. It reported on “a trend among governments around the world, which decades after dismantling food reserves and putting their faith in global trade, are now rebuilding emergency stockpiles.” The report noted countries from Sweden and Norway to India and Indonesia are building emergency reserves, spooked by fears of a world they see as growing increasingly unstable.
It’s the same uncertainty that weighed on the value of the U.S. dollar and pushed precious metal prices higher than ever. I know, it’s not that simple. But with central banks accumulating gold reserves to build financial security, it’s not unthinkable countries will build grain and energy reserves. That would be a sudden increase in demand that changes the outlook for all grains.
That is, of course, if the system can handle it. Demand beyond 16.4 billion bushels would stress the system, but there is no reason to think the U.S. lacks the infrastructure to make it happen. And if the system can’t handle the demand, or if demand falters, the cash market will make it known through a declining basis market.
For now, flat price is low enough to encourage more demand, and the cash market tells us demand is good enough for better-than-average basis. Use marketing strategies that capture the above-average basis but give demand a chance to prove low prices cure low prices.
