Happy Holidays! This is my last newsletter of the year. The last week saw a sizable number of reports released by the government as they continue to catch up from the shutdown. The WASDE report, trade data, and numerous usage
reports for crops provided by NASS came out. Overall, they were slightly bearish for most crops and led to a slight decrease in prices during the week culminating in a bearish sell off on Friday. Prices struggled to get traction on Monday and followed through on the price direction begun on Friday.
Wheat Market Outlook:
KC hard red winter wheat prices fell over the last week. The March contract closed at $5.12 on Monday. March HRW futures prices dropped below the lower end of the $5.20 – $5.55 range that they have been in since late October and
approached the calendar year lows seen in early to mid-October. July harvest contract prices closed at $5.37 and fell back near early October levels as well. While large global wheat supplies are a part of the narrative, a general sell off in
grain markets containing a technical component contributed to the drive lower on HRW prices. Price movements of this nature can be ephemeral but punishing. Cash prices in Oklahoma, presented in Table 1, continue to move with futures
prices with little movement in basis according to AMS data
Last week saw the USDA release a bundle of reports that updated date pertinent to wheat markets. Most of the focus was on the December WASDE report. USDA made minimal changes to domestic wheat balance sheets for 2025/26. Small
adjustments to trade for white and soft red winter wheat made no impact on the overall wheat balance sheet. For the second consecutive month, USDA raised global production.
Almost every major exporter saw an increase in production for the crop year. Figure 1 shows the countries outside the U.S. classified as major exporters in the WASDE report. Every listed nation except for Ukraine had production raised in the report. In total, major exporter production went up 318 million bushels from November’s report. A total of 13.06 billion bushels of wheat produced by major exporters saw global production climb above 30.7 billion bushels
Global wheat ending stocks increased to almost eleven billion bushels despite increases in trade and feed usage. It was a slightly bearish report since many market observers had penciled in higher world production as reports from around the world keep finding more bushels of wheat. It does set up a competitive export market over the next year. The Census Bureau released data on Wednesday that showed wheat grain exports in September at 3.23 million metric tons (118.68 million bushels). The exports in September were up approximately twenty percent from August and confirmed the strong shipments provided in the export inspections report. Export inspections for all wheat in September totaled approximately 112 million bushels depending on how one calculates the monthly rollovers.
USDA continues to catch up on export sales data releases and are up to November 20 as of last Monday. Through December 11, wheat export inspections are 519 million bushels, up around ninetyfour million bushels from last marketing year. Over the last month weekly inspections averaged sixteen million bushels per week and remain on pace for USDA’s forecast. Hard red wheat export inspections sit at 190 million bushels and have slowed in pace over the last month. At present, the pace needs to pick up to hit USDA’s forecast for hard red winter wheat exports. Figure 2 shows recent global port prices for wheat. While the wheat prices shown reflect a variety of classes and quality specifications, the prices have remained stable over the last few weeks despite the bearish production forecasts. A portion of the price support appeared tied to uncertainty over Black Sea grain trade and recent softening of global prices reflects less concern on that front and confirmation of large global crops
Additionally, NASS released the quarterly Flour Milling report last Wednesday. July-September wheat ground for flour totaled 231.4 million bushels, up 8.5 million bushels from the April-June total and essentially flat by being down one million bushels from last year. Wheat food usage in the balance sheet looks to remain unchanged for now
Corn Market Outlook:
Corn markets also received a slug of reports from USDA last week. USDA provided a minor surprise in last week’s WASDE by raising the forecast for corn exports to 3.2 billion bushels, up 125 million bushels from the previous forecast. Strong export pace along with changes to overseas production, particularly Ukraine and Canada, underpinned this move. Export inspections remain torrid through December 11. Corn inspections came in at 886 million bushels, up 525 from last year as shown in Figure 3. Census data released last week placed corn exports at approximately 275 million bushels in September. Export inspections were reported at 257 million bushels during September. One can see the logic in raising exports given the recent pace and the low price bringing out global buyers. Even so, the number is massive and drives corn usage for the 2025/26 marketing year to 16.28 billion bushels, up over 1.13 billion bushels from last marketing year.
Ethanol demand remains good, but for corn usage to make the 5.6-billion-bushel forecast put forth by USDA, the pace needs to pick up significantly. Last week, NASS released the Grain Crushing report that provided corn usage over the first two months of the marketing year. Corn usage for fuel by month is shown in Figure 4. Through the first two months of the marketing year, corn usage for ethanol sits at 911.8 million bushels, up one million bushels over the 2024/25 marketing year.
Thus far, the pace is not exactly at a level that shows an over 150 million bushels increase for the marketing year.
The pace needs to pick up at a half a million bushels per day for the rest of the marketing year. Gasoline demand has run below last year. While ethanol exports remain strong, the data thus far shows no significant increase thus far in the marketing year. While new policies are coming into effect next year in the form of a 45Z tax credit that will provide incentives to ethanol producers, someone must buy the product.
The prospects for feed and residual come into focus with the January release of the Stocks report. At
present, USDA’s 6.1-billion-bushel forecast sits high in comparison to most market analysts. Feed and
residual are a derived number calculated from the stocks reported on hand every quarter. While usage
will be huge in the first quarter of the marketing year, it is going to need to be massive for the current feed
and residual forecast to materialize. January 12 will see the release of the Stocks for December 1 and the
final production numbers for corn from the 2025 crop. The releases on that day could create a shock in
the corn market.
Corn prices fell despite the somewhat bullish WASDE report reflecting the underlying fundamentals
discussed above and pressure from other agricultural markets. March corn futures contract closed
Monday at $4.40 at the lower end of the range of $4.35 – $4.55 that the prices has moved around in since
late October. Oklahoma cash prices varied between $4.10 – $4.35 over the same period with prices at
$4.17 on Monday. At present, a rally in corn prices that breaks out of the recent range seems like a remote
possibility given the underlying fundamentals and uncertainty around the upcoming January reports.
