Todd Hubbs– After the initial shock of the data USDA released last Monday, futures markets recovered a bit to end the week. While the wheat market dealt with bearish data, the corn market truly took the brunt of punishment dished out by USDA’s
statistical branch. The main takeaway from the NASS reports and WASDE forecasts is higher supply both domestically and globally for grain and oilseed crops. Demand remains robust at these lower prices.
Wheat Market Outlook:
KC hard red winter wheat futures prices clawed all the way back at the end to the week near prices seen on Monday before the reports. The March contract closed at $5.27 on Friday. The recovery put March futures back near the middle of the $5.00 – $5.55 range that they have been in since late October. July harvest contract prices closed at $5.51. The prospect of reaching the lofty heights of $5.75 seen in early November seems difficult under present market conditions.
Rallies that reach those heights merits consideration of sales if possible. Cash prices in Oklahoma, presented in Table 1, continue to move with futures prices with tightening in harvest basis over the last few weeks.
The USDA reports set the tone for limited upside of price rallies. On the wheat domestic balance sheet, feed and residual usage dropped 20 million bushels to 100 million. Ending stocks increased to 926 million bushels on that change and a
slight adjustment to seed usage. The December 1 stocks report triggered the move on feed and residual usage as it came in higher than expected. Figure 1 shows December 1 wheat stocks for the U.S., Kansas, and Oklahoma. Stocks of
1.675 billion bushels in the U.S. were up over 100 million from last year. Oklahoma stocks increased year over year by 18 million bushels to 131.
Elsewhere on the balance sheet, exports remain unchanged. There is a slight concern on the export front as net sales for the last two weeks were negative for hard red winter wheat. Total wheat and HRW exports are slowing under fierce international competition.
Once again, USDA raised global production. Increases for Argentina and Russia pushed production for
the crop year in major foreign exporters to over 13.5 billion bushels, an increase of 1.65 billion bushels
over last year. Small increases to global feed, imports and exports could not offset the production
jump and world ending stocks moved approximated 125 million bushels higher to 10.1 billion bushels.
This part of the report was only slightly bearish since 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.
Figure 2 shows recent global port prices for wheat. While the wheat prices shown reflect a variety of
classes and quality specifications, the prices reflect the continuing growth in crop production totals
and the competitive nature of the wheat market at present. Argentina’s massive crop along with
Australia’s excellent production totals this year keep prices competitive in the southern hemisphere.
Despite continued conflict in the Black Sea region, prices remain competitive. The drop in production
totals in Mideast countries in the WASDE was the major downward adjustment (mainly Turkey) along
with a slightly smaller crop in Japan for major importers. The potential for supplies to make up for
these issues is abundant and diverse.
The other major report with market implications for wheat released by NASS was the winter wheat
seedings report. Winter wheat acreage planted barely dropped from 2025 as discussed in last week’s
newsletter. Given recent weather in the southern plains, production issues will be in the news for the
next few months. Figure 3 shows the difference between planted and harvest acres along with winter
wheat drought conditions. The correlation is tenuous at best when looked at in mid-January. Rallies
due to speculation on a decrease in harvested winter wheat acreage may be good pricing
opportunities.
Corn Market Outlook:
Corn markets nosedived after the reports came out on Monday and spent the rest of the week trying to
recover. March corn futures fell 25 cents on Monday and Tuesday of last week to close at $4.20. By the
end of the trading day on Friday, March contracts closed at $4.25. Cash prices over numerous
locations in Oklahoma came in at $3.75 – $3.80. The December contract closed at $4.50 with basis
reports near 40 under. An over 17-billion-bushel crop with supplies topping 18.5 billion bushels is hard
to recover from and puts an emphasis on whether the USDA’s usage forecast of 16.37 billion bushels
is attainable.
Corn ending stocks for the 2025-26 marketing year increased to 2.2 billion bushels, up approximately
200 million bushels from the previous forecast. Usage changes for corn consisted of a higher feed and
residual forecast along with a slight reduction of 10 million bushels for slower high fructose corn syrup
and glucose/dextrose usage. The export and corn use for ethanol forecasts remain unchanged.
Corn exports remain on pace as shown in Figure 4. Total commitments (exported corn and outstanding
sales) total 2.049 billion bushels through January 8, 64 percent of the forecast total. Commitments sit
slightly above the average pace of 62 percent through this point in the marketing year. The potential for
USDA’s corn export forecast to materialize depends on crop developments in Brazil’s second corn
crop and the 2026 corn crop potential in the U.S. At present, exports are on pace.
Ethanol demand remains strong with a record weekly production total reported last week. Corn usage
for ethanol production through the first quarter of the marketing year came in almost identical to the first quarter of the 2024-25 marketing year at 1.382 billion bushels. USDA’s expectation of stronger
ethanol usage for the remainder of the marketing year is highly dependent on ethanol exports and
reduced usage of other feedstocks (like sorghum) for ethanol production. Thus far, the pace is not exactly
at a level that shows an over 150 million bushels increase for the marketing year.
The forecast for feed and residual increase of 100 million bushels, to 6.2 billion, is the data point on usage
most in question by market observers. Given the size of the livestock herd and last year’s 5.45-billionbushel total, an expectation of a lower forecast is in place. First quarter corn disappearance for feed and
residual came in at 2.74 billion which is up 388 million bushels over the first quarter of last marketing
year. Usage at that level does provide slight support for the forecast increase. In forecasting feed and
residual usage, both components come into play. Given the massive supply on hand from the 2025 corn
crop, one should expect a larger residual component. To show the relationship, Figure 5 presents a
scatterplot during the Renewable Fuels Standard era for marketing year percent changes of corn supply
compared to changes in feed and residual totals. One thing stands out in the upper left quadrant of the
graph: the 2025-26 marketing year is an outlier for this relationship. The percent change increase in feed
and residual is greater than the change in supply. Given this relationship, future grain stocks reports could
create large volatility swings in corn prices if usage does not materialize and the relationship reverts to
historical norms.
