USDA Report Takes Center Stage as Grain Markets Weigh Competing Forces

While waiting for Tuesday’s USDA yield update, the markets started the week with a two-sided but lower trade. Positioning ahead of the report, upcoming Russia/Ukraine peace talks (more heavy two-way bombing weekend) and potentially market changing bullish demand from a new Farm Bill and China, the trade is dealing with several key very difficult to predict factors. 10-week lows in crude, diesel, and unleaded were made today and the noticeably lower price at the pump has been welcome. By Thanksgiving, US harvest will be near completion, and these factors should have more clarity, helping to set the outlook for 2026.

News and Notes:

• South America’s weather forecasts turned wetter and less threatening over the weekend. US harvest will keep moving along on seasonally cool and mostly dry weather.
• The industry estimates for Tuesday’s November USDA report are on Page 2 and show the expectation of a slight .09 BPA reduction in corn yield but a .4 BPA yield increase in beans. This report is a credibility test for the USDA after the furor that was unleashed on the agency after the October corn yield number was 5 BPA an acre over the trade estimates. The subsequent audit by the USDA of their data collection and yield projection process that confirmed mistakes but did not change the yield, even adds to the potential backlash if the corn number is dropped to 178 BPA or lower.
• The USDA issued a press release on Friday outlining the payments (record total of $13.8 billion) for the 2025 ARC/PLC programs and other updates to the program. The things I noticed were you do not have to choose between ARC or PLC, the new program defaults to the higher payment for your operation. The other is the payment limit was raised from $125,000 to $155,000 with a maximum payout of $160,000. The sign-up period for the 2026 program is open. Please contact your local FSA office for any additional help. This does not include the $8 billion Harvest Fuel Relief Program payments. So, in total, there is $21.8 billion in government money on the way.
• A routine corn sale to Mexico was announced this morning, but China was not a buyer of anything. Along those lines, a Friday call between Sec Bessent and the US Trade team with China initially rallied beans, as China extended their US tariff exclusion for another 2-months with the US indicating they would reciprocate. The 30 x 30 trade framework was not implemented by either side on this call. China is on pace to buy the pledged 25 MMT of beans from May but is well behind the $17 billion pledge from September. For comparison, the 25 MMT bean purchases will total roughly $11-$12 billion, so the $17 billion would be even more impactful.
• The political fallout from the elections will leave the Republicans in a lame duck position, which may help the Farm Bill get passed. With the upcoming Democrat control of every committee, the Farm Bill becomes a larger priority as the Farm Bill also controls the SNAP and food stamp programs, which are strongly supported by the Dems. Currently, year-round E-15 is in the Bill, and if passed, would incrementally add over 2.6 BBU of additional corn use in the next 5-years. Depending on where you live, the ethanol mix lowers the price of gas roughly 50-70 cents a gallon for E-10 and closer to $1 for E-15. Using trend yields, 2.6 BBU would require substantially more corn acres and ethanol blend facilities and push total corn used for ethanol over 8 BBU.
• The cattle and hog markets started the week out with sharp rallies with feeders peaking at $9 gains. After the recent $36 collapse because of weaker cash markets and the equity market collapse, stabilization was a relief. Higher cash prices will have to develop to push prices back to recent highs.

The battle between potential demand (China and year-round E-15), the trend the USDA will continue to raise this year’s US crop yields and potential Russia/Ukraine peace are all actively being debated and traded, with the bearish aspects of yield and re-opening the Black Sea winning for now. The trade doubts the USDA will admit any errors this quickly, so tomorrow’s yield update is not expected to be bullish, with more focusing on the January report to make up for any yield over-estimations by adjusting other less obvious categories. We will be out with a post-report overview after Tuesday’s 11 AM central release.