USDA threw out some surprises in Wednesday's NASS Crop Production, World Agricultural Supply and Demand Estimates (WASDE) and Farm Service Agency (FSA) reports. Pre-report focus for the grains centered on the potential for yield cuts, with some caution about acreage changes. This is the first report each year where FSA acreage data is incorporated into NASS numbers, and bulls were burned last year by a sharp upward revision.

USDA did, in fact, hike estimated U.S. corn and soybean acres versus the July reports, but grain markets settled sharply higher despite that move. To a degree, I suspect traders were "once bitten, twice shy."

I could spend the next few minutes discussing the minutiae of USDA yield cuts versus last month, their interaction with state-level and FSA data, and whether our weather models suggest they are a bushel too high or too low. However, I think it might be time better spent looking at some broader macro trends that I believe will prove important for corn, soybeans and wheat over the next couple of months.

CORN

USDA reduced its EU corn production forecast by 3.6 million metric tons (mmt) on Wednesday, citing hot and dry weather in several countries hurting yields. However, it raised Russia and Ukraine by 3.2 mmt versus July and bumped up the U.S. and Canada, for a net global increase of 1.8 mmt. Russian corn regions have seen above-average temperatures but also abundant rainfall.

Here in the U.S., a 2.3-bushel-per-acre yield cut offset nearly all the production gain from higher harvested acres (up 1.2 million). The net gain was only 13 million bushels, or 0.3 mmt. Export pace remains stout, with USDA hiking both last year's and the coming year's figures by 75 million bushels each. I credit that to availability -- U.S. ending stocks are a comfortable just under 2 billion bushels -- and an average cash price that is the lowest since 2019-20. It's hard to maintain loose stocks and high prices at the same time, but "low prices cure low prices (eventually)." Those strong exports can certainly continue, as the projected world corn stocks-to-use ratio -- excluding the U.S. and China -- is the second tightest since 2001 (see the graphic accompanying this column). Since China is a negligible corn exporter, that means the world, for the most part, must come to the U.S. -- or Brazil, to a lesser extent -- for any incremental increase in demand.

SOYBEANS

Soybeans present something of an irresistible force meeting an immovable object. There has been an inexorable increase in global soy production, from 428 mmt in 2024-25 to the current 442.25 mmt projected for 2026-27. Brazilian production alone has grown from 130 mmt in 2021-22 to 186 mmt in the August 2026-27 estimate -- an additional 2.2 billion bushels of annual production. If current yield and acreage projections hold, U.S. production would also reach an all-time high.

That production increase isn't happening in a vacuum. Industrial use -- primarily for biodiesel and renewable diesel -- is absorbing the expansion. Initially, it was policy-driven, aimed at replacing below-ground hydrocarbons with above-ground renewable sources that conveniently absorb CO2 while growing. Renewable Fuel Standard mandates and California subsidies encouraged significant new crush plant construction in the U.S. Most of those plants are now online. In 2026, the jump in diesel prices driven by multiple Middle East conflicts is also creating market-driven expansion for soy oil as a feedstock.

Crush plants will almost always win a bidding war against soybean exporters due to lower freight costs. I have argued for several years that U.S. soy exports will shrink due to rising domestic use, ceding that ground to South America. That outlook depends on soy oil not pricing itself out of the feedstock market -- versus greases, palm oil, canola and other alternatives -- and on fuel costs remaining elevated.

That said, increased soybean export sales would have significant leverage on U.S. soy prices. The currently projected 7% stocks-to-use ratio is the tightest since 2022-23, and soy prices are much lower than they were then. Increased sales to China COULD be the lever, as long as there are no offsetting losses to other destinations. The latter is usually the case (see my Planet Earth supply and demand theory), but the lag can be meaningful.

WHEAT

U.S. wheat production is at its smallest level in decades, the result of reduced acreage, hot and dry weather in key growing areas, and a resulting drop in estimated average yield. Wednesday's USDA ending stocks-to-use ratio of 38.3% is the tightest since 2023-24 -- and actually the third best in the past 10 years. This is despite export sales projected to reach only 775 million bushels, after topping 900 million bushels last year. As far as WASDE is concerned, the U.S. remains a high-priced residual supplier.

What could change the wheat export picture? USDA cut EU production estimates, with the secretary's briefing emphasizing hot and dry weather heading into harvest. World ending stocks are still seen 7 mmt tighter than last year, with production increases for Canada, Ukraine and Kazakhstan masking most of the EU and U.S. reductions. To me, the wild card is reduced Russian and Ukrainian export capacity, constrained by each country bombing the other's ports and curtailing export shipments. Russia and Ukraine are the cheapest suppliers, so lost exports could translate into potentially larger sales by the U.S. and Canada -- if the fighting continues.

Alan Brugler may be reached at alanb@bruglermktg.com

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