The latest USDA reports have added significantly more corn to the balance sheet than traders expected, while inflation and interest rates continue weighing on the broader economy. Texas A&M grain marketing specialist Mark Welch says those developments are creating new challenges for producers as they look ahead to next year’s crop.
“That 173 million bushels of additional grain then got carried over for the new crop year for the ‘26, added to the ‘26 crop, that was like adding two bushels an acre to the corn crop in 2026. It’s kind of the equivalent of increasing slightly much. And then in the October WASDE, in the October crop report, USDA then raised the corn yield again. So we added almost three bushels more to the corn crop in the crop production report, and got numbered in the supply and demand tables in the WASDE. So yeah, between those two reports, we’ve got a good bit more corn on hand that we thought we were going to have just about 30 days ago. And the corn market is reflecting that.”
Welch believes the market may face additional pressure if current production estimates hold.
“Again, at this point, still holding pretty strong relative to what those fundamentals and particularly those production numbers, if they’re correct and if they hold, we’ll have trouble, in my opinion, holding this price at 480, because that’s a lot of corn. So we’ll see what plays out in other factors influencing the market. But that number alone, that’s a big number, and that’s going to put some pressure on prices.”
Inflation remains a major concern across the economy, with energy costs continuing to ripple through agriculture and consumer spending alike.
“And of course, the category that’s driving that inflation rate in general and impacting many of those individual categories certainly is the energy component. If we look at the price of gasoline, the price of diesel, one of the highlights that I’ve been hearing recently is, homes in the Northeast that heat their homes with heating oil, which is basically diesel. And the price of that product for those homeowners, as well as what we’re seeing with diesel prices for agriculture, and just anything that can move up and down the highway. If it’s hauled by truck, it’s being impacted by these higher prices to move stuff around.”
Inflation is also shaping expectations for monetary policy, and Welch says financial markets are already preparing for the possibility of higher borrowing costs.
“So even with all these pressures and concerns, the economy’s holding up pretty good, jobs are holding up okay. And so if the Fed feels like we need to ramp up these rates to kind of cool down the economy and cool down inflation, there’s an argument there to be made. So we’ll see if they move this time, or if they’ll wait and have another meeting before the end of the year. Two more opportunities before the end of the year if they want to bump these rates up. So it’ll be interesting to see how that conversation goes at this upcoming meeting. I think if you look at most of your long-term rate markets, like the bond market, they’ve pretty well dialed in higher rates.”
Higher interest rates are arriving at a time when producers are already facing difficult budget decisions. Welch says current margins could influence cropping plans for the coming season.
“These input costs, boy, you start putting your budget together for next year. This thing looks pretty tough. And then prices on that December 27 contract are still over $5. But that’s where they need to be. If you look at an Illinois crop budget, $5 on the board doesn’t cut it. You’re looking at a loss on a per acre basis when it comes to corn. Now, these current prices do indicate a profit on soybeans that basically offsets the loss in corn. So maybe a farm that’s 50-50 corn and beans still has a positive number for the whole operation. But I think that does then add weight to the argument we’re going to see less corn planted next year and a bigger shift to soybeans.”