A Grain Supply Surprise Puts Demand Back in Focus

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Harvest brings a lot more information to the crop price outlook. Despite the slower, rainy start to harvest for some in the Upper Midwest, by October, combines are moving across more acres, and USDA now has more yield information to use in its forecasts. That means markets also get a better idea of just how much grain is out there, too.

But before we dive into USDA’s October data, let’s go back a few weeks. The first surprise came before USDA's October World Agricultural Supply and Demand Estimates, or WASDE, report. The Sept. 30 Quarterly Grain Stocks report showed corn stocks totaled 2.10 billion bushels on Sept. 1, up 35% from a year earlier. We knew there was a lot of corn around. The surprise was just how much. Soybean stocks provided less of a shock at 315 million bushels, down 3% from last year.

That changes the starting point for the 2026-27 balance sheet. USDA had to incorporate those larger corn beginning stocks alongside updated harvest acreage, yield and production estimates.

October brings a clearer look at yield and overall supplies

In the October WASDE, 2026-27 corn supplies were raised by 173 million bushels in beginning stocks, based on the increased stocks in the Grain Stocks report. USDA then further raised corn supply by an additional 234 million bushels of production, based on a 2.7-bushel-per-acre increase in forecast yield to 181.2 bushels per acre. That yield increase was unexpected, and initial market reaction was quite negative.

For soybeans, beginning stocks were decreased slightly based on the September stocks report data. Like corn, the 2026-27 soybean yield forecast was also increased, but more moderately, by just 0.3 bushels per acre to 53.1 bushels per acre. While the adjustment was small, if realized, this would be a record national average soybean yield. Expected soybean supplies were raised by 17 million bushels in total.

October does not give us the final answer on crop size. USDA will continue updating yield and production as harvest progresses. There is also plenty of variation at the farm level. Across the Midwest, reports have ranged from very strong yields to fields where storms, excess moisture or other weather challenges took a toll.

But with more harvest information available, the supply side of the equation is becoming clearer.

Ultimately, the number that matters is margin

Supply, demand and commodity prices matter, but at the farm level they eventually come back to margins.

Even as crop prices remain stronger than they were earlier this year, these latest USDA reports cooled markets off of recent highs. Plus producers are planning for potentially higher 2027 input costs. Energy, fertilizer and financing costs all remain part of the equation.

Interest rates add another cost variable. The Federal Reserve raised its target range for the federal funds rate by 25 basis points in September to 3.75% to 4%, citing elevated inflation. Since then, inflation has shown some signs of moderating, with August PCE inflation at 3.4%, although it remains above the Fed's 2% goal. For producers, that means borrowing costs are likely to remain an important part of 2027 planning, even if the pace of rate increases slows. At the same time, the national unemployment rate was 4.2% in September, while nonfarm job growth slowed. Cooler inflation and labor market data could give the Fed more reason to pause when the Federal Open Market Committee meets later this month, leaving some uncertainty around the next interest-rate move.

Counterintuitively, improving your breakeven does not necessarily mean cutting inputs. The lowest-cost production plan is not always the most profitable one. It’s about right-sizing expenses for your unique operation and carefully considering the expected return from each additional dollar spent. Cutting an input may save money upfront, but if it reduces yield and revenue by more than the cost savings, it has ultimately made your margin worse.

As you make decisions this fall, what additional information do you need to make the best economic choices for your farm? With fertilizer prices where they are, for example, if it has been a while since conducting comprehensive soil testing, the cost of accurate soil fertility data may be well worth the economic value gained from right-sizing your fertilizer and soil pH program to each field. 

Right-sizing how much you need is one decision; deciding when to buy it is another. Last fall was a good reminder that input markets can be difficult to time. Some producers delayed fertilizer purchases in fall 2025, expecting lower prices, but costs moved higher in spring 2026 instead. In rarer cases, some producers skipped fertility altogether. The lesson is not to predict where prices will go next, but to avoid all-or-nothing decisions. Incremental purchasing and prepaying portions of expected needs can help manage price risk while preserving flexibility.

The same thinking can apply to seed populations, crop protection, machinery decisions and other inputs: spend where there is a reasonable expected return, cut carefully where there is not and avoid treating every acre on your operation the same.

In yet another year when both revenues and costs remain uncertain, good cost management is less about simply spending less and more about spending the time to make sure the dollars you do spend are working as hard as possible on each acre.

Stay informed with more timely insights from Compeer’s AgEdge podcast and AgriMindset series. For both our October and November AgriMindset webinars, we’ve designed them to be something you can join live and watch, join live and just listen from the cab of your combine, tractor or semi, or listen later at your convenience. 

On Oct. 21, join us for Fraud is Getting Smarter, Is Your Operation Ready? with a panel of speakers including Kristi Nyblom, Compeer’s Fraud Officer. During the busyness of harvest, it may be easier than ever to be fooled by a financial scam. This webinar will give you the tools to recognize the latest tactics of fraudsters, reduce your risk and protect the profitable farm enterprise you’re working to build.  

Then on Nov. 18, we will shift gears with The Ag Outlook After Election Day. We’ll begin with a post-harvest economic update covering both the October WASDE and upcoming November WASDE, before moving into an in-depth post-election agricultural policy outlook. Perry Aasness, vice president of Legislative Affairs, will join us. 

The information provided is accurate to the best of the author’s knowledge at time of publishing. It is presented “as is” with no guarantee of completeness, accuracy or timeliness, and without warranty. The information is educational in nature and not investment, legal, accounting, tax or other advice of any kind.