Calling the Bluff: Why the Cash Market May Matter More Than the Report
Feb 02, 2026
Zack Gardner
Grain Marketing & Origination Specialist
The January USDA Report
Let me start off by saying, the USDA’s January report is what it is and we can’t change that. For corn, they raised yield to 186.5 bu/acre and they raised harvested acres by 1.3 million (bringing total planted corn acres up to a record 98.80 million acres), which gave us an ending stocks number of 2.22 billion bushels. If I were the USDA, I would have lowered corn yield slightly (probably not as low as most Iowa producers would like) and I would have offset some of the yield drop with a reduction in feed demand, probably giving us a corn carryout around 1.8 billion bushels. Now, the difference between a 1.8 billion bushel carryout and a 2.2 billion bushel carryout is still a tremendous amount of corn surplus.
The good news is, it doesn’t really matter what numbers the USDA gave us, as physical bushels still need to move. Farmers need income, elevators need space before next fall, and ethanol plants and exporters need to buy corn. So now it’s up to the cash market to call the USDA’s bluff and that’s where basis and spreads come in to make up the difference and get us to cash prices where physical bushels move.
A Potential Story for Corn
The global cash market is already calling the USDA’s bluff. This past week we had a phenomenal amount of corn export sales. 157 million bushels for the week to be exact, which was approximately 50 million above the average trade expectations for the week. Basically, when the USDA’s bearish January report hit, corn dropped $0.24 and international buyers swooped in for cheap corn. This essentially means we found a short-term price floor, where corn got cheap enough to find new demand! This also reaffirmed that we are the world’s corn supplier until the world is confident in the weather for the Brazilian safrinha corn crop.
As far as Brazilian weather goes, there’s two things we need to keep an eye on - late planting and a developing El Nino. For late planting, approximately 30 percent of their soybean crop was planted late, which means approximately 30 percent of their safrinha corn will also be planted late and the tail end of its growing season will be pushed into the dry season, which is typically not good for safrinha corn yields.
We also need to keep an eye on the strengthening of El Nino in South America. Brazilian farmers and traders that I talk to are very adamant to point out that two of their three worst safrinha corn yields were in years with an El Nino weather pattern. El Nino’s typically bring higher moisture to the U.S. and lower moisture to South America. So, pairing an El Nino (earlier onset of dryness) with approximately 30 percent of their corn getting pushed into the dry season has me thinking that a trendline yield isn’t guaranteed and if they have any sort of a production hiccup, we remain the world’s source of corn for an additional four to five months!
Price Movement
How do all these numbers, technical jargon, and what-ifs correlate to price movement?
If Brazil has a somewhat normal corn crop and our corn carryout stays somewhere near 1.8-2.2 billion bushels, then we might only see a $0.00-0.25 futures move as the world stays well supplied on corn. But if Brazil has a production short fall and we pick up an additional approximate 250 million bushels in exports, our “real” carryout might move from approximately 1.8 billion bushels down to the roughly 1.5 billion bushel range. Compare that to the carryout and price movement we had last year, and we could be in the $4.75-5.00 price range for summer corn.
Grain Marketing & Origination Specialist
The USDA Report and a Potential Story for Corn
The January USDA Report
Let me start off by saying, the USDA’s January report is what it is and we can’t change that. For corn, they raised yield to 186.5 bu/acre and they raised harvested acres by 1.3 million (bringing total planted corn acres up to a record 98.80 million acres), which gave us an ending stocks number of 2.22 billion bushels. If I were the USDA, I would have lowered corn yield slightly (probably not as low as most Iowa producers would like) and I would have offset some of the yield drop with a reduction in feed demand, probably giving us a corn carryout around 1.8 billion bushels. Now, the difference between a 1.8 billion bushel carryout and a 2.2 billion bushel carryout is still a tremendous amount of corn surplus.
The good news is, it doesn’t really matter what numbers the USDA gave us, as physical bushels still need to move. Farmers need income, elevators need space before next fall, and ethanol plants and exporters need to buy corn. So now it’s up to the cash market to call the USDA’s bluff and that’s where basis and spreads come in to make up the difference and get us to cash prices where physical bushels move.
A Potential Story for Corn
The global cash market is already calling the USDA’s bluff. This past week we had a phenomenal amount of corn export sales. 157 million bushels for the week to be exact, which was approximately 50 million above the average trade expectations for the week. Basically, when the USDA’s bearish January report hit, corn dropped $0.24 and international buyers swooped in for cheap corn. This essentially means we found a short-term price floor, where corn got cheap enough to find new demand! This also reaffirmed that we are the world’s corn supplier until the world is confident in the weather for the Brazilian safrinha corn crop.
As far as Brazilian weather goes, there’s two things we need to keep an eye on - late planting and a developing El Nino. For late planting, approximately 30 percent of their soybean crop was planted late, which means approximately 30 percent of their safrinha corn will also be planted late and the tail end of its growing season will be pushed into the dry season, which is typically not good for safrinha corn yields.
We also need to keep an eye on the strengthening of El Nino in South America. Brazilian farmers and traders that I talk to are very adamant to point out that two of their three worst safrinha corn yields were in years with an El Nino weather pattern. El Nino’s typically bring higher moisture to the U.S. and lower moisture to South America. So, pairing an El Nino (earlier onset of dryness) with approximately 30 percent of their corn getting pushed into the dry season has me thinking that a trendline yield isn’t guaranteed and if they have any sort of a production hiccup, we remain the world’s source of corn for an additional four to five months!
Price Movement
How do all these numbers, technical jargon, and what-ifs correlate to price movement?
If Brazil has a somewhat normal corn crop and our corn carryout stays somewhere near 1.8-2.2 billion bushels, then we might only see a $0.00-0.25 futures move as the world stays well supplied on corn. But if Brazil has a production short fall and we pick up an additional approximate 250 million bushels in exports, our “real” carryout might move from approximately 1.8 billion bushels down to the roughly 1.5 billion bushel range. Compare that to the carryout and price movement we had last year, and we could be in the $4.75-5.00 price range for summer corn.