Ag Minute: Momentum in the Grain Markets - What Is Behind the Rally
- 4 hours ago
- 4 min read
Rarely does this column cover grain markets, because prices move every day and the numbers change before the ink dries. But the last few weeks have been worth documenting. On August 26th, December corn closed at $5.36, a new contract high and the strongest the market has been since 2023. November soybeans closed up 28 cents at $12.66, also a contract high. December Chicago wheat, the class grown here in Illinois, closed limit up at $7.48, meaning it moved the maximum the exchange allows in a single session. Heading into summer, the conversation in the countryside was about surviving another thin year. That has changed in a hurry, and those changes seem to have some momentum behind them.
In May, the farmdoc team at the University of Illinois revised its 2026 Illinois crop budgets using $4.50 corn, $11.50 soybeans, and $6.60 wheat. Even at those prices, projected corn returns were negative in every region of the state, from a $45 to $53 per acre loss in northern and central Illinois to a $91 loss in the south. A 50-50 rotation on cash rented ground in central Illinois penciled out to a profit of just $11 per acre, against a long run average closer to $100. Harvest basis around here generally runs 25 to 40 cents under the board for corn and 40 to 60 cents under for beans, which puts cash corn near $5.00 and beans north of $12.00 at current futures. On the 241 bushel corn and 76 bushel soybean trend yields those budgets assume, an extra 50 cents is worth roughly $120 and $38 per acre respectively. That turns a $45 corn loss into a $75 profit and pushes the rotation toward $90 an acre. The catch is that none of it counts until it is sold, so this depends on the volume growers are currently locking in their prices on, or how much momentum this rally sustains through harvest.
A big part of the corn rally is a supply story. USDA pegged the national yield at 180.7 bushels in August. The Pro Farmer Crop Tour, sending more than 100 scouts through over 3,000 fields, came back on August 21st with 173.2 and a crop of 15.344 billion bushels, finding lower ear counts and more variability than the crop showed from the road. USDA's final has historically landed three to four bushels above Pro Farmer, which would put carryout under 1.5 billion bushels and stocks-to-use near 8 or 9 percent, the tightest since 2021-22 when corn traded around $6.00. Demand has been strong on top of it, with old crop exports at 3.454 billion bushels against 2.775 billion a year ago.
Soybeans got here differently. Pro Farmer estimated 53.3 bushels, above USDA's own number, with scouts noting fewer pods but unusually large beans inside them. This crop could set a record. The rally is not about a short crop, it is about one buyer. China took roughly two thirds of new crop sales in mid August and bought another 12.2 million bushels on the 26th, and the United States declined to sanction China over its Iranian oil purchases ahead of an expected meeting between the two presidents in late September.
Wheat is the most dramatic of the three, and unlike corn it had a bullish story building long before the Black Sea entered the picture. On June 30th, USDA stunned the trade by cutting 2026 wheat plantings to 42.74 million acres, down 5.7 percent from last year and a record low, driven largely by drought shrinking hard red winter ground across the Southern Plains. The resulting winter wheat crop is projected at 1.03 billion bushels, the smallest since 1965. Layered on top of that shortfall, Ukrainian strikes have taken all three grain terminals at Novorossiysk offline, shutting down more than 90 percent of Russia's export capacity in the Black Sea region. Russia is the largest wheat exporter in the world and may move only 3 to 3.4 million tons this month against a five year August average of 5 million. When President Putin signaled escalation rather than negotiation on August 26th, funds piled in and both winter wheat classes hit new contract highs. The qualifier worth remembering is that the Black Sea half of this is a logistics problem rather than a crop failure, and that wheat rallies have a history of running short, since the higher American wheat climbs the faster it prices itself out of the global export business.
Plenty of things move grain prices, but they all run through the same equation of supply and demand. Corn and wheat are trading a supply problem, one from a crop that appears to be coming up short and one from a war that closed the ports. Soybeans are trading a demand improvement. The timing matters here, because this rally has arrived in the same weeks many producers are pricing fall fertilizer for 2027, and farmdoc has been clear that those input costs will bite harder next year than this one. Nobody is going to pick the top of this thing. But for the first time in three years, the pen is moving in the right direction for farmers.
For a recap of the day corn and both winter wheat classes made new contract highs, follow the link below to AgWeb;
For the Pro Farmer Crop Tour's national corn and soybean estimates, follow the link below;
For the University of Illinois revision to the 2026 Illinois crop budgets, follow the link below to farmdoc daily;
For coverage of how Ukrainian strikes have stalled Russian grain exports, follow the link below to DW;
For background on the record low wheat acreage that set this rally up, follow the link below to Farm Progress;
