USDA's September crop report points to tighter U.S. corn inventories, while Chinese buying activity and weather-driven production losses continue to support a bullish outlook for grain markets.
The U.S. Department of Agriculture's September crop report delivered a mixed reaction from grain markets, but according to Farms.com Risk Management Chief Commodity Strategist Moe Agostino, the longer-term outlook remains constructive for corn and soybeans.
Speaking during the Ag Commodity Corner+ Podcast for the week ending September 11, titled “26/27 U.S. Corn Stocks to Use Ratio 9.7% = $6.00 Futures + China 'Wild Card,'" Agostino said the report confirmed a tighter corn supply situation despite a modest decline in futures following its release.
"The report was friendly, but it was not friendly enough to keep the rally going immediately," Agostino said. "However, the bigger picture remains bullish."
Corn Supplies Continue to Tighten
USDA pegged the U.S. corn yield at 178.5 bushels per acre, slightly above trade expectations, but still 2.2 bushels below the previous month's estimate. Ending stocks were estimated at 1.57 billion bushels, resulting in a stocks-to-use ratio of 9.7%.
Agostino noted that a stocks-to-use ratio below 10% historically signals a relatively tight supply environment.
According to his analysis, the market has already lost roughly 1.5 billion bushels of potential corn production due to weather challenges during the growing season.
Despite the reduced production outlook, demand remains resilient. "I do not think we have enough bushels to meet the strength of demand that we are seeing," he said.
While soybeans and canola experienced a bearish reversal near the end of the week, Agostino characterized the setback as profit-taking rather than a major shift in trend.
Chinese Buying Could Be a Wild Card
A major factor supporting Agostino's bullish outlook is continued Chinese demand for U.S. agricultural commodities.
He pointed to soybean purchases that helped push soybean futures to three-year highs earlier in the week and suggested additional Chinese buying could become a catalyst for corn markets as well.
Agostino estimates Chinese purchasing activity is approaching levels last seen during the Phase One trade agreement period in 2020. He believes any announcement of significant Chinese corn purchases could quickly reignite market enthusiasm.
"If China steps in with a major corn purchase, that could be another strong bullish signal for the market," he said.
The strategist also noted that market participants will be closely watching upcoming trade discussions involving U.S. and Chinese officials, particularly any developments related to tariffs or agricultural trade flows.
Extreme Weather Leaves Lasting Impact
Weather also remains a major feature of the grain market story in 2026.
Agostino highlighted data indicating that July was among the hottest July periods on record in the United States, with seasonal temperatures ranking among the highest seen in more than a century.
Heat stress across portions of the U.S. Corn Belt and Plains reduced yield potential, while excessive moisture and harvest-time rains have complicated crop conditions in parts of Western Canada.
Canadian growers are also dealing with concerns including fusarium pressure in wheat, sprouting issues in several crops, and renewed flooding during harvest operations.
Additional frost threats across northern growing regions could create further challenges as harvest progresses.
Wheat Market Watching Geopolitics
Although wheat markets have recently pulled back, Agostino believes broader geopolitical risks are not fully reflected in current prices.
He pointed to ongoing uncertainty surrounding Russia-Ukraine relations and global grain trade disruptions as factors that could support wheat values if conditions change.
Global wheat ending stocks increased in the USDA report, limiting immediate price strength, but Agostino views the recent decline as a correction rather than a reversal of the longer-term trend.
Energy Markets Add Another Layer of Uncertainty
Outside the grain sector, Agostino said higher crude oil prices continue to influence inflation expectations and agricultural input costs.
Diesel fuel remains elevated compared to levels seen earlier this year, creating additional concerns for producers preparing for harvest and planning future input purchases.
At the same time, higher energy prices are contributing to broader inflation concerns, which could influence future interest rate decisions by the U.S. Federal Reserve.
Outlook Remains Constructive
Despite the market's muted response to the September USDA report, Agostino remains optimistic about the direction of grain prices.
He believes the combination of tight corn supplies, steady demand, potential Chinese purchases, and ongoing weather concerns creates a supportive backdrop for prices moving into late 2026 and early 2027.
While short-term corrections remain possible, Agostino argues the underlying fundamentals have not changed.
"The bull market is not over," he said. "We may need more time, but the supply-and-demand story remains supportive."
For producers, the strategist says continued monitoring of Chinese demand, harvest results, and upcoming USDA updates will be critical as markets search for their next major catalyst.
Watch the 26/27 U.S. Corn Stocks to Use Ratio 9.7% = $6.00 Futures + China "Wild Card" Podcast below.
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