The USDA quarterly reports (Grain Stocks, Small Grains, Hogs & Pigs, etc.) have a reputation for generating big market moves. Data is released less frequently, and thus, trade expectations can wander further between reports. The actual numbers also have more time to shift. These reports also tend to be released at the end of the month and end of the quarter, coinciding with spec fund position-squaring and asset allocation moves. There is more money sloshing around than on an average day.

Corn, soybeans and wheat all found something to dislike in Tuesday's reports. We'll focus on corn here.

Unlike the benign June report, this September Grain Stocks report surprised the corn market on several fronts. The 2024 corn production was increased 25 million bushels (mb) after the residual use derived from the previous production number appeared to be out of line. That magnified the bearish increase in Sept. 1 stocks. Those were already going up because of an (in our opinion) overly ambitious feed and residual use number in the Sept. 12 WASDE report.

The bottom line is, while end-of-year corn stocks were down 13% from last year (this is now the official ending stocks number), they were 195 mb larger than the average trade estimate going into the report. The result on Sept. 30 was a 6-cent-per-bushel price drop and a downside breakout of the rising regression channel December corn has enjoyed since the early August low. We did bounce off the 40-day moving average support at $4.14 3/4, so not all the bulls have abandoned ship.

Now that we've covered the macro details, let's look at a rather interesting dynamic in regional corn supplies. This will mainly be of interest to corn producers and merchandisers, as it does have some basis implications. Basis is the differential between the futures price and the local cash market. The former, of course, is driven by the macro fundamentals and money flow coming from spec funds and technical setups and algorithms. The latter tends to be driven by local demand for the physical commodity and export demand.

So, what do we find? At the U.S. level, corn stocks going into what is presumed to be a record 2025 harvest were down 13% from 2024, with the on-farm stocks down 18% and off-farm stocks down 10%. However, there are significant regional differences. September 1 stocks in Ohio, Indiana and Illinois were down a sharp 31.65% from last year and quite similar to 2022. Ohio and Indiana are both down 33 mb from last year, and Illinois was down 75 mb. That's 140 mb combined. IF harvest is delayed in that area, merchants will have to bid harder to source bushels.

Bears will, of course, point out the September NASS Crop Production report had those three states growing 225 mb more corn this year than in 2024 -- more than enough to offset the shortfall from the previous year. However, there are also concerns fall dryness and various diseases could trim production in that area between now and the "final" number in January.

The Western Corn Belt (Minnesota, Iowa, Nebraska, Missouri and Kansas in this series) is in a much different situation than the Eastern Corn Belt on Sept. 1. The stocks were down only 0.4% from 2024, which was the largest inventory since 2020 for that region. Supplies of old crop were only 2.8 mb smaller than a year ago. See the table below for the state-by-state breakdown.

To add insult to injury, projected five-state production in the Sept. 12 NASS report was 8.035 billion bushels, up 899 mb from a year ago. The region does have a lot more feedlots and ethanol plants than we see in the Eastern Corn Belt, but they are badly needed to absorb this level of inventory. Strong projected corn exports (WASDE thinks record large) will help both regions.

Alan Brugler may be reached at alanb@bruglermktg.com

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