Corn and soybeans are set for record-breaking harvests, but bullish demand and a U.S.-China tariff truce could shake up global feed prices and dairy margins.
EXECUTIVE SUMMARY: The USDA’s latest WASDE report forecasts record U.S. corn and soybean crops for 2025-26, with corn output expected to hit 15.8 billion bushels and soybean crush reaching new highs. Despite this bin-busting supply, the agency surprised markets by projecting stronger-than-expected export demand and tighter ending stocks, especially for soybeans. A 90-day U.S.-China tariff détente adds a temporary boost to export prospects, though South American competition remains fierce. For dairy producers, these developments signal potential relief on corn-based feed costs but continued firmness in protein prices. The outlook remains volatile, hinging on weather, global trade, and policy shifts. Smart risk management will be crucial as markets digest these mixed signals and prepare for the months ahead.
KEY TAKEAWAYS:
- USDA projects record U.S. corn and soybean crops for 2025-26, with corn at 15.8 billion bushels.
- Stronger-than-expected export demand tightens ending stocks, especially for soybeans.
- A 90-day U.S.-China tariff truce temporarily boosts export prospects but competition from South America stays strong.
- Dairy producers may see lower corn feed costs but steady protein prices due to record soybean crush.
- Volatile markets ahead: weather, trade policy, and global competition will shape feed prices and margins.
The latest USDA World Agricultural Supply and Demand Estimates (WASDE) report has shaken grain markets with projections of monster crops paired with surprisingly robust demand figures. Released on May 12, the report adds a bullish twist to what many traders expected to be a bearish outlook, while a temporary U.S.-China trade détente injects additional market optimism. These developments could reshape feed cost trajectories for dairy producers for the coming year.
Record-Breaking Corn Production Meets Strong Export Demand
USDA economists shocked the market with their first comprehensive look at the 2025-26 corn outlook, projecting an unprecedented 15.8 billion bushel harvest that would smash previous records by 3.1%. This mammoth production forecast stems from a perfect storm of expanded acreage and exceptional yield potential. Farmers have planted 95.3 million acres of corn, the highest level in 12 years, while yields are expected to reach 181 bushels per acre.
Despite this tsunami of production, the market rallied on news that the USDA expects much stronger demand than private analysts had anticipated. The agency forecasts corn exports to reach a five-year high of 2.675 billion bushels for 2025-26, up from 2.6 billion in the current marketing year. This optimistic export projection caught traders off guard, as many had braced for significantly higher ending stocks.
“Market reaction to the immediate response to what we saw on the balance sheet with old and new crops was a little bit friendly. That’s the best you could phrase that, especially in the corn and beans,” said Jacob Burks with AgMarket.Net.
Even with record production and robust total use, USDA projects 2025-26 ending stocks at 1.8 billion bushels – historically substantial but notably lower than the pre-report average trade guess of 2.044 billion bushels. Despite the projected record supplies, this surprising twist gave corn futures an unexpected boost.
The season-average farm price for corn is forecast at $4.20 per bushel, down 15 cents from the current year. While this price decline reflects the weight of record supplies, it’s less severe than many had feared, offering a glimmer of hope for dairy producers concerned about their income-over-feed-cost margins.
Soybeans: Tight Stocks and Record Crush Drive Bullish Sentiment
The soybean outlook delivered an even bigger surprise, with USDA projecting dramatically tighter stocks than analysts expected. For 2025-26, ending stocks are forecast at a relatively slim 295 million bushels, well below trade expectations of 351 million. This represents a 16% drop from the revised 2024-25 estimate of 350 million bushels.
This bullish stocks figure comes despite a slight production decrease to 4.34 billion bushels, down marginally from 4.366 billion in 2024-25. The key factor tightening the balance sheet is domestic crush, projected to reach an unprecedented 2.49 billion bushels, marking the fifth consecutive season of record-setting processing volume.
Ending U.S. soybean stocks for 2025-26 were pegged at 295 million bushels, a 16% drop from 2024-25 and well below the average analyst estimate at about 375 million bushels. The lower stocks figure reflects expectations for a smaller U.S. crop and outlook for a 3% increase in crushing, USDA said,” reports Farm Progress.
The crush boom is primarily driven by strong demand for soybean meal in livestock feed and the continued expansion of soybean oil use for biofuel production. USDA projects 13.9 billion pounds of soybean oil will go toward biofuel production in 2025-26, up from 13.1 billion in the current marketing year.
For dairy producers, the outlook suggests relatively stable to slightly higher soybean meal prices, with the season-average farm price for soybeans projected at .25 per bushel, up from .95 in 2024-25.
Global Production: South American Powerhouses Continue Dominance
While U.S. production numbers grabbed headlines, the global picture remains dominated by South American output. Brazil’s soybean crop is projected to reach a mind-boggling 175 million metric tons (MMT) in 2025-26, up 3.6% from the current year’s 169 MMT. Brazil’s corn production is forecast at 131 MMT, slightly higher than the 130 MMT estimated for 2024-25.
Argentina’s corn production is expected to jump to 53 MMT from 50 MMT, while its soybean crop is forecast at 48.5 MMT, slightly below the current year’s 49 MMT. These massive South American harvests will continue to compete fiercely for U.S. exports in global markets.
“Exports of major South American soybean-producing countries (Brazil, Argentina, Paraguay, and Uruguay) are expected to rise 8.5 million tons, more than offsetting lower U.S. exports,” according to the WASDE report details. This competitive pressure may limit potential price rallies despite the tighter U.S. balance sheets.
U.S.-China Trade Détente: Temporary Reprieve Buoys Markets
Adding fuel to the market rally, the U.S. and China announced a 90-day tariff truce on May 12, coinciding with the WASDE release. Under this agreement, U.S. tariffs on Chinese goods will drop from 145% to 30%, while China’s tariffs on U.S. imports will fall from 125% to 10%.
“The executive director of Farmers for Free Trade is encouraged by the U.S. and China agreeing to roll back tariffs drastically. Brian Kuehl calls Monday’s announcement a step in the right direction,” reports Brownfield Ag News.
The timing is significant, as the 90-day window will extend through mid-August, just before the U.S. harvest begins. During this period, officials from both countries will negotiate toward potentially longer-term trade policies. For grain markets, particularly soybeans, this provides a temporary but meaningful opportunity to move more product to the world’s largest importer.
However, industry experts caution against overexcitement about the trade news. “This agreement brings U.S. tariffs down to 30 percent and China’s tariffs down to 10 percent,” notes Arlan Suderman with Stone X Group, who believes markets are overreacting. “It’s always good when the two sides are talking… But it’s not expected to change the supply-demand balance sheet materially.”
Suderman points out that even with reduced tariffs, “Brazil soybeans at port in China are still 70 cents a bushel cheaper than those coming from the U.S. Gulf, before any retaliatory tariffs are applied.” This highlights the ongoing competitive challenges faced by U.S. exporters.
Implications for Dairy Producers: Feed Outlook and Risk Management
These developments create a mixed but generally favorable feed cost outlook for dairy producers. The projected record corn production and price reduction to $4.20 per bushel should provide some relief on the energy side of the ration. However, the tighter soybean stocks and continued strength in crush demand may keep protein costs firm, with soybean meal prices potentially rising from current levels.
The 90-day trade détente with China creates a window of opportunity that could support export sales, but its temporary nature means producers should remain cautious about longer-term price assumptions. The agreement expires as the 2025 harvest begins, potentially creating renewed uncertainty during a critical marketing period.
Smart dairy operators will use any price rallies in the coming months as opportunities to lock in feed needs for the remainder of 2025 and early 2026. With record production projected but surprisingly strong demand components, markets could remain volatile as weather developments and trade negotiations continue to evolve.
Looking Ahead: Weather and Policy Will Drive Markets
The WASDE projections assume normal growing conditions throughout the summer, making weather the critical wild card that could dramatically alter these forecasts. Any significant production shortfalls would quickly tighten balance sheets and drive prices higher, particularly given the stronger-than-expected demand outlook.
On the policy front, biofuel mandates continue to reshape demand patterns, especially for soybeans. The projected increase in soybean oil use for biofuel production to 13.9 billion pounds represents a structural shift that supports crush margins and overall soybean values.
The aggressive USDA export projections will face scrutiny as the marketing year unfolds. “We thought they (USDA) could have increased it to 100 million bushels. They came in and increased it 50 million bushels, which I thought was a pretty aggressive approach,” notes Jacob Burks regarding the corn export forecast.
For dairy producers, the key takeaway is cautious optimism on feed costs, with corn potentially offering better value while protein costs remain firm. The heightened uncertainty around trade policy suggests implementing risk management strategies while favorable opportunities present themselves, rather than betting on sustained market direction in either direction.
Conclusion: Navigate Carefully Through Market Contradictions
The May WASDE report presents a fascinating contradiction – record production forecasts alongside surprisingly robust demand projections that tightened balance sheets beyond trade expectations. Add the wild card of a temporary trade truce with China, and markets face significant crosscurrents in the months ahead.
These market dynamics demand careful attention to feed procurement strategies for dairy producers. The projected record corn supplies suggest favorable energy feed costs, while strong crush demand signals potential firmness in protein costs. The temporary nature of the U.S.-China trade détente adds another layer of complexity to an already nuanced market outlook.
As planting progresses and summer weather patterns emerge, these initial WASDE projections will evolve. Smart dairy operators will stay engaged with markets and implement flexible risk management plans that protect against adverse price movements while maintaining the ability to capitalize on favorable opportunities.
Learn more:
- Grain Markets Shift While Dairy Producers Face Feed Cost Opportunity
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