Midwest farmers faced extreme weather challenges in 2026, including summer heat and dryness, followed by excessive rain in September. Some areas received over 15 inches of rain, with Iowa experiencing one of its wettest Septembers on record. The October 9 USDA report is anticipated to provide critical insights, but private estimates suggest larger crops. However, the late-season rain may have caused more harm than good, leading to issues like lodging, stalk rot, and harvest losses, already reported in Iowa and Illinois.
The grain markets are currently bearish, with USDA reporting 2.10 billion bushels of September 1 corn stocks, 35% higher than last year. Forecasts predict drier harvest weather, which could accelerate the release of corn and soybeans into the market. However, bullish arguments remain, particularly for soybeans, where old-crop stocks were 3% below last year, indicating tighter supply.
The developing El Niño could significantly impact grain prices, particularly in 2027. While it may not affect the Midwest winter, it could influence South American crop conditions, potentially benefiting Argentina but posing risks for Brazil. Additionally, weather models suggest a rapid transition to below-normal tropical Pacific temperatures by summer 2027, which could make the growing season unpredictable and volatile.
Jim Roemer and Scott Mathews emphasize a two-act outlook for grains. Act I focuses on harvest 2026, with big supplies and better harvest weather exerting bearish pressure, especially on corn. Act II spans winter through summer 2027, where South American weather, falling U.S. stocks, and a potential ENSO transition could increase upside risk. The authors suggest that soybeans have a more explosive setup due to smaller stock cushions and the potential for significant weather-driven market shifts.