August WASDE Supports Crop Prices, but Credit Risks Remain
USDA trims yield forecasts but finds more acres in August WASDE
The August World Agricultural Supply and Demand Estimates, or WASDE, can be a market mover. For agricultural lenders, the August report is also an important checkpoint for borrower revenue projections, repayment capacity and harvest-season risk conversations. August’s WASDE lowered expected yields for both corn and soybeans but increased expected harvested acres from July. Markets reacted favorably, seeing the report as bullish and pushing futures prices higher.
The August WASDE includes the first major yield estimate updates for new-crop corn and soybeans, incorporating information from producer surveys as well as crop condition information, satellite imagery and other data. This year’s August agricultural yield survey included a new focused methodology as the National Agricultural Statistics Service, NASS, embarks on a data modernization initiative.
Yield forecasts lowered, but corn and soybean production estimates remain large
For corn, USDA lowered the 2026-27 corn yield forecast from 183.0 to 180.7 bushels per acre in the August WASDE. However, the cut was partly offset by a 1.2 million-acre increase in estimated harvested acres, leaving production slightly higher than July at 16.0 billion bushels.
Even with the yield cut, USDA is still forecasting a very large U.S. corn crop—the second highest on record if realized. This is larger production than some analysts expected in July, when lack of rain and adverse weather led to expectations that the USDA corn yield estimate could fall into the high 170s in the August report. However, USDA’s August estimate remained above that range.
Even with the additional acres reported in August, stronger export expectations helped tighten U.S. ending stocks, which are now expected at 1.65 billion bushels. U.S. exports are expected to get a lift from higher global demand and reduced exports from other corn exporters. Ukraine’s export outlook was reduced because of conflict-related logistics disruptions, while the EU’s corn outlook was reduced because of excess heat and dryness. USDA raised the expected season-average U.S. farm price by 10 cents to $4.50 per bushel.
Soybeans told a similar, but slightly less dramatic, story. USDA lowered the national soybean yield forecast from 53.0 to 52.7 bushels per acre, but estimated harvested acres increased by a sizeable 1.4 million. The result was a larger production forecast, now projected at about 4.52 billion bushels.
Stronger crush demand helped absorb part of the increase, but new-crop ending stocks still moved higher to 320 million bushels. USDA left the 2026-27 season-average soybean price unchanged at $11.40 per bushel. Markets reacted favorably, interpreting the report as price-supportive and pushing futures prices higher.
For wheat, the August WASDE continued a trend that began in spring, with USDA lowering U.S. production estimates and supplies due to challenging weather conditions and fewer harvested acres. USDA reduced estimated U.S. all-wheat ending stocks by 5 million bushels to 717 million, which would be a more than 20% decline from last year if realized. USDA increased the 2026-27 season-average farm price by $0.20 per bushel to $6.20.
For lenders, the U.S. crop balance sheets point to a mixed borrower outlook. Higher futures prices may improve projected revenue, but the expected corn and soybean supplies remain large enough that price support could remain sensitive to final yield, domestic usage, export demand and global supply shifts. For borrowers with wheat acres, higher prices may not fully offset lower production if yields limited marketable bushels.
August weather remains important for borrower crop revenue
The August WASDE did not end the yield or weather conversation. Parts of the eastern Corn Belt have dealt with excessive rain and extreme weather, while areas farther west have faced drought and heat.
August is particularly important for pod fill and soybean yield. For now, the August WASDE is giving both corn and soybean markets some upward momentum while lenders and borrowers continue monitoring how final yields and production affect harvest revenue.
The August WASDE crop price reaction is helpful, but it does not significantly ease margin pressure or change the cost side of the equation. Energy markets remain a key risk for diesel, fertilizer and transportation costs this harvest season.
The U.S. Energy Information Administration’s (EIA) August outlook pointed to continued challenges in the Strait of Hormuz. EIA projects Brent crude oil prices to average about $85 per barrel in the third quarter of 2026, keeping energy costs elevated compared with earlier expectations. Escalation between Russia and Ukraine, including trade disruptions in the Black Sea region, also remains important for grain, energy and fertilizer markets.
For lenders, the practical question is whether any improvement in crop prices is enough to offset higher operating costs, elevated borrowing costs and potential working capital pressure heading into harvest and 2027 renewal conversations.
Livestock remains dynamic
U.S. red meat production forecasts were lowered, while poultry production increased. Price changes varied by commodity. The 2026 all-milk price forecast was lowered five cents to $19.85 per hundredweight. Egg prices saw the largest forecast change, with prices expected to rise for the remainder of 2026 and into 2027. Cattle prices have softened on lower-than-expected demand, with 2026 steer prices forecast at $245 per hundredweight, down about $6 from July. Hogs continue to face lower prices. Slightly higher grain prices and rising forage costs may also compress margins and affect borrower cash flow in livestock-heavy portfolios.
Interest rates and policy keep pressure on repayment capacity
Another major factor for producers is interest rates. June Personal Consumption Expenditures, or PCE, inflation cooled to 3.7% from a year earlier, down from May, while core PCE, which excludes food and energy prices, was up 3.3% from a year earlier. That is improvement, but still well above the Federal Reserve’s 2% goal. The personal saving rate also fell to 2.7% in June, suggesting consumers are absorbing higher prices partly by saving less.
At its July meeting, the Federal Reserve held the federal funds target range at 3.50% to 3.75%. Notably, three Federal Open Market Committee, or FOMC, members dissented because they preferred a quarter-point rate increase. This dissent underscores that the rate discussion has shifted away from near-term cuts and toward whether inflation requires a longer pause, or even more tightening. It appears we are in a higher-for-longer rate environment until higher costs, driven in part by shocks to the energy market, slow down.
Since the FOMC meeting, some data have pointed to slower inflation and signs of labor market weakness, both of which could support a more patient interest rate outlook. Consumer Price Index, or CPI, data showed July inflation had moderated from spring levels. July CPI inflation rose 0.1% on a seasonally adjusted basis after falling 0.4% in June. Year over year, July CPI inflation was 3.4% and, when excluding food and energy prices, core CPI was 2.5%.
Furthermore, job growth was weaker than expected at –23,000 jobs in July, while the unemployment rate changed little at 4.1%. However, longer-term Treasury yields have moved higher recently, resulting in an unsettled rate outlook. For lenders, that means softer inflation and labor data may support a Fed pause, but longer-term borrowing costs could remain stubbornly elevated for farm borrowers, especially those financing land, equipment or larger operating lines.
Lastly, policy uncertainty remains a part of the summer outlook. Farm bill discussions advanced in the Senate, but the bill did not make it out of committee before the August congressional recess. E15 also didn’t make it to the Senate floor before summer break.
Energy and fertilizer market uncertainty adds another consideration as harvest season approaches. Final yields, harvest prices, export demand, energy costs, fertilizer prices and interest rates will all shape borrower cash flow, repayment capacity and 2027 credit needs heading into fall. The August WASDE improved the crop price conversation, but margin pressure remains elevated.
The information provided is accurate to the best of the author’s knowledge at time of publishing. It is presented “as is” with no guarantee of completeness, accuracy or timeliness, and without warranty. The information is educational in nature and not investment, legal, accounting, tax or other advice of any kind.