Prospective Plantings Report Reveals Farmers Spring Plans: Will Weather or Rising Costs Change Intentions?

 

 

 

The last day of March brings the closely watched annual Prospective Planting report, along with a Quarterly Grain Stocks report, both of which continue to shape expectations for the upcoming growing season. Continued oil price volatility is also shaping expectations.

 

Prospective Plantings Report Gives Glimpse at Potential Mix of 2026 Crops

From an agricultural economics perspective, the United States Department of Agriculture's (USDA) Prospective Plantings report remains one of the most closely watched data releases in row crop markets. This year’s numbers, based on a National Agricultural Statistics Service (NASS) survey of farmers conducted at the end of February and early March, offered a few small surprises relative to market expectations.

USDA estimates show intended corn plantings at 95.3 million acres for 2026. While this figure came in above most pre-report predictions and above USDA’s February Outlook projection of 94 million acres, it is down 3% from 2025's actual planting acreage of 98.8 million acres. Soybean plantings are projected at 84.7 million acres, landing below most pre-report estimates and just under USDA’s February projection of 85 million acres, though still up 4% from last year's 81.2 million acres.

Going into the report, there were a few reasons to believe corn acreage would not drop as much as some analysts expected. Strong demand signals and good yields for corn last fall, when many producers were making seed and fertilizer decisions, likely helped corn remain a strong choice in many operations despite lower prices.

That said, there are important caveats to this dataset. Since the USDA survey was conducted, major geopolitical events and weather developments have occurred, and the response rate was relatively low. Both factors could influence how these intentions ultimately translate into actual planted acreage. In addition, planting intentions are always just that: intentions.

 

Quarterly Grain Stocks and the April Word Agricultural Supply and Demand Estimates (WASDE): Familiar Trends, Ongoing Corn and Soybean Divergence

The USDA Quarterly Grain Stocks report reinforced several ongoing trends in grain markets. As of March 1, 2026 both corn and soybean inventories are higher than a year ago:

• Corn stocks: 9.0 billion bushels, up 11% year-over-year
• Soybean stocks: 2.1 billion bushels, up 10% year-over-year

However, the story lies in how these numbers compare to expectations. Corn stocks came in slightly below the average pre-report estimate of 9.1 billion bushels, continuing a pattern where USDA data suggests stronger-than-expected usage helping to draw down large available supply. In contrast, soybean stocks slightly exceeded pre-report expectations of 2.0 billion bushels, aligning with a broader 2025/26 trend of more conservative demand assumptions.

This divergence is becoming more pronounced in the 2026 outlook. Corn reflects the potential for large production and ample supply, but also strong demand that may prove more resilient than expected. Soybeans, on the other hand, continue to show comparatively softer demand signals, now further complicated by geopolitical uncertainty and delayed trade discussions.

Reports that the Trump administration asked China to delay a planned summit with President Xi Jinping—expected to include discussions on agricultural trade—added pressure to soybean markets. In response, soybean futures traded limit down (-$0.70 per bushel in one trading day) in mid-March, as traders quickly priced in potential risk to U.S. soybean exports. Over the following week, soybean futures saw roughly a $1.00 trading range, underscoring just how sensitive the market remains to U.S.-China relations. While some of those losses were later recovered, soybean prices remain particularly sensitive to global trade disruptions—particularly those involving China, the largest importer of U.S. soybeans.

In the April WASDE report, 2025/26 U.S. corn outlook was unchanged from the prior month. The trend of larger supplies, exports, feed and residual use along with higher ending stocks compared to the prior marketing year continues. Exports remain a bright spot on the U.S. corn balance sheet, with the farmgate price forecast at $4.15 per bushel, up $0.05 from the start of the quarter.

The 2025/26 U.S. soybean outlook is for slightly lower supplies, higher crush, lower exports and higher ending stocks than the prior marketing year. The April WASDE raised soybean crush by 35 million bushels to 2.6 billion. However, exports were reduced 35 million bushels to 1.54 billion, reflecting a slower U.S. annual export pace and higher South American shipments. Based on prices to date, the farmgate soybean price forecast increased $0.10 to $10.30 per bushel.

While the USDA Outlook Forum and the Prospective Plantings report provide initial insight, the May WASDE will offer the first full look at USDA’s 2026/27 corn and soybean balance sheet.

Taken together, these reports suggest a grain and oilseed outlook defined by ample supply, unresolved demand and rising macroeconomic pressure. With planting season underway, continued geopolitical uncertainty and weather risks mounting, the coming weeks will be critical in shaping market direction.

 

Weather Watch: Concerns Begin to Build

As planting season approaches, attention significantly shifts to the weather. Will it be too hot, too cold, too wet or too dry?

Regionally, there are emerging pockets of moderate to severe drought in the Upper Midwest. On a broader scale, conditions across the lower Great and High Plains remain concerning, with ongoing wildfires in those areas continuing to highlight the severity of dry conditions. The South and Southeast, particularly parts of Texas and Florida categorized as exceptional drought (D4), continue to see incredibly dry conditions. However, in recent weeks, additional moisture has resulted in some improvements.

For corn and soybean production nationwide, 44% of acres were in drought conditions as of March 31. Approximately 56% of U.S. hay acreage was affected by drought.  94% of cotton acres and 96% of peanut acres were experiencing drought, exacerbating already challenging economic conditions for southern row crop producers.

For livestock, 64 percent of cattle inventory are in areas experiencing drought. In contrast, just 35 percent of dairy cow inventory are in drought.

 

Cattle Markets: Remain Strong

While row crop markets digest mixed signals and wait on the weather, protein markets are generally firmer. In the April WASDE, total annual red meat and poultry production for 2026 was lowered, emphasizing tight protein supplies relative to demand.

The cattle market in particular continues to surge. June live cattle futures have returned to contract highs just shy of $250 per cwt, reflecting strong cash prices and tight supply conditions. The April WASDE projects an annual 2026 steer price of $242 per cwt.

Broilers are lower in the first quarter, but on annual basis maintain a strong price projection of $1.24 per lb. Even milk, despite increased production compared to other proteins, is benefiting from firmer demand and recovering some price losses from earlier in the year. The all milk price increased in April to $20.50 per hundredweight.  

 

Interest Rates, Inflation and Jobs: Mixed Signals for the Economy

While agricultural markets digest USDA data, geopolitics and weather, the broader macroeconomic environment is sending mixed—and at times conflicting—signals.

At the March Federal Open Market Committee (FOMC) meeting, the Federal Reserve made no changes to the Fed Funds rate, holding steady at 3.50%–3.75%, a move that was widely expected by economists and markets. However, stability at the monetary policy level hasn’t translated to calm in broader financial markets.

Market-based interest rates, particularly longer-term yields, have been edging higher, driven by a combination of geopolitical tensions, rising debt concerns and shifting expectations around future Fed policy. Earlier in the year, markets had largely “priced in” two rate cuts for 2026. Now, some of that optimism is being unwound as new uncertainties, particularly around global energy prices, have emerged.

In simple terms, markets could not fully anticipate the events of March and may have gotten ahead of themselves. With renewed inflation concerns, particularly tied to rising energy and related goods costs, those anticipated rate cuts are no longer a given, and that shift is pushing bond yields and variable interest higher.

The Fed’s own commentary and economic projections reflect this uncertainty. To further underscore this, they noted in their March meeting press release that “the implications of developments in the Middle East for the U.S. economy are uncertain.” The FOMC “dot plot” from March—where each dot represents a committee member’s projection of where the Fed funds rate will trend—still points to an average of one rate cut (-0.25%) this year, suggesting policymakers may continue to ease rates later in the year.

 

Labor: A Temporary Bright Spot?

The Fed’s primary decision drivers are labor market conditions and inflation—and recent labor data offered a bit of optimism.

The April Bureau of Labor Statistics Job Situation report showed 178,000 jobs added in March and an unemployment rate of 4.3%, an improvement over February's 4.4%. After recent softness in job growth, this was a welcome move in the right direction and gives the Fed more flexibility to maintain a “wait-and-see” approach to rates.

However, there is still some skepticism about how durable this strength will be. March’s rebound could be temporary rather than the start of a sustained trend.

 

Inflation: Heating Back Up

If labor data provides some breathing room, inflation is doing the opposite.

The Fed’s preferred measure, the Personal Consumption Expenditures (PCE) price index for February was 2.8% year-over-year. On an annual basis this was flat to January’s 2.8% PCE inflation, but on a monthly basis, a 0.4% acceleration. Other indicators also suggest inflation is re-accelerating and moving further away from the Fed’s target of 2% annual inflation.

The most recent Producer Price Index (PPI) for February, which measures wholesale inflation, showed prices rising 0.7% month-over-month and 3.4% year-over-year, marking the highest annual increase in a year. Importantly, this data does not yet fully reflect the latest surge in energy prices, suggesting further upward pressure could emerge in coming months. The most recent Consumer Price Index (CPI) represents the first governmental inflation data with March prices in it, and it does indeed show inflationary impacts of oil prices, with overall inflation rising 0.9% month-over-month to an annual rate of 3.3%. Energy inflation in March rose to 12.5%.

The PCE price index for March, which will include higher energy prices due to the strained oil supply chain, won’t be released until early May. The March PPI report is scheduled for release in mid-April.

Because PPI is often viewed as a leading indicator for consumer inflation, this trend raises concerns that inflation could shift from persistently sticky but stable back into a more problematic range.

 

Energy Volatility: The Wild Card

Underlying much of this uncertainty is one key variable: oil.

Over the past month, both West Texas Intermediate (WTI) and Brent crude have surged at times above $100 per barrel, with significant price swings along the way. For example, following a two-week ceasefire announcement in early April, oil dropped by nearly 20% in one trading day. That level of volatility makes economic forecasting challenging.

Energy prices don’t just affect fuel costs; they ripple across the entire economy. From fertilizer and chemical inputs to transportation surcharges for moving goods and plastics, oil is directly or indirectly embedded in nearly every aspect of the agricultural and food value chain.

This creates a compounding effect: higher energy prices can push up inflation, which influences interest rates, which in turn affects borrowing costs and investment decisions across rural communities.

It’s not just economists who are uneasy about recent macroeconomic data points. Measures like the University of Michigan Consumer Sentiment Index show growing concern among consumers about the economic outlook.

That hesitation matters. Consumer confidence influences spending, which drives economic growth and ultimately demand for food and agricultural products.

 

The Uncertain Bottom Line and What This Means for Ag Lenders

Taken together, the macroeconomic backdrop is anything but clear-cut. An unchanged Fed policy stance, mixed labor data, rising inflation pressures and volatile energy markets are pulling the outlook in different directions and creating uncertainty.

• Margins under pressure from costs and rates: Rising input costs (fuel and fertilizer) tied to volatile energy markets, combined with elevated interest rates and fewer expected rate cuts, are tightening producer margins and increasing repayment risk, particularly for leveraged borrowers.
• Weather risk is elevated heading into planting: With about 44% of row crop acres and a majority of cattle areas already in drought, production variability is a key concern—reinforcing the importance of liquidity, working capital and crop insurance coverage.
• Mixed ag economy requires borrower-level focus: Strong livestock prices are supporting some operations, but overall conditions remain uneven. Lenders should differentiate risk by enterprise mix, closely monitor cash flow sensitivity, and stress-test for price, yield and interest rate volatility.

For agriculture, this means navigating not just weather and supply-demand fundamentals, but also a broader economic environment that remains fluid amid changing geopolitical concerns. With planting season already underway in the South and just around the corner in more northerly regions, the coming weeks will be critical in shaping market direction.
 

Agri-Access is a division of Compeer Financial, ACA.
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.