After three months of war, tensions appear to be easing in the Middle East. That could free ag markets to focus on their main event: El Nino and the growing season for U.S. corn and soybeans.
Of course, volatility in financial and energy contracts could still seep back into Chicago futures with the speed of a late-night social media post. Otherwise, summer is here, putting the size of Midwest crops most definitely in play.
To be sure, some seed is still in the bag, not the ground. But with 86% of corn and 79% of soybeans planted, estimates of 2026 cop supplies can soon be made with at least some semblance of mathematical certainty.
To more accurately forecast corn yields, I use three data sets. Though not provided in real-time, this is as close as such data gets:
- Weekly Crop Progress ratings put out by USDA on the first business day of week, usually Mondays, during the growing season. The first corn conditions report is expected June 1, with soybeans soon to follow.
- Vegetation Health Index measures based on satellites data gathered on Sundays, released on Thursdays
- Weather data, including July temperature and precipitation, June crop stress and planting timeliness in key producing states. Most states hit their mid-May planting targets for corn. Eastern states, however, are starting to lag a little.
Crop conditions and VHI become statistically significant with yields – that is, the connection is more than mere chance – in the second week of June, nearly two months before enough weather data accumulates to allow accurate forecasts. The first ratings won’t quite reach the level of significance right away but will be close enough to merit scrutiny as an early warning system.
190-bpa corn?
Thus far, widespread dryness isn’t a concern and is limited to southern and western states according to the latest Drought Monitor. But normally steady VHI readings declined over the past month, just as the cold La Nina phase of the El Nino – Southern Oscillation cycle transitioned to neutral. El Nino warming is expected to emerge for summer, increasing odds for better than normal yields.
Current maps are already consistent with patterns seen in other El Nino summers. If this connection holds for 2026, yields could be around 4% better than expected, hitting 190 bushels per acre for corn and 55 bpa for soybeans. USDA plugged yields of 183 bpa corn and 53 bpa soybeans into its May 12 World Agricultural Supply and Demand Estimates.
No quick fall for crude oil
Supply is only one part of the price equation for corn and soybeans – demand matters too, and a semblance of peace between the U.S. and Iran could impact hopes for biofuels made from soybean oil and corn ethanol. Though it’s unclear if a peace dividend will boost usage of either crop, aggressive blending targets buoyed optimism earlier.
Nearby crude oil fell back below $100 a barrel for both the West Texas Intermediate and Brent benchmarks, but deferred contracts continue to run $10 to $20 above levels from before the bombs started falling on Tehran. That suggests fuel prices could stay higher for longer, reducing summer driving demand and perhaps nudging world economies closer to recession.
Pain at the pump could also keep inflation elevated, making it harder for the Federal Reserve and other central banks to cut lending rates, their normal go-to solution for jump-starting struggling economies. While many foresaw cuts coming a few months ago, those betting on Federal Funds Futures now predict one and possibly more rate hikes are possible, just as new Fed Chair Kevin Warsh takes the helm of monetary policy. That would increase the financing costs farmers pay on loans, just as fuel bills also rise.
Opening the Strait of Hormuz could address one problem – fertilizer costs that spiked to their highest level in three years, pushing the bill for feeding an acre of corn in Illinois up more than 30% from 2025. Relief won’t come in time for this year’s crops, but most of that fertilizer was already booked earlier.