5 Big Factors That Could Influence Grain Prices

What Happened

January provided plenty of surprises and fresh fundamental news for the grain markets. The January USDA WASDE report provided a friendly surprise for corn and soybean futures thanks to a draw down in supplies for the 2024/2025 crop year.

The friendly USDA report propelled corn and soybean prices higher, aided by fund buying and a hotter and drier weather forecast for Argentina. Many farmers rewarded the rally with cash sales. 

With the January USDA WASDE report now priced into the market, grain markets are searching for the next round of fundamental news to dictate the next price direction. 

From a Marketing Perspective

Potentially, the biggest fundamental factors that may influence grain prices are:

1. Weather

Brazil and Argentina are the countries being monitored the most right now in terms of weather and potential grain production. A large crop there for both corn and soybeans would seal the deal for larger global carryout of those grains and keep a lid on prices. 

The soybean crop in Brazil will be harvested soon, with second crop corn ready to be planted. Any large delays in soybean harvest could put the corn crop at peril, as a later planted corn crop would then face the dry season in Brazil during pollination time. 

It will also be important to watch the weather in Russia, Ukraine, Europe, and North America for the rest of the winter, in terms of how it could affect winter wheat.

2. Geopolitical Drama

The ongoing Russia/Ukraine war, Middle East turmoil, and potential trade wars with China, Mexico and Canada continue to be top of mind for 2025. Remember, one unexpected headline from any of these topics could create a major price reaction. 

Monitor global events, as they have the potential to send prices into a spinning free-fall lower or surprise rally higher. Therefore, it is paramount to have a plan in place to know when or how to price your grain, in response to any unforeseen geo-political event.

3. Crude Oil 

Be mindful of the potential for lower crude oil prices ahead. The new administration is working on increasing domestic energy production, seeking lower prices at the pump for Americans.

This will not be an overnight action. It may take some time. Keep in mind the historical correlation between crude oil prices, ethanol prices, and corn prices. They do tend to trend together, higher or lower, depending on market fundamentals.

According to the most recent USDA report, U.S. farmers grew a 14.87-billion-bushel corn crop, and 5.5 billion bushels of corn is pegged for use in ethanol. That means more than a third of the value of corn is directly tied to energy.

4. Funds

The funds are the big investment money that partakes in the trading of commodities. The fund managers also watch and monitor all the fundamentals listed above, as they are looking for opportunities to invest and make money. Every week the government requires the funds to disclose the number of positions bought or sold during the week. From there, we can track if they are amassing a long position in the market or a short position. They currently hold a hefty net long position in corn, a mostly neutral position in soybeans, and a net short position in wheat futures. 

5. USDA updates

The next monthly USDA WASDE report will be on Tuesday, Feb. 11. There will be much scrutiny over any updates to domestic demand and global supplies. 

The USDA Outlook Forum in Washington, D.C., will be Feb. 27–28. While it is not an official USDA report, the event brings outlook opinions regarding grain market fundamentals, and potential guesstimates for spring planted acreage.

Prepare Yourself

Be mindful of these factors throughout February, as they may dramatically affect the grain markets sending prices either higher or lower depending on how they play out. Being aware of how they fluctuate may help you manage marketing opportunities and minimize market risks. Have action plans ready for whatever market scenario unfolds. Prices can turn on a whim, so be confident and ready.

If you have questions, you can reach Naomi at naomi@totalfarmmarketing.com or visit totalfarmmarketing.com. 

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