Grain Futures: A Strategic Buy Amid Shifting Supply Chains and Geopolitical Uncertainty

The global grain markets in 2025 are at a crossroads, shaped by a confluence of record U.S. production, geopolitical trade frictions, and weather-driven supply chain disruptions. For investors, this volatility has created a unique opportunity: corn and soybean futures appear undervalued relative to their long-term fundamentals, despite near-term headwinds.

Corn: A Record Harvest Overshadowed by Price Compression

The U.S. Department of Agriculture (USDA) projects a record 2025/26 corn crop of 16.7 billion bushels, driven by a historic 188.8-bushel-per-acre yield and expanded harvested acreage [2]. Yet, this bounty has not translated into profitability for farmers. The market-year average farm price for 2025 corn has plummeted to $3.90 per bushel—a 30-cent drop from earlier forecasts—while production costs remain near record highs at $897 per acre [4]. This creates a stark $0.85-per-bushel loss, pushing corn into undervaluation territory.

The disconnect between supply and price reflects global oversupply and weak export demand. U.S. corn exports are forecast at a record 2.9 billion bushels, but increased competition from Brazil and Argentina, coupled with China’s shifting focus to soybeans, has depressed prices [2]. However, this scenario may reverse if China’s soybean-driven feed demand outstrips its capacity to source from South America. With U.S. corn ending stocks projected at 2.1 billion bushels—the highest in seven years—investors could benefit from a potential price rebound if demand shifts or trade tensions ease [5].

Soybeans: A Market in Transition

The U.S. soybean market faces a more complex challenge. While production is projected at 4.3 billion bushels, exports are expected to fall to 1.745 billion bushels due to China’s near-total absence from U.S. purchases [2]. Retaliatory tariffs have pushed China’s effective duty on U.S. soybeans to 34%, making Brazilian imports far more competitive [3]. By Q2 2025, U.S. soybean exports to China had collapsed to 783,000 tonnes—a 67% year-over-year decline—while Brazil and Argentina filled the void with record shipments [4].

Yet, this crisis may present a buying opportunity. Soybean prices have fallen to levels below production costs, with November 2025 futures dropping to $9.845/bu from $10.3575/bu in July [3]. If trade tensions abate—such as through a November 2025 tariff reduction—U.S. soybeans could regain market share, particularly as China’s domestic soybean stocks dwindle. Additionally, strong crush demand for soybean oil in biofuel production provides a floor for prices [4].

Weather and Supply Chain Volatility: A Double-Edged Sword

Weather patterns in 2025 have introduced both risks and opportunities. While heat and humidity have accelerated corn growth in the Corn Belt, severe storms in Nebraska and Indiana have damaged crops, and fungal diseases like southern rust threaten yield potential [1]. For soybeans, Brazil’s record safrinha crop has flooded global markets, but U.S. farmers are seeing their first seasonal improvement in crop conditions [1].

This volatility underscores the fragility of global supply chains. Argentina’s dry harvest and Brazil’s reliance on timely rains for safrinha corn add further uncertainty [1]. However, reduced yield variability in the 21st century—compared to the 20th—suggests U.S. harvests may become more predictable, potentially stabilizing prices over time [2].

Geopolitical Uncertainty: A Catalyst for Rebalancing

The U.S.-China trade standoff remains the most critical factor. China’s shift to South American suppliers has cost U.S. farmers billions, but it also creates a vacuum that could be filled if diplomatic efforts succeed. A November 2025 agreement to reduce tariffs could extend the U.S. export window and pressure Brazil’s dominance [1]. Meanwhile, China’s strategic stockpiling of soybeans—reaching 72.6 million metric tons by July 2025—may eventually drive demand for U.S. corn as a feed alternative [6].

Investment Implications

For grain futures, the current environment resembles a “buying the dip” scenario. Corn’s $3.90 price is 17% below its five-year average, while soybeans trade at a 22% discount. Both commodities are priced below their respective breakeven costs, creating a margin of safety for investors. Key triggers for a rebound include:
1. Trade normalization between the U.S. and China.
2. Weather-related supply shocks in Brazil or Argentina.
3. Increased biofuel demand for soybean oil.

Conclusion

Grain futures are undervalued assets in a market defined by short-term pain and long-term resilience. While U.S. farmers grapple with record production costs and geopolitical headwinds, the fundamentals—robust yields, global demand shifts, and potential trade resolutions—favor a strategic entry point for investors. As the 2025/26 marketing year unfolds, those who position now may reap rewards when volatility subsides and demand rebalances.

Source:
[1] Grains Market in 2025: Analyzing Soybeans, Corn, Wheat [https://www.stonex.com/en/thought-leadership/global-outlook-for-soybeans-corn-wheat-and-vegetable-oils-q3-2025/]
[2] USDA Ups 2025 Corn Production More Than Expected in ... [https://www.agriculture.com/august-usda-wasde-report-11789127]
[3] Soybeans Without a Buyer: The Export Gap Hurting U.S. Farms [https://soygrowers.com/news-releases/soybeans-without-a-buyer-the-export-gap-hurting-u-s-farms/]
[4] High Production Cost Series, Part 1 [https://ncga.com/stay-informed/media/the-corn-economy/article/2025/08/high-production-cost-series-part-1]
[5] USDA corn yield estimate hits record high [https://www.farmprogress.com/marketing/record-corn-yield-forecast-sends-futures-plummeting-soybean-estimates-surprise]
[6] Dim Sums: Agricultural Markets in China: July 2025 [http://dimsums.blogspot.com/2025/07/]