Soybeans vs. Corn: Navigating Geopolitical and Weather Risks in Q3 2025

The global agricultural commodities market faces a pivotal quarter as geopolitical tensions in the Middle East and favorable U.S. crop conditions create stark divergences between soybean and corn fundamentals. For investors, this environment demands strategic repositioning to capitalize on soybean's upside potential while avoiding corn's oversupply-driven downside.

Soybeans: Geopolitical Tailwinds and Biofuel Catalysts

Soybeans are positioned to benefit from three converging forces: Middle East instability, U.S. biofuel mandates, and shifting trade dynamics.

1. Middle East Tensions and Fertilizer Risks:
   The Iran-Israel conflict threatens the Strait of Hormuz, a chokepoint for 20% of global oil and a quarter of nitrogen fertilizer exports. Disruptions here could spike urea prices—critical for soybean production—as the U.S. relies on Middle Eastern imports for 97% of its potash and 18% of nitrogen. already show a 10% rise in Q2 2025, foreshadowing cost pressures for corn farmers. Soybeans, however, gain indirectly through:

2. Biofuel Mandates:
   The EPA's proposed 2026–2027 Renewable Fuel Standard targets a 5.61 billion gallon mandate—a 68% increase from 2025—driving demand for soybean oil. This policy shift has already pushed CBOT soybean oil futures up 15% since early June, with traders anticipating further gains if mandates are finalized.

3. China's Import Dynamics:
   Chinese soybean imports from Brazil surged 37.5% in May 2025, signaling a strategic shift to South American supplies. This reduces reliance on U.S. exports but amplifies global price volatility, favoring soybean holders as buyers compete for limited supplies.

Corn: Oversupply and Favorable Weather Pressures

Corn faces headwinds from abundant global supplies and ideal U.S. growing conditions, making it a risky short-term bet.

1. Supply Overhang:
   The USDA projects 2025/26 U.S. corn ending stocks at 1.75 billion bushels, up 10% year-on-year. Brazil's record 123.3 million-ton safrinha corn crop (2024/25) further depresses prices, with global supplies expected to hit a 10-year high.

2. Weather-Fueled Yield Gains:
   Favorable Midwest weather—above-normal rainfall in the Great Lakes and Ohio Valley—supports robust yields. Historically, such conditions have led to overproduction, exacerbating price declines.

3. Weak Demand Drivers:
   Ethanol production remains sluggish due to high corn prices and competition from biofuels reliant on soybean oil. The EPA's mandates, while bullish for soybeans, offer little relief to corn, leaving it vulnerable to inventory overhang.

USDA Reports and Weather Forecasts: Catalysts for Reassessment

Two key reports will refine this outlook:

1. June 30 Acreage Report:
   Farmers Business Network (FBN) forecasts a 300,000-acre drop in corn plantings to 95.0 million acres, offset by a 202,000-acre rise in soybeans to 83.7 million. These changes are modest but could confirm a soybean supply contraction relative to corn.

2. July 11 WASDE Report:
   This will incorporate updated yield estimates and weather data. Favorable Midwest conditions may push corn ending stocks higher, while soybeans could see tighter balances if Middle East risks disrupt fertilizer flows.

Investment Strategy: Position for Divergence

• Go Long Soybeans (SOYB): Invest in the Invesco DB Agriculture Fund (SOYB), which tracks soybean futures. The fund's focus on commodities with geopolitical and policy tailwinds aligns with soybeans' fundamentals.
• Avoid Corn Until Oversupply Eases: Short corn via CBT corn futures or use options to hedge against price declines. Wait for a 20–25% correction before re-entering long positions.
• Cautious Wheat Play: Monitor spring wheat contracts (SRW/SRW2) for weather-related volatility, particularly if Canadian or Russian exports face logistical bottlenecks.

Conclusion

The Q3 2025 landscape favors soybeans as a hedge against Middle East instability and policy-driven demand growth, while corn's oversupply and weak fundamentals make it a risky hold. Investors should prioritize soybean exposure through ETFs like SOYB, remain patient on corn until supply overhang eases, and keep a weather eye on Midwest conditions—a single heatwave or drought could shift dynamics abruptly.

In this volatile environment, agility and a focus on diverging fundamentals will determine success.