Soybeans Surge as Middle East Tensions and Weather Risks Reignite Commodity Volatility

The global commodities market is in a state of heightened volatility as geopolitical fireworks in the Middle East collide with weather-driven supply uncertainties. For investors, this is a pivotal moment to reassess positions in agricultural commodities, particularly soybeans, wheat, and corn. While soybeans are riding a wave of geopolitical tailwinds and biofuel demand, corn faces mounting headwinds from ample supplies and favorable crop conditions—a divergence that presents clear opportunities and risks for strategic portfolio adjustments.

The Soybean Rally: Geopolitical Tensions Fuel Biofuel Demand

Soybean prices have surged in June 2025, driven by a confluence of Middle East instability and U.S. policy shifts. Escalating tensions between Israel and Iran—exacerbated by U.S. involvement in strikes on Iranian nuclear sites—have pushed Brent crude prices to a six-month high of $76.50/barrel, reigniting fears of supply disruptions through the Strait of Hormuz. This volatility has indirectly boosted biofuel economics, as higher crude prices make alternatives like soybean-based biodiesel more cost-competitive.

The U.S. Environmental Protection Agency (EPA) has further amplified this trend by proposing aggressive biofuel mandates for 2026–2027. The 5.61 billion gallon target for renewable fuels (up from 3.35 billion in 2025) and reduced RIN credits for imported feedstocks are expected to sharply increase demand for domestically produced soybean oil. This policy pivot has already pushed CBOT soybean oil futures to $1,164/ton, a 15% surge since early June, and traders are pricing in further gains if the EPA finalizes its rules.

Corn: Ample Supplies and Favorable Weather Cap Gains

While soybeans thrive on uncertainty, corn faces a less auspicious outlook. The USDA's June 16 crop progress report revealed that 94% of the U.S. corn crop has emerged, with 72% rated good-to-excellent—slightly ahead of seasonal averages. Favorable rainfall and moderate temperatures have eased early-season stress, while the WASDE report trimmed 2025/2026 ending stocks to 1.79 billion bushels, a modest reduction that failed to ignite a sustained rally.

Traders remain cautious about the June 30 USDA acreage report, which could reveal whether farmers expanded corn plantings at the expense of soybeans. However, global supply dynamics are bearish: Brazil's record soybean harvest and strong safrinha corn crop, combined with China's reluctance to import U.S. corn, have kept pressure on prices. New-crop corn futures, now near 2025 lows, are likely to remain range-bound unless extreme weather or geopolitical shocks disrupt supply chains.

Wheat: A Mixed Picture, but Weather Risks Offer Opportunities

The wheat complex is split between winter wheat struggles and spring wheat optimism. USDA data shows winter wheat harvest progress lagging at 10% complete, with condition ratings slipping to 52% good/excellent—a 2-point decline week-on-week. Persistent moisture delays and localized droughts are weighing on yields, while export demand (notably from Nigeria) provides some support.

In contrast, spring wheat conditions improved to 57% good/excellent, benefiting from timely rains and cooler temperatures. This divergence suggests a short-covering opportunity in winter wheat futures if weather improves, while spring wheat could see upside if conditions remain favorable.

Strategic Investment Recommendations

1. Soybeans: Go Long with Caution
2. Buy Signal: Enter long positions in soybean futures (e.g., SOYB ETF) on dips below $14.50/bushel, targeting $16.00/bushel.

3. Risk: Monitor geopolitical developments closely; a de-escalation in the Middle East or delayed EPA rule finalization could cap gains.

4. Wheat: Short Covering and Weather Plays

5. Short Covering: Reduce short positions in winter wheat if harvest delays ease, targeting gains from improved export data.

6. Spring Wheat: Look to buy contracts at $6.80/bushel, with upside potential to $7.50/bushel if favorable weather persists.

7. Corn: Avoid Bullish Bets

8. Avoid Longs: U.S. corn faces a bearish backdrop of ample supplies and global competition. Short positions or inverse ETFs (e.g., COWZ) may be warranted.
9. Watch for Triggers: Monitor the June 30 acreage report and weather forecasts for the Corn Belt—extreme heat or drought could create short-term spikes, but structural oversupply remains a headwind.

Conclusion: Stay Nimble Amid Uncertainty

The commodities market is a battleground of opposing forces: geopolitical risks, weather patterns, and policy changes are all vying for influence. Soybeans are the clear beneficiaries of this environment, while corn and winter wheat face structural headwinds. Investors must remain agile, using real-time data on crop conditions and geopolitical developments to adjust exposures. For now, the playbook is clear: favor soybeans and wheat weather plays while hedging against corn's supply overhang.

The next few weeks will be critical. As the USDA's acreage report and NOAA's weather outlooks materialize, traders must be prepared to pivot swiftly. In this volatile landscape, vigilance and flexibility will define success.