4/5/2024

Soybeans, wheat and corn as trading assets

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Including agricultural commodities such as corn, soybeans and wheat in an investment portfolio can provide diversification and potentially benefit from projected growth in global food demand.

However, when investing in each of these crops, you must carefully evaluate both the risks and potential returns. This guide examines these investments and shows the critical connections between agriculture, finance and global trade.

Corn: raw material for livestock and fuel

The main consumer of corn is the livestock industry, where it is used to feed cattle, poultry and pigs. This makes the demand for corn dependent on the state of the meat industry.

Corn also plays an important role in the production of ethanol biofuel, accounting for more than 95% of its production in the United States. Thus, corn demand is also affected by fuel policy and gasoline demand.

As a food product, corn is sold on the cob, but is much more common in processed forms: corn syrup, starch and oil are widely used by food manufacturers and home cooks as sweeteners, thickeners and for frying.

Corn prices are directly related to annual production and inventories. Drought or flooding in corn-growing regions could cause prices to spike. At the same time, livestock farming, bioethanol production and the food industry provide a stable base demand for this crop.

Soybeans: oil and meal

Soybeans are eaten both raw and as part of various products: tofu, soy milk, soy sauce, miso and many others. They are valued for their high protein and oil content.

Due to their properties, soybeans are a major oil crop and are processed into two major industrial products: soybean oil and soybean meal.

The largest exporters of soybeans today are Brazil, the USA, Paraguay, Canada and Argentina.

Soybean prices, like corn, are subject to fluctuations depending on meat production volumes and demand for biodiesel. Weather factors affecting soybean crops in the US, Brazil and Argentina may also lead to supply shortages in the market.

Wheat: key agricultural crop

Wheat is one of the most important food crops in the world. From it, flour is obtained by grinding, which is used to produce bread, pasta, baked goods, breakfast cereals and other food products.

Wheat prices are subject to fluctuations under the influence of various factors. These include:

  • Weather conditions in major wheat growing regions. Adverse weather conditions, such as drought or excessive rainfall, can significantly reduce yields and increase prices.
  • Level of world wheat stocks. Low inventory levels can lead to higher prices, while high levels can lead to lower prices.
  • Changes in consumption patterns. Increased demand for wheat due to population growth or changing dietary preferences may cause prices to rise.

In addition to these factors, geopolitical events, trade policies and currency fluctuations can affect wheat prices. For example, trade embargoes or conflicts in key wheat growing regions could disrupt supply chains and affect prices.

Unlike corn and soybeans, wheat is not an important source of biofuel or animal feed.

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