South American weather disrupts global grain market amid cold waves and export pressures.

In the first trading week of 2025, the CBOT grain futures market experienced significant volatility, primarily influenced by South American drought conditions, anticipated cold snaps in the U.S. plains, and low trading volumes. Wheat prices fell, while soybeans and corn saw slight gains amid fluctuations. Future weather and export dynamics have become the focal point of the market's attention.

Wheat: Cold Snap May Provide Support, Export Pressure Remains

On January 2nd, K.C. hard red winter wheat March futures dropped 7.5 cents, closing at $5.51-3/4 per bushel, ending five consecutive trading days of gains. Although the forecasted cooling and snow in the southern plains may protect winter wheat, export pressure remains significant.

Recently, Egypt purchased Russian wheat, and U.S. wheat has lost competitiveness in international markets due to a strong dollar. Additionally, the U.S. Department of Agriculture (USDA) is set to release a winter wheat planting area report on January 10th, which may provide new market direction. While the cold snap might support wheat prices in the short term, weak export demand and a strong dollar continue to exert major pressure.

Soybeans: South American Weather Drives Market Volatility

CBOT March soybean futures rose 1.5 cents to $10.12 per bushel, hitting a new high since November. In Argentina, the worsening drought has heightened concerns about declining yields, although Brazil's expectation of a record 171.4 million tons of soybean production imposes limits on price increases.

Driven by South American weather, soybean meal prices strengthened, with CBOT March soybean meal futures rising $3 to $319.90 per short ton. However, within the U.S., a weak domestic feed demand and adequate supply limit the room for price increases. According to USDA data, U.S. soybean crushing in November reached 6.3 million short tons, second only to the historical peak in October.

Corn: Export Demand Supports Price

CBOT March corn futures rose 1 cent to $4.59-1/2 per bushel. The cash market basis is steadily increasing, reflecting a revival in export demand. Upcoming USDA export sales data indicates that for the week ending December 26th, U.S. corn export sales might reach 1.4 million tons, though down from the previous week, overall demand remains robust.

Moreover, U.S. ethanol production has recovered. A report from the Energy Information Administration (EIA) indicates that corn ethanol production recently reached 1.111 million barrels per day, the highest level in a month, while inventories increased to 23.639 million barrels, the highest since September. This suggests that downstream demand for corn remains strong.

Soybean Oil: Increased Fund Short Positions Weigh on Prices

CBOT soybean oil futures are showing weakness due to the continuous increase in speculative net short positions. Despite abundant supplies, the global vegetable oil market remains fiercely competitive, and uncertainty regarding U.S. biodiesel policies limits price growth potential.

Outlook

In the coming weeks, weather and exports will continue to dominate the trends in the grain market. The wheat market may receive short-term support from the cold snap, but export pressures and a strong dollar will limit its rebound. Soybean and soybean meal prices will fluctuate under the dual influence of the drought in Argentina and Brazil's bumper crops. The corn market, benefiting from ethanol demand recovery and increased exports, is expected to remain relatively strong. As the growth conditions in South America and global market dynamics become clearer, high volatility will continue to characterize the grain market.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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