Corn vs. Soy vs. Wheat: What Investors Need to Know

Investing in corn, soybeans, and wheat can expand a portfolio and add potential gains from expected growth in global food demand. Each of these grains has its risks and potential returns to consider if you want to invest in them.

In what follows, we take you through these three crucial agricultural products that help feed much of the world daily and appear in products far beyond foodstuffs. We tell you how they are produced, what the markets are for each, and your choices for investing based on your goals and risk tolerance.

Agricultural commodities such as corn, soybeans, and wheat are essential food sources worldwide and vital areas for investing. Understanding these commodities is crucial, as they are consequential in global food security and economic stability.

Corn, given its high liquidity in futures markets, is a popular choice for investing, accommodating both short-term traders and long-term investors. The corn market, however, has often been volatile, influenced by changing weather conditions and agricultural policies. Soybeans tend to be more stable price-wise, though soybean production is concentrated in specific global regions, making it susceptible to local economic, climatic, and other environmental factors. Wheat, whose market is often at the whims of geopolitical events such as conflicts and export bans, can also have unpredictable volatility.

This guide explores these investments while showing the crucial links among agriculture, finance, and global trade.

Understanding Corn, Soy, and Wheat as Commodities and Investment Options

Corn, soy, and wheat were among the earliest goods traded, giving rise to the first markets. Wheat harvesting dates to the beginning of the agricultural revolution, about 11,600 years ago. Corn or maize was domesticated by indigenous peoples in Mexico some 10,000 years ago and was traded as far back as to become a staple in many Native American societies. Soybeans are relative latecomers at about 9,000 years old, vital in establishing the earliest Chinese civilizations. Harvests of each could mean great abundance and wealth from trade, and droughts and failing crops could mean tremendous suffering.

While the daily headlines in financial news point to the latest moves in tech and changes in sophisticated investment vehicles, corn, soy, and wheat are still core elements in our global economy. Fluctuations in grain prices might indicate changes in economic growth and influence everything from the ability of billions to put food on their tables to the stability of nations.

Investors and traders enter the grain markets to diversify their portfolios, hedge against risks, or speculate on market trends. These “soft” commodities can diversify a broader portfolio since they don’t correlate to changes in stocks and bonds. Investing in them can thus be a hedge against inflation since tangible assets like commodities often keep much of their value in times of economic uncertainty.

Perhaps most importantly, though, producers and commercial consumers of grains use these markets to hedge against future price changes, allowing farmers for millennia to have the ability to save from one season to the next and to withstand volatile crop yields. By locking in prices through futures contracts or other derivatives, they can protect themselves from unexpected problems in the coming harvest. Investors thus play no small role in agriculture, not just now but going back almost to its beginnings.

Hedging is still essential for budgeting, planning, and maintaining profits in an industry with often-slim margins and subject to the whims of fate like uncontrollable weather patterns, climate shifts, pest infestations, and global economic changes. Let’s look at each of these crops in turn.

Corn

As a Commodity

Most corn feeds livestock such as cattle, poultry, and swine. This makes corn demand heavily dependent on the meat industry. Corn is also notably important for ethanol biofuel, accounting for over 95% of U.S. ethanol production. Fuel policies and gasoline demand, therefore, also influence the demand for corn.

As a food for humans, corn is sold on the cob but is far more prevalent in products like corn syrup, cornstarch, and corn oil, which are widely used by food manufacturers and home cooks for sweeteners, thickeners, and frying. Indeed, a significant amount of corn grown in the United States is turned into high-fructose corn syrup (HFCS), a sweetener that is cheaper than cane sugar and used in many snacks and beverages. The prevalence of HFCS in the food supply continues to concern many health-conscious consumers and public health advocates. It’s important to note that while corn in its natural form provides nutritional benefits, the same cannot be said for its processed derivatives like HFCS. Changes in its use, driven by consumers seeking healthier alternatives, would affect demand for this crop.

Leading exporters of corn include, by order of yield, the U.S., Argentina, Ukraine, Brazil, France, and Romania.

As an Investment

Corn prices depend heavily on annual production and stockpiles. Drought or floods in regions where corn is grown, like the U.S. Midwest, could generate a price spike. At the same time, the livestock, bioethanol, and food-processing industries mean there is a stable baseline demand.

There are several ways to invest in corn:

• Corn futures: Chicago Mercantile Exchange (CME) corn futures and options provide exposure to physical corn prices.
• Corn ETFs: Funds like the Teucrium Corn ETF (CORN) hold baskets of corn futures, allowing exposure without managing contracts.
• Grain producers: Stocks of companies like Archer-Daniels-Midland (ADM) and Tyson Foods (TSN) offer indirect corn exposure since they have corn processing and livestock operations.
• Farmland REITs: Real estate investment trusts (REITs) that own corn-producing farmland, like Farmland Partners (FPI), benefit from higher crop prices that boost land values and farm rent.

Soybeans

As a Commodity

We eat soybeans (soya) as raw beans (edamame), tofu, soy milk, soy sauce, miso, and countless other products. They are valued for their high protein and oil content. Soybeans are thus a top oilseed crop and are processed into two main industrial products: soybean oil and soybean meal.

Soybean oil is processed for use in cooking, salad dressings, baking, and frying fats. Biodiesel production has been driving up demand for soybeans in recent years.

After the oil is extracted, the remaining solids are processed into a meal. Soybean meal is a high-protein livestock feed for poultry, swine, and farm-raised fish. Soymeal prices, therefore, tend to track with meat and fish production. In addition, soybean meal is found in healthy and vegetarian alternative foods, as well as protein supplements and meat substitutes, catering to the growing demand for plant-based proteins for vegetarianism and veganism.

Top soybean exporters include Brazil, the U.S., Paraguay, Canada, and Argentina.

As an Investment

Like corn, soybean prices fluctuate with meat production and biodiesel demand. Likewise, weather disruptions to soy crops in the U.S., Brazil, and Argentina can lead to undersupply.

There are several ways to invest in soy:

• Soybean futures: CME corn futures and options provide exposure to physical soybean prices, as well as contracts listed for soybean oil.
• Soy ETFs: Funds like the Teucrium Soybean ETF (SOYB) hold baskets of soy futures, allowing exposure without managing contracts.
• Grain producers: Stocks of companies like ADM and Tyson Foods offer indirect soybean exposure through their processing and livestock operations.
• Farmland REITs: Real estate investment trusts (REITs) that own soy-producing farmland, like FPI, benefit from higher crop prices that boost land values and farm rents.

Wheat

As a Commodity

Wheat is milled into flour for staple food products such as flours, breads, pasta, baked goods, and breakfast cereals. It is likely the most important food crop worldwide, serving as a primary source of carbohydrates and protein for a large part of the global population.

There are several types of wheat, including hard red winter wheat, hard red spring wheat, soft red winter wheat, white wheat, and durum wheat. Each variety has specific qualities and is used for different food products, like flour, bread, or pasta.

Key factors influencing wheat prices include weather conditions in major growing areas, global stock levels, and changes in consumption patterns. As with corn and soybeans, unfavorable weather conditions, like droughts or excessive rainfall, can significantly reduce yields and increase prices.

Top wheat exporters include Russia, the U.S., Australia, Canada, and Ukraine.

As an Investment

Wheat is heavily traded. Key factors influencing wheat prices include weather conditions in major growing areas, global stock levels, and changes in consumption patterns. Wheat prices can be volatile since they are influenced by geopolitical events, trade policies, and currency fluctuations. For instance, trade embargoes or conflicts in key wheat-growing regions can disrupt supply chains and affect prices.

Unlike corn and soy, wheat is not a significant input into biofuels or animal feed. Similar to the lists for corn and soybeans, here are some ways to invest in wheat:

• Soybean futures: CME wheat futures and options provide exposure to physical wheat prices and come in contracts for Chicago soft red winter and Kansas City hard red winter varieties. Black Sea and Australian wheat contracts have been more recently listed.
• Wheat ETFs: Funds like the Teucrium Wheat ETF (WEAT) hold baskets of wheat futures, allowing exposure without managing contracts.
• Grain producers: Stocks of companies like ADM and Tyson Foods offer indirect wheat exposure through their processing and livestock operations.
• Farmland REITs: Those that own wheat-producing farmland, like FPI, benefit from higher crop prices that boost land values and farm rents.

What to Consider When Investing in Corn, Soy, and Wheat

As grain crops, corn, soy, and wheat are sensitive to weather patterns and how they translate into better or worse harvests. Historical prices, supply and demand trends, and market sentiment explain the potential returns and risks of investing in corn, soybeans, and wheat.

Here are some crucial factors to analyze:

• Multiyear price charts to identify price ranges, trends, and seasonal patterns
• U.S. Department of Agriculture (USDA) forecasts for U.S. and global production, consumption, and stockpiles
• Seasonal weather forecasts to anticipate potential effects on planting, growing conditions, and yields
• The export outlook based on trade policies and major importer demand
• Input costs like fertilizer and fuel that affect profitability and crop acreage

Long-term influences on demand for these crops affect their future prices. These include climate change, technological advances, population growth and migration patterns, and changes to international trade policies.

As an investor, it’ll be essential for you to keep an eye on both the physical crop and futures markets. If futures volume rises, this could signal a rush of speculators entering the market, leading to distorted prices that affect the real supply and demand for corn, soy, and wheat. When futures prices are too far out of balance with their underlying commodities, either up or down, traders will look for opportunities for contrarian trades in expectation of a reversal to the mean.

How to Invest in Corn, Soy, and Wheat

Investing in grains offers the prospects for speculating, hedging, diversifying, and getting physical delivery of products. Investors and traders gain exposure to grain markets with futures contracts, ETFs, shares of stock in grain producers, and farmland REITs.

• Futures contracts: Futures provide fairly direct exposure to grain prices. Investors can use long/short futures to speculate or hedge other positions. Futures, however, require managing margin, rollover costs, and delivery risks. In other words, you need enough money set aside for potential losses, there are fees if you delay the delivery date, and there’s a risk that the goods won’t be delivered as promised.
• Options on futures: Options on grain futures provide upside profit potential while limiting the downside. Strategies like call/put buying, spreads, and covered calls can be employed. However, options lose value over time if prices don’t move favorably and can end up worthless.
• ETFs: Commodity ETFs hold baskets of futures, providing exposure without you directly trading them. However, contango (when the futures price remains above the spot price) can cause the ETF to underperform vs. the actual price of the commodities over time.
• Equities: Stocks of grain producers and commercial grain users offer indirect exposure through their operations. However, with stocks for individual firms come company-specific risks like earnings misses, plus the performance will often correlate with broader equity markets.
• Farmland REITs: REITs that own cropland benefit from higher grain prices that boost land values and farm rents. However, REITs provide indirect exposure from land leasing or ownership and often come with expenses and management risks. Non-traded farmland REITs have little liquidity, meaning it’s difficult for investors to sell them. Publicly traded farmland REITs risk losing value as interest rates rise.
  

Market Outlook for Corn, Soy, and Wheat

Here is an overview of the mid-2020s markets for these three grains:

• Corn: Corn futures are experiencing low prices, almost the weakest since late 2020. The U.S. corn market has seen a significant increase in production, leading to a rise in supply not seen since 2018 to 2019. Higher domestic usage and exports have partially offset this, but the stock-to-use ratio is expected to reach a five-year high by September 2024. The elevated supply has put pressure on corn values.
• Soy: The soybean market is expected to have a buildup in the amount of soybeans available, driven by a recovery from Argentina, a major producer. There’s also an expanding interest in soybeans because of their biofuel use. New soy-crushing facilities indicate growing demand. Indeed, soybean prices remained relatively stable from 2023 to 2024, reflecting relative highs compared with the lows in 2020.
• Wheat: Unlike corn and soy, the wheat market faces a global drawdown in the amount available, the lowest in almost 10 years. Weather extremes have affected wheat production in key regions like Argentina, Australia, China, and the European Union. China has increased its imports since its domestic production has declined because of extreme weather conditions. That said, wheat prices continue to show a long-term decline, and prices today are far lower than when they spiked following Russia’s invasion of Ukraine in 2022.

Experts and analysts closely monitor these markets, specifically for changes in the global supply chains, weather patterns, and geopolitical events. For a more detailed analysis and the latest updates, it’s recommended to consult your broker, specialized market reports, and agricultural commodity experts.

The Bottom Line

Corn, soybeans, and wheat offer investors exposure to vital agricultural commodities via futures markets and ETF products. This provides the opportunity to speculate on price trends, hedge other positions, or diversify a broader portfolio.

However, their unique supply and demand profiles make a nuanced understanding of each market essential. By weighing historical prices, current fundamentals, and potential risks, investors can determine which, if any, grains align with their portfolio goals and risk tolerance.

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