AGRICULTURAL FUTURES FUNDAMENTALS
Plain English
Agricultural futures (corn, wheat, soybeans, cotton, sugar, coffee, cocoa) are driven by weather, government reports, export demand, and production cycles. Unlike financial assets, commodities can't 'go to zero' — they have a cost of production floor. But they can be extremely volatile.
Going deeper
Key agricultural fundamental drivers: (1) USDA WASDE Report (monthly, first or second week — exact date released in January for the whole year) — the most important ag market report; shows supply/demand balance for all major grains globally. (2) USDA Crop Progress Report (weekly during growing season) — crop condition ratings (excellent/good/fair/poor); conditions below 65% G/E are typically bullish. (3) Export Sales Report (weekly, Thursday) — US grain export commitments vs. prior year; Chinese demand is critical for soybeans and corn. (4) South American Production — Brazil and Argentina produce ~55% of world soybeans; their weather is crucial Jan-March (their growing season). (5) End-Users-to-Stocks Ratio — how many weeks of demand is covered by current inventories; very low ratios are extremely bullish.
Examples
Drought Weather Market
June forecast shows hot, dry conditions for the key corn belt (Iowa, Illinois, Indiana). Weekly USDA crop condition ratings drop from 70% G/E to 55% G/E. December corn futures rally from $4.50 to $5.80 in three weeks. Rain ends the rally instantly.
Brazilian Record Crop
Brazil confirms a record soybean crop of 163 MMT (million metric tons). Global supply jumps significantly. November soybean futures drop $1.50/bushel over two weeks as surplus supply erases the weather-risk premium. China shifts buying from US to Brazil.