What affects the price of grain markets?


Quick Answer

The price of grain markets is influenced by supply and demand, weather, precipitation and the value of currencies in the international trade market. Grains are a commodity, and are influenced by several factors, notes Investopedia. Constant changes in weather, temperature, seasonal availability and growing conditions can have a significant impact on the price of grains, which makes the grain market classify as a futures market.

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Full Answer

Seven products comprise the grain markets in the United States. They are corn, soybeans, soybean oil, oats, wheat, soybean meal and rice. Of these grains, corn is generally the most voluminous and has less market volatility than wheat and beans, states Investopedia. March, May, July, September and December are the most active corn production months.

Unlike corn, wheat and oats are produced in smaller quantities, and are more active in some months than others. The limited availability of these grains increases their prices and restricts their geographic distribution range. To protect financiers against major losses in grain trading, the Chicago Board of Trade, which regulates the grain markets in the U.S., imposes position limits to protect grains' prices from rising or falling too much in a day.

Sometimes, farmers substitute grains to compensate for a weak production year or limited supply of others. A cold winter, for instance, might yield a low corn supply. In turn, farmers switch to another substitute grain, which prompts a higher demand. This leads to more production of the substitute grain, which lowers its cost.

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