Factors Influencing Corn Futures Prices and Derivative Trading Strategies: A Literature Review

Corn is an important agricultural commodity used primarily for animal feed and industrial processing. Corn futures prices are influenced by a range of interconnected factors, including weather conditions, supply and demand fundamentals, exchange rate movements, geopolitical events, and trade policies. Although previous studies have examined these factors separately, relatively few provide an integrated review linking market fundamentals, multiple sources of risk, and related derivative trading strategies. This paper reviews the existing literature on the major factors affecting corn futures prices and discusses commonly used trading and risk management approaches. It examines global corn supply and demand, including the role of substitute grains such as wheat and sorghum. It also discusses climate and extreme weather risks, exchange rate risks, and geopolitical and policy risks, and reviews derivative strategies including weather-related option strategies, inventory-based trading, exchange-rate hedging, and cross-commodity arbitrage. The literature suggests that corn futures price movements are shaped by the interaction of fundamental, macroeconomic, weather, and policy factors rather than by a single dominant variable. The review also identifies limitations in the existing literature, particularly the reliance on historical data and the limited attention paid to trader behavior and recent market developments.