Soybean Markets – Buy the Rumour, Sell the Fact
Written for Sevita by Bailey Elchinger, Risk Management Consultant, FCM Division of StoneX Financial Inc.
Buy the Rumour
Last month’s comments started out talking about a significant gap on the January bean chart that occurred at the end of October and set the market up for a rally throughout the month of November. That rally was largely due to the belief that China would be buying ‘significant’ amounts of U.S. soybeans. This belief was fueled by numerous meetings and ‘announcements’ from the Trump administration, despite having limited (zero) details of the supposed trade deal.
Sell the Fact – Round One
In Mid-November the bean market began to question the legitimacy of the China ‘deal’ and started taking profit as the market started to drift towards the U.S. Thanksgiving Holiday. There was hope once again at the end of November, only for the market to be met with selling once again. Throughout the month of December, the January bean contract has lost roughly 70 cents and is currently attempting to fill the chart gap that I mentioned earlier.
What happened?
The only ‘detail’ that we had about the trade deal with China was that they were going to buy 12 million metric tons(mmt) by the “end of the year”, there were limited details on what those actually meant. Regardless of the semantics, the rubber needed to meet the road this month if the U.S. was going to sell or ship China any beans prior to the South American crop becoming available. Prior to mid-November, the U.S. had zero soybean sales booked to China for the 2025/2026 marketing year, meaning we would need to see a record number of sales in December if we were going to get close to selling the supposed 12 mmt. This fact led the market to really question the verbiage used by U.S. trade officials of “end of the year”. In Mid-November there was a large sale to China followed by smaller additional sales over the last two weeks.
Sell the Fact – Round Two
As December progressed and additional sales were confirmed and the first shipment to China was loaded, those questioning the bean market’s strength got louder. When putting pencil to paper and historical averages in perspective it became clear that it would be nearly impossible for China to buy 12 mmt by the end of the calendar year. The U.S. trade representative did finally say that the 12 mmt would be sold by the of the this ‘growing season’, which is equally as ambiguous. Whether the ‘growing season’ they are referencing is the U.S. marketing year which would end at the end of August 2026, OR the South American growing season which would end earlier in the spring – makes a big difference on the pace of the supposed sales. Either way, the soybean bulls were forced to check their bullishness or at least question their long positions in the bean market. Uncertainty of bean sales contributed to additional selling in the bean market.
The USDA did not provide much direction in their December report on the 12th either. There were zero changes made to the bean balance sheet in December on the supply or demand side of the ledger. Many were hoping for a yield update, but were left still hoping. Despite limited export sales the USDA also did not update their export expectations.
Where do we go from here?
The bean market is lacking a driving force for the time being. With the China story feeling exhausted it is prudent to ask, “what drives the market back higher?” A meaningful decrease in bean yields in the January report is a possibility, and it what will be needed to convince traders that we would need to rally prices to possibly ration demand. But, without a significant change in Chinese demand, how much overall demand would we need to ration? If we don’t need to ration demand the market likely doesn’t need to rally. This leads me to believe that the bean market is solidly in a comfortable trading range until the 2026 acreage story takes center-stage. If the speculative crowd, which is heavily influenced by charts and technical indicators, decides to be bearish and sell the market we could see additional downside risk. If we see this type of move the end-user should take advantage of a price break. Producers should manage their risk accordingly.
In a sideways priced market, it’s important for both producers and consumers to have concrete offers working in case the market moves in your direction. The moves could be very brief in nature and can easily happen when you’re not “looking”. Thus, having target prices and times in mind will be key.
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