Soybeans – Déjà vu
Written for Sevita by Kendra Dauer, Risk Management Consultant, FCM Division of StoneX Financial Inc.
Wait, haven’t we been here before?
The short answer to this question is, yes. Through the month of March, the soybean market drifted back into the trading range we were in prior to the USDA report on January 10th. Amid a lack of a bullish story to push the market higher, a large Brazilian crop, imposed tariffs, and managed money liquidating their long positions – the market set a weaker tone.
Brazil
The USDA left their Brazilian soybean production forecast unchanged earlier this month at 169 million metric tons while CONAB (Brazillian National Supply Company) raised their crop estimate to 167.37 million metric tons. Despite the slight differences in production estimates, if realized, both figures would be a record soybean production for Brazil.
Tariffs
On the tariff front, news has quieted down as additional 30-day extensions were granted at the beginning of this month – any goods that fall under the Canada-United States-Mexico Agreement (CUSMA) agreement are exempt from U.S. tariffs until April 2nd. China did impose retaliatory tariffs on U.S. agricultural products, including soybeans. Initially, the market was very reactionary to tariff announcements but has since become immune to the headlines as they change so often. It is important to note that while tariffs on U.S. agricultural products into China certainly sends a message on their trade war stance, as mentioned above – Brazil is in the process of harvesting a record size crop. This isn’t the time of year where we historically see large U.S. grain exports to China – so these imposed tariffs might be a moot point for the time being. Should the ‘trade war’ continue into the North American harvest and we see it impact soybean export volumes we may see a change in the status quo.
Managed Money
The ever-changing geo-economic landscape created headline risk in the soybean market, and thus, managed money began liquidating their long positions. As of last week, the funds were estimated to be net short on their held soybean positions. Could this be setting us up for a spring rally should planting intentions come in lower than expectations?
What makes us change direction?
The soybean market appears to have found a range that it is comfortable being in, headed into the March Prospective Plantings report at the end of the month. As a reminder, the USDA Ag Forum last month estimated soybeans acres at 84 million for the 2025/2026 marketing year. This would be a decline of 3+ million acres vs. last year. The 24/25 carryout remains very comfortable, and amid strained international relationships, one wouldn’t expect to see an uptick in soybean demand for exports. February’s NOPA crush came in at a disappointing 177.9 million bushels – but the year-to-date crush pace is still running in line with USDA expectations.
So, what makes us change the current status quo? If the USDA prints a surprise acreage estimate at the end of the month, that will set the tone as we head into spring planting. If the acres estimate comes out in line with expectations, then we likely see range bound trading until spring planting gets underway.
The volatility we saw to start the calendar year has subsided as we moved through the month of March. Producers who are holding onto old crop supplies – rallies need to be rewarded as those opportunities have become fewer and fewer. Looking ahead to new crop – patience might be the best path forward as we watch for marketing opportunities through the planting and growing season. Patience is not the same as complacency, having a marketing plan prepared for when opportunities arise will help manage risk and allow producers to capture profitability.
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