Soybeans - Whiplash
Written for Sevita by Kendra Dauer, Risk Management Consultant, FCM Division of StoneX Financial Inc.
The Whip
After being thrown a life raft in the month of January from the index funds wanting to put their money into the commodity complex, the bean market struggled a bit more in February. At the beginning of the month, the front-month contract, March, traded up to $10.80 before losing nearly 60 cents by mid-month. President Trump had announced tariffs on China, Canada, and Mexico to start the month of February, but the Canada and Mexico tariffs were quickly postponed. Chinese tariffs have not been postponed but China has also not placed reciprocal tariffs on U.S. grains or oilseeds specifically. The lack of meaningful tariff impacts, so far, allowed the bean market to relax lower.
To add to the easing of fears we were once again reminded mid-month by the USDA that the U.S. is still facing a whopping 380-million-bushel carryout. The large carryout does not look to be threatened by an increase in demand from either exports or crush. While both aspects of demand have performed well so far this marketing year many are questioning if the rapid pace can continue.
The Pivot
By mid-month the March soybean contract had fallen to the 50-day moving average and found technical support there. Inflation fears due to tariffs seemed to return and entice active fund buying in the corn market which offered support to the bean market as well. The new crop corn-to-soybean ratio allowed the corn market to gain momementum higher as it looked for additional corn acres in 2025 and the bean market did not want to be left behind. The new crop acreage story has quickly become the front-page story as that clearly drives the suppy and demand situation for the next eighteen months. Many analysts believe that bean acres will decline as producers switch acres to corn.
The Lash
After bouncing off the 50-day moving average the bean market added 25 cents over roughly 6 very volatile days. Volatility has truly been the name of the game for the bean market so far this calendar year and February was no different. A fifteen to twenty cent trading range, or more, each day was common over the last month. As we mentioned last month the funds are net long in the bean market today, even if not massively so. Regardless, the added fund involvement allows the market to be extremely headline driven. When facing a new administration and quickly changing policy and direction it is important to keep grain marketing at the top of your to-do list.
With volatility so high and quickly changing market dynamics it is important for producers to keep their head on a swivel. Be nimble but also be steadfast in their grain marketing plan for 2025. By having a plan and sticking to it while learning to capitalize on the volatility producers can avoid feeling the whiplash of the grain markets.
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//Market ReportA Lifeline
Through the month of January, the soybean market was ‘saved’ by technical momentum, managed fund support, and a turn in South American weather. After breaking to contract lows in December, the market was thrown a lifeline in January after a cut to yield and harvested acres in the monthly USDA WASDE report.
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//Market ReportSoybeans - Status Quo
In the November commentary, we discussed the bean market having found its comfort zone. The market seemed to be comfortable with the projected carryout and had found prices that neither incentivized nor discouraged demand. As we entered the month of December the markets also appeared to be content with the status quo. We had the USDA December supply/demand report, which is commonly uneventful, and this year was no different.
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