Soybean Markets – Up, Down, Up and Away
Written for Sevita by Bailey Elchinger, Risk Management Consultant, FCM Division of StoneX Financial Inc.
Gap and Go
For the last two months, I have written largely about a soybean market that has worked really hard to go ‘nowhere’. Soon after writing the commentary for October the market finally decided to go ‘somewhere’. That somewhere has largely been higher. The market today is nearly 85 cents off of its lows from late October, but it hasn’t been a direct path higher, having seen a few days of setbacks in between. At the end of October, details of a reported trade deal between the U.S. and China regarding soybeans were released - sort of. This was the spark that allowed the bean market to ‘gap’ higher and never really look back at the levels we traded for most of October.
Buy the Rumor
Rumors began to quickly swirl of China purchasing vessels of U.S. soybeans, despite not knowing the official details of the reported agreement. These rumors seemed substantiated by basis values improving drastically at U.S. ports. By October 31st we heard from U.S. trade representatives that China would buy 12 mmt by the ‘end of the year’ and buy 25 mmt annually each year for the next three years. The 25 mmt annually didn’t cause much excitement as that amount would be an average year of US bean purchases by China. The big point of contention is the 12mmt ‘by the end of the year’. We have yet to hear directly from China about these volumes and time frames.
The Hope
The sheer HOPE of a trade deal and increased Chinese purchases has been enough to remove the black cloud that had been hanging over the bean market since the spring. In the midst of the trade uncertainty, we have also been facing the longest-lasting US government shutdown on record. During the shutdown, we did not receive any supply-side updates from the USDA, nor did we see any fund positions reports. We did receive weekly export inspections data (what is actually loaded and shipped out). Thus, we were only reminded of demand with little to no reminders of how big the US crop was in 2025.
Sell the fact?
The US government opened back up on November 13th, and the USDA released the November supply/demand report on November 14th. The report was the first official supply-side update in over 45 days. The USDA lowered the US bean yield by .5 bushels per acre to 53.0 bu/acre, which was within the range of estimates. They also lowered bean exports by 50 million bushels. The net of these adjustments left the US bean carryout for 25/26 at 290 million bushels. The fact that we will still have plenty of beans available caused the market to sell off once again.
The lack of official volumes and agreement details from either government created plenty of skepticism and thus the market was willing to take profit and go lower on any fear of China not purchasing beans. By mid-month, more rumors of China purchases swirled and US basis at the ports rallied once again as they saw this as a ‘confirmation’ of more China business to come. Bottom line volatility has been a main theme over the last 30 days.
Many farmers have been willing sellers of the bean market rally so far. When volatility prevails, it’s important for both consumers and producers to have price targets working and margin goals in mind. Take advantage when the market moves in your direction.
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