The soybean market in South America is gearing up for a record harvest in 2025, despite facing some weather challenges. Brazil, the leading soybean producer globally, is expected to produce 169 million metric tons for the 2024/25 season, a significant increase from the previous year. This surge is driven by a 3% rise in planted area, reaching approximately 117 million acres. Similarly, Argentina, the third-largest producer, is projected to produce 49 million tons, with adjustments being made due to varying weather conditions across the country.
The expansion of planted areas for the 2024-25 soybean crop is a notable development, with 44.2 million acres being planted, marking the most significant increase since the 2015-16 season. These robust outputs from South America are putting pressure on global soybean prices, which have dropped to $10.20’4 per bushel as of July 21. Over the past month, soybean prices have decreased by about 3.5%, while year-to-date, they remain relatively unchanged.
However, U.S. soybean exports are facing challenges, particularly in dealing with China, their largest buyer, accounting for about 60% of U.S. soybean exports. The forecast for U.S. exports for the 2024/25 marketing year stands at 1.75 billion bushels, down by 70 million bushels from earlier estimates. This decline is attributed to increased competition from Brazil’s record crop and a favorable Brazilian real exchange rate.
The USDA Foreign Agricultural Service (FAS) report from December 2024 highlights the market’s expectation for the Brazilian real to continue trading at around R$5.5 to USD 1 in 2025, which is highly advantageous for Brazilian soybean exports. The decrease in China’s soybean demand in 2025 is driven by sufficient domestic reserves and ample supplies from Brazil, raising concerns about its impact on U.S. acreage.
In terms of market trends, November soybeans have been range-bound since the beginning of the year, with prices retreating after probing the channel high of $10.75. The market has exhibited a downtrend pattern of lower highs and lows, with a failed attempt at a price rally near the July 07 gap down. This indicates that there is still supply near the origin of the gap, affecting price movements.
Looking at the managed money traders’ Commitments of Traders (COT) report, there are intriguing insights into their positioning. Managed money has been quietly building a short position over the last three months, with an increase in short positions and a decrease in long positions. This shift began when prices were near the top of the $10.75 channel high, indicating a bearish sentiment among traders.
Furthermore, research from the Moore Research Center, Inc. (MRCI) reveals a 15-year seasonal pattern in soybean prices, indicating a historical trend of price action within a channel. The upcoming seasonal window suggests a potential downside move for November soybean futures, aligning with the managed money traders’ short positions.
While seasonal patterns can offer valuable insights, traders should consider various technical and fundamental indicators, risk management strategies, and market conditions before making trading decisions. The soybean market presents challenges and opportunities, with prices under pressure and a potential for further declines. Whether trading futures, options, or ETFs, thorough analysis and informed decision-making are key to navigating the market successfully.
