Dr. Ken Rietz
Soybeans seem to be the only agricultural game in town. Most other ag reports align fairly closely with market expectations. There is also little excitement in soybeans, for that matter, with people making guesses regarding how many millions of bushels of soybeans China will “forget” to order from the US. But since the soy market has three separate tracks (beans, oil, and meal), there is at least something to discuss. That is what we will do in this week’s commentary. But first, we need to look at the CBOT soybean front-month futures.
Figure 1: Front-month futures for CBOT soybeans
Let’s look at the soybean market first. 2025 was the fourth consecutive record year for soybeans, so a decreasing year-over-year price is expected. From a technical perspective, the futures dropped on Monday to a new low, but support held, and the market bounced a bit. There is still some boost from China, but the markets are beginning to show increasing fatigue. Even if the Chinese do fulfill their promise of 440 million bushels (and they are currently at an estimated 260 million), it will be a considerable drop from last year. Other countries are taking up part of the difference, but large crops from South America are making it difficult for the US.
Figure 2: Front-month futures for CBOT soybean oil
Next, we move to soyoil, specifically focusing on the US market. Soyoil has been dropping, for several reasons. There is some uncertainty in the US EPA requirements for diesel biofuel, which uses a majority of soyoil. Also, a recent health study showed that eating soyoil can lead to weight gain. Soyoil is used extensively in processed foods, and this is unwelcome news for soyoil. As a final blow to soyoil prices, soyoil stocks have surged 40% yoy.
Figure 3: Front-month futures for CBOT soybean meal
We now turn to soymeal, a high-protein feed for livestock, so it is not as visible to consumers. A big factor for soymeal is the South American soybean crop. They are getting some rain now, ahead of the January planting, which is expected to help their upcoming crop. Since Argentina is a large global exporter of soymeal, the soymeal futures are down. Of course, the weather is volatile, but a good start on the crop is, for now, driving prices down.
Finally, what is the best way to trade this information, and that usually implies knowing what direction the price is going to move. In this case, ING has a specific, well-thought-out recommendation. Since the US market is oversupplied, it is very likely that farmers will reduce the acres devoted to soybeans, which will cause supplies to drop and prices to increase. So, the long-term trend will turn upward.