Soybean field in Brazil

Top 3 things impacting the soybean market

June 13, 2024 | Kriss Nelson

June’s United States Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) report released on Wednesday is being described as neutral as little movement was made to the soybeans and corn.

Perhaps the one surprise was the lack of attention from being brought to a shrinking safrinha crop in South America, says Kristin Stien, a grain marketing advisor for Ever.Ag.

“It seems the USDA is still trying to get a handle on the safrinha acres planted in South America and then will come in with a production estimate,” she says. The safrinha crop-South America's second corn crop-could impact South America’s corn production numbers, Stien says.

According to the USDA, with increased supplies for 2024/25 and no use changes, soybean ending stocks are projected at 455 million bushels, up 10 million. The soybean price is forecast at $11.20 per bushel, unchanged from last month.

Soybean meal and oil prices are also unchanged, at $330 per short ton and 42 cents per pound, respectively.

The 2024/25 global soybean outlook includes lower beginning and ending stocks. Higher beginning stocks for the U.S. are offset by lower stocks for Brazil and Paraguay.

What is affecting the markets?

The top three things Stien says could be affecting the current soybean market are:

1. Brazil’s tax code changes

According to Stien, these changes could lead to a short-term boost in U.S. soybean exports as China and the rest of the world explore what that means for their countries.

To compensate, merchants will likely have to raise soy prices, making soybeans grown in Brazil less competitive with American soybeans, according to Arlan Suderman, chief commodities economist with StoneX.

“This tax law basically increases costs, increases the tax burden of all corporations doing business in Brazil,” Suderman says.

2. Current world soybean stocks

“The 32 percent world soybean stocks to use ratio is the second highest in history only to 2018,” says Stien.

3. Current U.S. crop conditions

“The U.S. has had a good start to soybean production. Currently, 87% of the soybeans are planted, which is higher than the five-year average of 84%. Additionally, 72% of the crop is rated as being in good-to-excellent condition, compared to the five-year average of 73%.”

How much could the weather affect the market?

Due to the current soybean conditions, adverse weather may have a harder time impacting the soybean market enough to expect a large rally. If U.S. farmers continue to see a generally favorable growing season, downside futures risk could be up to $9.50 a bushel.

“La Niña, which typically brings a warmer and drier weather pattern in parts of the U.S. Corn Belt and Argentina, could affect conditions in July, August and September,” she says.  “That could make traders take a second look at having such a large short position.”

However, current outlooks have forecasters predicting a milder La Niña, which Stien says could help boost yields rather than bring them down.

As we wrap up the second week in June, Stien suggests farmers sell their old crop.

“The basis has improved slightly, but that won’t likely be the case for long,” she says.

Stien says she is encouraging her clients to be aggressive and sell that new crop as the $12.00 futures mark nears.

“A rally could occur in the next couple of weeks as a function of warm weather, and that is the time to price soybeans,” she says. “Many producers are nervous to sell into those rallies with concerns of production, to which my response is typically: ‘The time to be selling is when you’re uncomfortable, and that’s the time to lean into your crop insurance policy and call options to help settle your nerves.’ ”