Soybean prices are under intense pressure as the market grapples with record-high beginning stocks, signaling an oversupply issue that traders can't ignore. Strong yields have kept production levels high despite a reduced planted acreage, adding to the glut. Meanwhile, export demand remains sluggish, weighed down by shifting global trade dynamics and increased competition from other suppliers. As a result, weakening farm income is becoming a growing concern, forcing farmers and traders to make tough decisions in an increasingly bearish market.
What's next for soybean prices?
Brazil, the world's largest soybean producer, expects an increased yield for 2025 over 2024. The primary headwind for higher soybean prices remains the overwhelming supply outlook, mainly from Brazil. Unlike the previous season, when weather-related setbacks curtailed yields in Brazil and Argentina, current projections indicate a strong South American harvest. As the world's leading soybean exporter, Brazil is flooding the global market with a competitively priced supply, capping any significant upside potential. As a result, soybeans are struggling to trade above the $10 per bushel price. The 2024 average soybean price of $12 is just above current prices.
Source: US Department of Agriculture (USDA)
The graph above shows Brazil's soybean harvest season is almost halfway through. Allowing estimates to be more reliable. Thus, Brazil's soybean production for 2025 is estimated to be between 171.4 and 171.7 million metric tons. This is a record high for the country and a 14.4% increase from the previous season. The increase is due to a larger planted area, higher yields, and conducive weather in the growing regions. The higher production is expected to meet the increased demand for soybean oil for biodiesel. StoneX analyst reports, "The group expects Brazil to export 107 million tons of soybeans for the season, up from its earlier estimate of 103 million."
The USDA reports Argentina's 2025 soybean crop consists of approximately 75% early-planted and 25% late-planted varieties. Dry and unusually hot conditions in January impacted the critical flowering stage of early soybeans, leading to below-average vegetation health in key growing regions, as indicated by satellite data. As a result, the total soybean yield is projected at 2.83 t/ha, though the crop still has another month of critical development. Harvest is set to begin in late March, with final yields dependent on upcoming weather conditions." Argentina is the third largest producer behind the US in the world. However, their 2023/2024 production was only 48.21 million metric tons compared to Brazil's 153 million metric tons and the US's 113.27 million metric tons.
Technical picture
Source: Barchart
The question for soybean prices is, will $12 or $8 come first? The long-term monthly chart shows good support in the low $8 range. In contrast, overhead resistance and the 2024 average soybean price of $12 are located.
Seasonal pattern
Source: Moore Research Center, Inc. (MRCI)
MRCI, through extensive research, has found a 15-year seasonal pattern (black line) for the new crop November soybean contract. Soybeans have historically put in a seasonal high price in March, resulting in prices falling into mid-May. As the planting season is completed in June/July, the market begins looking towards the harvest season, and when supply increases, prices will be lower.
As a crucial reminder, while seasonal patterns can provide valuable insights, they should not be the basis for trading decisions. Traders must consider other technical and fundamental indicators, risk management strategies, and market conditions to make well-informed and balanced trading choices.
To support MRCI research suggesting a possible high price has occurred historically, we need to find some supporting evidence to confirm that this year may result in prices falling in March.
The Disaggregated Commitment of Traders (COT) report
Source: CME Group Exchange
The previous managed money COT report supports MRCI's historical findings that soybeans will make a meaningful high near March 2025. It's not a guarantee, but it's an additional edge.
The COT report shows that managed money became buyers (blue bars) in August 2024. Soybean prices (yellow line) were making lows during this period and traded sideways until mid-December. When managed money began scaling into their long positions, they had approximately 47K contracts. During the price rally, they continued adding to their long positions, and currently, they now have 118K contracts. Prices have only increased about .80 off the lows in August. What should be concerning for soybean bulls is that managed money is already at a 12-month high in long positions for this insignificant move from the August lows. This means somebody is aggressively selling these contracts.
Source: CME Group Exchange
The COT report for the Producer/Processors commercial traders shows that producers have been aggressively selling contracts as the price has made this minimal move from the August lows. Like corn producers, soybean producers hold more short positions in soybeans than ever in the past 12 months. While that is significant, it is essential to note that they are so bearish at the $10.50 level. During this time last year, they had fewer short positions, and prices were trading at $12. Are producers concerned they will not see higher prices soon to hedge at?
Assets to trade soybeans
Futures traders could trade the standard-size soybean contract (ZS), the mini-contract (XK), or the new micro-contract (MZB). The new micro-grain contracts will begin trading on February 24, 2025. Equity traders could use the exchange-traded fund (SOYB) to participate.
In a recent article for Barchart, "Corn Prices Rebound in 2025: Is the Rally Here to Stay? Want Less Risk to Participate?" I discussed more information about the new micro-grain contracts.
In closing……
The soybean market faces multiple headwinds, with record-high beginning stocks and robust production—especially from Brazil—reinforcing an oversupply that traders cannot ignore. Despite reduced acreage, strong yields have bolstered production levels, while sluggish export demand and weakening farm income add further downward pressure. The dynamics in Brazil, now the most significant contributor to the global supply, have capped prices below the $10 per bushel mark, a stark contrast to last year's $12 average. This convergence of fundamental factors underscores the importance of a cautious approach as market conditions remain highly volatile.
On the technical front, insights from seasonal patterns and the latest Commitment of Traders report provide valuable context for navigating this complex market. Historical data suggest a potential seasonal high in March, yet managed money positions are already at a 12-month high despite only minimal price gains since August, indicating aggressive selling pressure. Moreover, commercial producers are hedging aggressively at lower prices, highlighting their bearish outlook amid current conditions. As traders, integrating these technical signals with the underlying fundamentals is key to making well-informed decisions in an increasingly bearish soybean market.
