Soybean Prices Drop as Supply Grows and Brazil's Output Rises

Soybeans experienced modest gains driven by short covering and technical buying. Favorable crop conditions in most of Brazil supported prices, although southern regions and parts of Argentina may face drier weather soon. This weather outlook also boosted soybean meal prices, given Argentina’s status as the leading exporter of the product. However, soybean oil prices weakened after failing to surpass technical resistance levels. The USDA will release updated supply, demand, and production estimates on the 10th, followed by CONAB’s projections for Brazil on the 14th.

Congress recently extended the 2018 Farm Bill through September 2025, allocating $20.78 billion for disaster relief and $10 billion in emergency aid for farmers. This assistance aims to address high input costs, low commodity prices, and elevated interest rates. Grain and oilseed markets, including soybeans, have faced price declines despite robust demand. Favorable U.S. and South American production pressured prices, with soybeans falling 22.9% in 2024—the steepest drop since 2008—and showing a two-year decline of 34.3%, the largest since 2000. Spot soybean meal fell 20.3%, the sharpest drop since 2015, while soybean oil declined 17.8%.

The American Soybean Association (ASA) and its partners secured USDA funding through the Regional Agricultural Promotion Program (RAPP) to expand global market access for U.S. soybeans. These funds will support diversification and growth strategies to meet rising protein demand and strengthen nutrition security in regions like Africa, Latin America, and Asia.

China’s Ministry of Agriculture and Rural Affairs (MARA) granted safety certificates for 17 gene-edited crop varieties, including soybeans, wheat, corn, rice, and cotton. These approvals aim to promote higher yields, reduce import reliance, and enhance food security. Unlike genetic modification, gene editing alters existing genes to improve traits and is viewed as less risky. China previously approved a gene-edited soybean in 2023 with elevated oleic acid content, reflecting a broader trend toward improving efficiency and health profiles.

Brazil’s soybean production continues to expand, with a projected 2.6% increase this season to 6.1 billion bushels—the slowest growth rate in a decade but still a record high. Favorable weather has supported growth, while Argentina shows potential gains despite La Niña risks and pest threats. Brazil’s soybean planting area is expected to grow by 7%, the largest expansion since 2016. Long-term growth prospects in Brazil remain strong, supported by an estimated 70 million acres of pastureland convertible to cropland without deforestation and another 40 million acres available for double-cropping.

Consultancy firm StoneX raised its forecast for Brazil’s 2024-2025 soybean crop to 171.4 million metric tons, up from 166.2 million, citing increased planted areas and higher yields—a 14.4% rise over the previous season. Brazil’s soybean exports are projected to reach 107 million tons, exceeding prior estimates. However, analysts remain watchful of potential weather disruptions late in the cycle. These developments reinforce Brazil’s dominance in global soybean markets.

Soybean prices on the international market have experienced a persistent decline throughout 2024, with projections indicating that prices may remain below the previous year’s levels through the first quarter of 2025. This trend has primarily been driven by an optimistic supply outlook, as Brazil and Argentina are expected to achieve robust harvests this season. In contrast to the underperformance observed last year, current estimates suggest ample production, which has left little room for prices to rise above $10 per bushel on the Chicago Board of Trade. Futures contracts for January 2024 had averaged around $12 per bushel, underscoring the notable price drop.

The abundant U.S. soybean yield has also added pressure to prices. Data from Valor indicates a price decline of over 25% within the past year. Analysts anticipate that favorable weather patterns and strong yields will continue into 2025, reinforcing the expectation of sufficient supply. StoneX market specialists support this outlook, highlighting the likelihood of record crops in Brazil and improved yields in Argentina, which will sustain an oversupply and limit price increases. While global demand is forecasted to increase by 5% during the 2024/25 period—twice the historical average—analysts warn that any shortfall in demand growth could lead to higher stockpiles and further price declines.

Despite lower prices, sales of the 2024/25 harvest are progressing at a faster pace than previous years. Brazilian farmers, concerned about storage limitations and potential price drops, have already pre-sold 35% of their upcoming soybean harvest—surpassing the 20% sold during the same period last year and the ten-year average of 30%. Analysts expect price drops of 10% to 15% as harvesting begins in South America, exacerbating storage challenges due to infrastructure shortages.

Export activity also reflects mixed signals. The USDA reported strong weekly export sales, with 2.62 million metric tons of soybeans sold for the 2024/25 marketing year, led by China’s significant purchases. However, traders remain cautious due to geopolitical uncertainties and the strength of the U.S. dollar, which has made American exports less competitive globally. The recent strengthening of the dollar may add further pressure on prices.

Soybean futures have shown modest gains entering 2025, with prices fluctuating amid market uncertainties. Contracts have traded slightly higher, with cash prices hovering around $9.56 to $9.57 per bushel. Soymeal futures have posted gains of $3 to $5.20 per ton, while soy oil futures experienced marginal declines. Weather conditions remain a key variable, with rainfall anticipated in parts of Argentina and dryness persisting in southern Brazil, potentially impacting crop yields.

Looking ahead, analysts emphasize the importance of monitoring planting decisions in the U.S. later in 2025. Lower soybean prices might encourage farmers to shift acreage toward corn, which could set the stage for a price recovery in the latter half of the year. Despite current price weakness, the combination of export activity, weather patterns, and planting trends will shape the soybean market’s trajectory in the coming months.

Data for Technical Analysis (1D) CFD US Soybeans Futures - Jan 25 (ZSF5)

Resistance : 1,014.5, 1,030.0, 1,054.7

Support : 965.0, 949.5, 924.7        

1D Outlook

Source: TradingView 

Buy/Long 1 If the support at the price range 950.0 - 965.0 is touched, but the support at 965.0 cannot be broken, the TP may be set around 1,032.5 and the SL around 942.5, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1,014.5 - 1,029.5, TP may be set around 1,054.7 and SL around 957.5, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1,014.5 - 1,029.5 is touched, but the resistance 1,014.5 cannot be broken, the TP may be set around 965.0 and the SL around 1,037.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 950.0 - 965.0, TP may be set around 859.7 and SL around 1,022.0, or up to the risk appetite.       

Pivot Points Jan 3, 2025 02:46AM GMT