Soybean Markets – Rockets Away?
Written for Sevita by Bailey Elchinger, Risk Management Consultant, FCM Division of StoneX Financial Inc.
The Rocket
Since the writing of the comments in January, the front-month bean contract has rallied nearly a dollar. As we mentioned in last month’s comments the tides seemed to have turned in the month of January as we saw China finally fulfilling some of their purchase agreements and shipments of beans. Additionally, we saw the January supply/demand report from the USDA. As those tides turned, we saw more conversations between U.S. President Trump and Chinese President Xi. Early in February, Trump reported that he had an ‘excellent’ conversation with President Xi and discussed many things, including soybeans.
During their call, according to Trump, Xi agreed to purchase 20 million tons of soybeans for the ‘current season.’ We never heard this confirmed specifically from Xi. If this comes to fruition, that could take Chinese purchases up another 8 mmt (from what they reportedly agreed to back in October). The trade got every excited over the prospect of another 290 million bushels of demand, especially considering the USDA is only projecting a 350 mb carryout. This seems unlikely to many analysts, but many also admit we can’t entirely rule it out. Brazilian soybeans are nearly $1 per bushel cheaper than US beans today, even without factoring in the tariff, which adds to the unlikeliness of this story coming true.
The other piece of news on the China front that was less talked about was the release of their “No. 1 Document”, which is often seen as their ‘blueprint’ for rural and agricultural production for the coming year. In recent years, that document has heavily outlined China’s need to become more self-sufficient and less reliant on foreign nations for their food supply. In this year’s document, the tone was more “cooperative” in nature, noting their need to import commodities that are in short domestic supply. A senior official was then quoted as saying farm product imports are critical to national security. This was all likely to help ease concern within China about food security and the general economy – Xi wanting to provide some sense of stability.
Away
Following the phone call between the two Presidents and the supposed policy shift within China, many traders became quite optimistic. We have yet to see any confirmation of significant additional purchases by China following the ‘excellent’ phone call. Many cash traders in the industry did report interest in the export market, and cash bids supported it, so the market seemed to run with it.
In mid-February, the USDA held their annual Ag Forum where they release long-term estimates for the corn and soybean balance sheets. This showed the possibility of bean acres increasing to 85 million acres in 2026. The market did not seem to react when these estimates were released.
Volatility has continued to be an ever-present factor in the soybean market. Late in the month, the U.S. Supreme Court ruled Trump’s tariffs unconstitutional. This brought many follow-up concerns to light and the markets seemed unsure of how to trade the news. The market ebbs and flows based on the latest political tweet!
The flight path for the bean market is unknown at this time, but we are at lofty levels that many only hoped for during December and January. Strong domestic demand likely keeps the bean market from experiencing a crash landing; thus end-users should look to get coverage if a setback occurs. Producers should look to capitalize on what the rocket ship has offered so far.
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