Source: Oleoscope (Russia)
Soybean prices are currently at their lowest levels in four years, primarily due to favorable weather conditions in the U.S. Midwest, weak export demand and forecasts for a bumper crop in 2024, reports Farms.com.
This has led traders to believe that optimistic yield forecasts could prove correct and keep prices low. Unless there is a dramatic change in the weather, which is unlikely, prices are unlikely to rise significantly. Indeed, markets are preparing for the USDA’s August new crop report, with preliminary yield data reaching a record 52.5 bushels/hectare.
Price pressure is being exacerbated by the fact that US farmers are holding record levels of soybean stocks in anticipation of better prices. On June 1, US corn and soybean stocks hit a four-year high, with 48% of soybeans stored on farms – the largest share since 2006. Any price rallies will be short-lived as farmers are in no hurry to sell their stocks, limiting potential price increases.
The condition of the crop on July 29, 2024 was also better than the same period last year: 67% of the US soybean crop was rated good or excellent, compared to 51% in 2023, further fueling expectations of a high yield. The USDA’s latest yield estimates point to an increase in stocks beyond the 400 million bushel mark, which could drive soybean prices to USD 8 or 9 per bushel.
Global market conditions are also contributing to lower soybean prices in the US. Export demand remains weak, due in part to a stronger U.S. dollar and more competitive global markets. Brazil has achieved record exports, which has increased competitive pressure on US soybeans. Overall, US soybean exports are down 19% this season. According to the USDA, US soybean shipments are expected to reach 4.8 billion bushels in the 2024/25 marketing year, an increase of 8% compared to the 2023/24 marketing year.
Brazil’s record soybean crop for the 2024/25 marketing year will only exacerbate the situation if La Niña weather conditions do not affect production. The country exported a record 11.2 million tons of the oilseed this month.
However, the level of soybean processing in the US is not enough to offset the lower and weaker export demand. In the search for more demand, the markets will have to trade lower. Without Mexico, the second largest buyer of US soybeans, sales would be even worse, experts say.
To summarize, a combination of ideal growing conditions, record crop forecasts and significant farmer inventories have pushed soybean prices to their lowest level in four years. While the market had hoped that weather disasters would drive up prices, in reality there were a number of favorable forecasts that guaranteed a bumper crop.