Soybean prices had been heading toward a significant downward correction even before the confirmation of a record U.S. crop on August 12, and the latest price levels might be acceptable if demand holds up. However, that's a significant uncertainty.
On Wednesday, August 14, CBOT November soybean futures hit a historic low of $9.55-1/4 per bushel, marking the contract’s lowest level since September 2, 2020. This decline followed the U.S. Department of Agriculture's forecast, which projected that 2024-25 U.S. soybean ending stocks would rise by 62% year-on-year to 560 million bushels—well above trade expectations of 465 million and the third-highest on record. The larger-than-expected stocks were driven by a much bigger soybean crop, largely due to an unusually significant increase in planted acres.
Soybean futures have averaged $9.72 per bushel, the lowest weekly average since $8.99 in 2020, which marked the third consecutive year of sub-$9 prices in mid-August. Adjusted for inflation, the average price of $9.72 per bushel is the lowest since 2006, during the early stages of China's soybean import boom.
The sharp decline in prices over the past few months indicates that the market was already anticipating a bearish scenario like the one revealed by the USDA. November soybeans have fallen as much as 23% since the start of the year and are trading about 26% lower than in mid-August 2023. These drops are the largest in at least three decades, yet the current price levels appear consistent with the underlying market fundamentals.
2024 Market Outlook
The increasing U.S. soybean supplies seem less daunting when considered alongside demand. The USDA’s latest estimates for 2024-25 show a stocks-to-use ratio of 12.8%, the highest in five years and significantly above the previous year's 8.4%. However, this ratio is only the fifth-highest in the last 20 years and doesn’t rank in the top 20 over a 61-year period. During the U.S.-China trade war in 2018-19, the stocks-to-use ratio peaked at a 30-year high of 23.4%.
When comparing historical August stocks-to-use forecasts with their corresponding price levels, November soybean prices are estimated to range between $9.25 and $10 per bushel, based on the current 12.8% projection for 2024-25. This suggests that soybeans may already be near their fair market value, though skepticism about demand could challenge this outlook.
The USDA’s conservative projection for 2024-25 U.S. soybean exports relative to the crop size has led to doubts within the industry about whether U.S. exporters can secure sufficient business from China, the top buyer, given the recent sluggish sales.
Chinese soymeal futures dropped to over a one-year low due to high inventory levels, with even more soybeans expected to arrive from Brazil, the leading supplier. China’s feed demand has been weak in recent years, while Brazil’s crop potential continues to grow, both of which pose risks to the U.S. market.
Hedging Against Correction Risks
Unless there’s an unexpected surge in demand, U.S. farmers may need to reduce soybean acreage in 2025 to avoid further swelling domestic stocks, especially if the anticipated boost from renewable fuel demand remains underwhelming.
In 2024, farmers expanded soybean acreage by 4%, while cutting corn acreage by a similar margin due to better profitability prospects for soybeans. However, this year’s soy plantings of 87.1 million acres are still over 3 million acres, short of the peak in 2017.
The overplanting in 2017 and 2018, coupled with the 2018 trade war that stifled U.S. soy exports, resulted in record-high ending stocks of 925 million bushels for 2018-19.
The unintentional correction of this situation began with severe flooding during the 2019 planting season, and in 2020, farmers scaled back plans due to the pandemic-driven price drop. Combined, these factors reduced more than 10 million acres of soybeans from the original estimates.
It took some time for futures to react significantly, staying below $10 from June 2018 to September 2020. However, the real catalyst for higher bean prices was the resurgence of Chinese purchasing in mid-2020.
Soybean Futures Contract Specs (CME Globex)
Soybean Futures contracts has the following specifications:
Minimum price fluctuation of ¼ of one cent (0.0025) per bushel which is = $12.50.
The last delivery date of the good is on the second business day following the last trading day of the delivery month.
Contract months are for 15 monthly contracts of January, March, May, August, September and 8-monthly contracts of July and November listed annually after the termination of trading in the November contract of the current year.
Trading Hours for CME Globex are from Mondays to Fridays, at these trading hours:
8:30 am – 1:20 pm CT
Or Sunday to Friday:
7:00 pm – 7:45 am CT
Soybean Futures Contracts Code,
CME Globex: ZS
CME Clearport: S
Clearing: S
TAS: SBT
Contact Unit: 5,000 bushels
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