Why Soybean Prices Have Continued to Fall Throughout 2024 (2024)

By Hilary Schmidt, International Banker

In mid-July, the price of soybean futures contracts dipped below $11 per bushel for the first time since November 2020, as the U.S. Department of Agriculture (USDA) and other major analysts reported more favourable than expected supply conditions for the global market, as well as weak export demand. With the soybean market extending its long-term trend of falling prices, therefore, speculation is growing that prices may even fall into single-digit territory for the first time in almost four years.

Known as the “king of beans”, the soybean is a leguminous vegetable that is widely valued as a source of low-cost protein for animal feed, an ingredient in food products such as tofu and soy milk for human consumption all around the world and a component of biodiesel for use in a multitude of industrial applications. Although initially popularised in Asia, soybean production is today dominated by the Americas, with the United States, Brazil, Argentina, Canada, Paraguay and Uruguay accounting for more than 85 percent of global production. In the US, soybeans are also the dominant oilseed crop, accounting for a whopping 90 percent of the country’s oilseed production, while the remaining 10 percent comprises cottonseed, sunflower seed, canola, rapeseed and peanuts.

For more than two years, however, soybean futures prices have been on a firm downward trajectory, declining from a near-10-year high in May 2022 of around $17.30 per bushel to below $11.00 per bushel by mid-July 2024. This trend is partly reflective of the wider bearish sentiment enveloping the grain complex this year. The Bloomberg Grains Subindex (BCOMGR), which tracks futures for corn, soybeans and wheat in Chicago and Kansas, has lost 17 percent to trade at its lowest level since December 2020. According to Bloomberg, the index’s performance is the worst among the main commodity groups, with energy and metals indexes rising in 2024.

In the case of soybeans, increasingly favourable supply conditions have been chiefly responsible for dragging prices lower. According to the latest “World Agricultural Supply and Demand Estimates” (WASDE) report from the U.S. Department of Agriculture published on July 12, global soybean beginning stocks for the 2024/25 marketing year—which gets underway on September 1—have increased slightly from the previous month’s report, with higher stocks for China mainly offset by lower stocks for Argentina, Brazil and Paraguay due to revisions for 2023/24.

As for the US, the USDA’s National Agricultural Statistics Service’s (NASS) “Acreage” report released on June 28 found that 86.1 million acres of soybeans had been planted in the US for the 2024/25 marketing year, which is 3 percent more than last year. “The US soybean supply for marketing year (MY) 2024/25 is forecast at 4.8 billion bushels, 8 percent higher than MY 2023/24 but down 20.0 million bushels from last month’s forecast,” the USDA’s July 2024 crop outlook report also stated, thus providing further justification for the recent soybean sell-off. As such, the agency lowered its forecasted US season-average soybean price for 2024/25 to $11.10 per bushel from $11.20 stated the previous month.

The bearish market sentiment for soybeans can also be observed in the record net short positions accumulated by speculators in soybean futures and options contracts traded on the Chicago Board of Trade (CBOT) exchange. Money managers’ previous record net shorts in CBOT soybean futures and options were 171,999 contracts, set on March 5. For the week ended July 9, however, net short positions were recorded at 172,605 futures and options contracts from 140,926 a week before. According to Reuters,92 percent of this overall position was built in the last six weeks, one of the biggest soy-selling streaks ever registered.

In more recent days, meanwhile, expectations that tropical storm Beryl would bring much-needed rain to dry areas and thus raise the likelihood of higher soybean crop yields have weighed significantly on prices. “Favourable row crop weather provided the recipe for widespread selling in the grain and oilseed markets, with few buyers jumping in to slow the momentum at this point,” Arlan Suderman, chief commodities economist at StoneX Financial, said in a note to clients, as reported by Bloomberg.

Extreme weather events have also been crucial in shaping soybean markets in South America, with prices receiving moderate support earlier this year from flooding in Brazil, the world’s largest soybean exporter. Since they began in April, the floods have had devastating impacts, leaving 180 people dead and affecting some 2.4 million people in the vicinity. Agricultural fields have also been submerged for prolonged periods, further compounding the damage to soybean crops.

Key soybean producer state Rio Grande do Sul was significantly impacted by the floods, as were other major agricultural states such as Mato Grosso, Paraná and São Paulo, prompting the USDA attaché in Brazil to reduce soybean-production estimates for the country’s 2023/24 soybean output by 2 percent from prior forecasts of up to 150 million metric tonnes. The flooding was chiefly responsible for the recovery of the soybean market observed in May, which saw the bushel price rise from $11.55 at the start of the month to trade above $12.50 by May 27.

Producers have also been kept on edge after the Brazilian government somewhat surprisingly signed a provisional tax change in June, which limits the potential for the country’s commodity exporters and processors to monetise tax credits. The fallout from this new measure is that merchants are expected to raise soy prices and thus lower the competitiveness of Brazil-grown soybeans compared with US soy. “In this scenario, there would be a shift in soybean demand to the US, removing Brazil as a competitive source between August and September, thus accelerating the US export program,” Victor Martins, Latin America risk manager for Amius, wrote in a report published in early June by the risk-management firm. Should the rule endure, Martins added, soy exports for next season could rise to offset the likely decline in domestic consumption.

That said, the 11-percent decline in the Brazilian real versus the US dollar this year has helped offset the decline in prices for Brazil’s soybean exporters, helping them to maintain their edge over their American competitors. Indeed, the weaker real is enabling Brazilian farmers to better withstand lower commodity prices that are denominated in dollars than their US counterparts. Although soybean futures lost almost 13 percent in US dollar terms, according to a July 8 report from Bloomberg, this decline is lowered to just 1.7 percent when prices are converted into reais.

The real’s weakness is helping to shield exporters from excessive losses so that they can continue expanding production. According to Martins, Brazilian farmers sold more than four million metric tons (tonnes) of soybeans during the five-day period ended July 5, which is the most for such a period since October 2020, as the real traded at its lowest level against the dollar in more than two years. Brazilian soybean exports also reached a record 13.9 million tonnes in June, according to customs data published on July 4.

The Brazilian Association of Vegetable Oil Industries (Abiove), meanwhile, recently raised its estimate of the country’s soybean crop output in 2023/24 to 153.2 million tonnes, which is a 700,000-tonne increase from its June forecast of 152.5 million tonnes. And a recent survey of planting intentions by Latin American agribusiness consultancy Safras & Mercado found that Brazilian soybean producers will seed 47.331 million hectares in the 2024/25 season—1.9 percent more than the estimated 46.4 million sown last year—such that initial production forecasts for 2024/25 could well reach a spectacular 171.5 million tonnes, 13 percent higher than the expected output for the 2023/24 year.

As a major global exporter of soy oil and meal, both of which are processed from soybeans, higher production forecasts from Argentina have only helped to further drag down soybean prices during much of 2024. According to late-April estimates from the Secretariat of Agriculture, Livestock and Fisheries (SAGyP), Argentina’s soybean output will reach 49.7 million tonnes in 2023/24, which would be a mammoth 99 percent more than the 25 million tonnes notched up in 2022/23. This increase is expected to arise from a much larger harvested area and higher crop yields after severe droughts slashed both during the previous year.

Should supply conditions remain favourable, one can reasonably expect soybean prices to remain subdued for the remainder of the year. “If August weather turns hot and dry, and yields are perceived to be potentially getting smaller, then that would naturally lead to concern that ending stocks to be getting smaller as well. Should that occur, that might allow for a possible price increase if that weather scenario plays out,” Naomi Blohm, senior market adviser at Total Farm Marketing, explained in a July 11 piece for the agricultural publication Farm Progress. “On the demand side, however, US exports for new crop beans remain dismal for the 2024-25 crop year, with very few sales on the books.”