The USDA's December monthly report indicates that the U.S. soybean supply remains ample, with no adjustments to production. Despite strong performance in exports and crushing, there is short-term pressure for a decline. Additionally, expectations of bumper crops in South America continue to suppress U.S. soybean prices, shifting market focus gradually to the January soybean production data and subsequent South American weather conditions.
U.S. Soybean Production and Supply: Bumper Crop Maintains
According to USDA norms, the December report does not adjust U.S. soybean yields, mainly revised in January after year-end surveys. Historically, January adjustments by USDA typically range between -0.5 to +0.5 bushels per acre, rarely exceeding this range. It is anticipated that adjustments will lie between 51.2-52.2 bushels per acre, maintaining a bumper level.
The report maintains the 2024/25 U.S. soybean ending stocks estimate at 470 million bushels, aligning with market expectations and indicating a continued ample supply scenario.
Export Demand: Strong in Short Term, Uncertainty Long Term
U.S. soybean export demand was strong in the fourth quarter, benefiting from a decline in Brazilian soybean supply. As of the week ending December 5, cumulative U.S. soybean exports reached 37.28 million tons, a year-on-year increase of 12.01%, surpassing USDA's earlier estimate of 7.67%. Current U.S. soybean sales progress reached 75.07% of USDA's target, significantly faster than the same period last year and the five-year average.
However, medium to long-term exports face challenges, especially due to uncertainties in U.S. trade policies. Former President Trump announced a potential future increase in export tariffs, which, if re-enacted, could alter trade relationships affecting U.S. soybean export routes, particularly to China. Additionally, U.S. soybean exports to China showed signs of decline in November, necessitating ongoing attention to trade dynamics.
Crushing Demand: Remains High but Growth Slows
U.S. soybean crushing set a record for October, with a year-on-year increase of 6.95%. However, market expectations suggest that the cumulative crushing growth in November will slightly decrease to 5.47%. Recently, pressures from softened soybean crushing margins and uncertainties in U.S. biodiesel policies have strained the crushing sector, with the expected growth range between 5.38%-6.95%, though still maintaining high levels in the short term.
South American Supply Pressure: Strong Bumper Crop Expectations in Brazil and Argentina
Recent weather conditions in South American soybean regions are generally favorable, further reinforcing bumper crop expectations. Soil moisture in major Brazilian production areas has improved, with November rainfall meeting or exceeding historical averages. Main institutions project Brazilian soybean production to remain high; CONAB raises its estimate to 162.21 million tons, an increase of 12.5%, and Abiove predicts a production of 168.7 million tons, a 10% increase.
In Argentina, November rains were similarly favorable, with soil moisture levels meeting or exceeding historical averages, accelerating sowing progress. By December 12, Argentina's soybean planting progress reached 64.7%, with a good-to-excellent rate of 65%, both at historical highs. USDA also raised Argentina's soybean production estimate to 52 million tons, further lowering U.S. soybean market price expectations.
Market Outlook and Focus Points
Overall, ample supply and South American bumper crop expectations will continue to pressure U.S. soybean prices, expected to remain around the 1000 cent range. The market will closely watch the following factors:
- January U.S. Soybean Production Data: Yield adjustment impact on the supply side.
- Changes in U.S. Soybean Demand: Including export demand and trade policy trends.
- South American Weather Conditions: Especially continuous rainfall performance in main production areas of Brazil and Argentina.
- Crushing and Biodiesel Policies: Growth in U.S. soybean crushing and related policy adjustments.
In conclusion, U.S. soybean prices are expected to maintain a volatile and slightly weaker tendency in the short term, with ample supply and optimistic South American production forecasts as main pressures. Further trade flows and demand changes need attention.
