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Dr. Ken Rietz |
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As the graph below this paragraph shows, the price of soybeans dropped in December, and then rose rapidly until just recently. That leaves considerable uncertainty about the direction of soybeans. Could this current slight drop be the precursor of another hike in prices? Could the price simply level out here for an extended period of time? Could the price instead be preparing to drop again? There is little technical analysis can do with this chart. |
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Figure 1: Front month CBOT futures for soybeans, in USD per bushel One of the very first sources to look at for information about future soybean prices is the USDA’s WASDE. The forecast there is for $12–$13 per bushel for 2025. Of course, many different values went into that calculation, and all other estimates should be compared to those numbers. But since the WASDE numbers were figured (it was released on December 12, 2024, so the numbers were calculated somewhat before that), more data have been gathered, and new figures have been found. Specifically, much more data about the South American soybean crops have been gathered, mostly about Argentina and Brazil. Several different events are very relevant. There has been some concern about an expanding lack of rain in the agricultural regions (including soybeans and other crops) expressed by the Buenos Aires Grain Exchange sufficient to cause downward adjustments to expected harvest yields. You can see this in the following figure. |
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Figure 2: Soil moisture in South America and effect of 2-week precipitation. Source: wxmaps.org These have had the effect of increasing the futures prices of soybeans, including in the US. Similarly, China has been importing a record amount of soybeans in 2024, which is commonly thought to try to order before the tariffs that Trump has said he will impose. This increase in demand also has the effect of raising the price of soybeans. But not all the signs point to higher prices. The Hightower Report, in particular, articulates a number of specific indications of a decrease in price. For example, it notes that the open interest in soybean contracts has dropped lately. The strengthening of the USD, now at its highest level since 2022, also enters here. Together with other issues, a pullback in soybean prices begins to look quite possible. This leaves unanswered the question of which direction soybean prices are likely to go. Taking into account all the pieces (including many that I did not have room to include here), the evidence seems to point more to a downturn than an upswing, to roughly the end of 2025. But shifts in weather can either augment or invalidate this. |