What is behind the market trend for soft soybeans in the last week?

AHDB's Gabriel Odiase looks at the fundamentals of market dynamics.

In the short term, improved weather in the US has improved supply prospects, but in the longer term, weak demand and ample supply could push prices further down.

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Gabriel Odiase

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Better weather in the USA

The recent improvement in the weather in the USA is having a positive impact on the soybean crop, which is now entering its most important development phase.

The rain of the last few weeks has eased concerns about soybean yields, which had initially come under pressure due to the heat and drought.

On Monday, the U.S. Department of Agriculture (USDA) crop progress report showed that the proportion of crops rated as good or excellent increased slightly compared to the previous week.

The weather forecast for the next seven days indicates lower than normal temperatures in the US's major soybean growing regions. This is favorable for crop yields and could increase overall production.

Weak global demand

Another factor pushing down the price is weak demand from the biofuel industry.

In the US, soy processors are feeling the impact of biofuel producers switching to cheaper alternatives such as used Chinese cooking oil.

The National Oilseed Processors Association reported a 4.4% decline in soybeans processed in the United States in June compared to May.

This was below market expectations, but was still at an all-time high due to factory expansions and the construction of new facilities in recent years.

Concerns about the weakening U.S. economy and slowing economic growth in China are also important indicators of consumer purchasing trends.

An oversupplied market

The forecast of a larger global soybean crop this year was also a major factor keeping prices low. The USDA expects soybean production from major exporters (including Argentina, Brazil, Paraguay and the United States) to reach 351.4 million tons in the 2024/25 marketing year, surpassing the previous five-year average of 306.9 million tons.

Ending stocks are now expected to reach 76.3 million tonnes, compared with the five-year average of 61.6 million tonnes.

Impact on the UK rapeseed market

Rapeseed futures have historically tracked movements in the global soybean market.

Therefore, as weather conditions improve in the US, there could be some pressure on rapeseed prices. In the longer term, high supply is also likely to limit any price support.

However, the current crisis in the Middle East is worth keeping an eye on as it could affect crude oil production and provide some support to the vegetable oils market.

In addition, the price premium of rapeseed over soybeans could increase further due to lower rapeseed production in Europe and Australia.