Soybeans have faced sustained selling pressure throughout the summer, closing below $10.00 for the first time since April today. Last year, November futures saw similar sustained selling throughout the summer before seeing strength in August.
The similarity in price action between the last couple of years can be partially attributed to China being largely absent from the U.S. soybean market. China has yet to initiate purchases for 2025-26 soybeans. Last year, they initiated purchases in mid-July. The last time they made initial purchases this late in the marketing year was 2005.
China purchasing soymeal from Argentina in the last couple of weeks has drawn question to how much they will eventually purchase from the U.S. Historically, China imports soybeans and crushes them, so a shift to importing meal could lead to reduced soybean purchases. China choosing Argentina over the U.S. is also rather strategic.
Given the recent EPA recommendation to increase renewable fuel standards for 2025 and 2026, the U.S. needs more soyoil, prompting crushers to operate at capacity. This will inevitably create an excess of meal as crushers shift the focus from producing meal for feed to producing soyoil as a feedstock for biofuels. That has encouraged spreaders to push soyoil futures to multi-year highs and soymeal futures to the lowest levels since 2016. The U.S. will need to export more meal in the coming years. While sales have increased, China being a large market choosing to forego U.S. origin supplies is rather disappointing. Still, if China does eventually become an active purchaser of Argentine soymeal, it could drive other export business to the U.S.
Only four years since 1980 have not seen a summer rally in soybeans. The July 30 close of $9.95 3/4 will act as a baseline going forward. Two metrics need to be cleared for a summer rally to be triggered – a close above downtrend resistance (near $10.15) and a break above the 40-day moving average (current around $10.25). Four other years saw the first summer rally begin on or after July 30. Rallies in those four years averaged both longer in duration and bigger in moves off of the prior low. This year, crop conditions are similar to those years as well, indicating the crop may not be as well off as conditions indicate.
Ultimately, the market needs a catalyst to work higher. That could come in the upcoming August 12 WASDE, which will give NASS’s first projection for the crop with FSA acreage data, the return of China to the U.S. soybean market or a deeper, widespread look into how the crop is faring. If a summer rally were to begin, similar anecdotal years suggest prices could rally upwards of $1.50 over the course of around 40 days.