BQC Afternoon Comments April 22.2025

Grok’s take: I asked the AI program Grok on X (formerly Twitter) “What will happen to the price of soybeans?” It came up with this response in seconds.

Current Situation

• Recent Price Trends: Soybean prices have been under pressure. In March 2025, prices averaged $10.12 per bushel, down 2.7% from February, hitting a three-month low. By early April, the most-active soybean contract on the Chicago Board of Trade (CBOT) dropped to $9.77 per bushel, a 3.4% decline and the lowest for 2025 so far.

• Trade Tensions: U.S.-China trade disputes are a big driver. China, which bought 52% of U.S. soybean exports in 2024, has slapped retaliatory tariffs (up to 135%) on U.S. soybeans in response to U.S. tariffs on Chinese goods. This has led to reduced U.S. exports to China, with China halting imports from three major U.S. suppliers in March 2025.

• Global Supply Dynamics: Brazil is stepping up as a major supplier, with a bumper crop expected to flood the market. China’s soybean imports from Brazil are forecast to hit a record 31.3 million tons in April-June 2025, reducing reliance on U.S. beans. Brazil’s weaker currency also makes its soybeans cheaper globally, putting downward pressure on prices.

• U.S. Supply Outlook: The USDA projects a slight increase in U.S. soybean production for 2025-26 to 4.37 billion bushels, despite lower planted acres (84 million vs. 87.1 million in 2024-25), due to higher yields (52.5 bushels per acre). However, tighter U.S. stocks have offered some price support recently.

Factors Likely to Influence Future Prices

• U.S.-China Trade War:
  • If tariffs and tensions persist, U.S. soybean exports to China could drop further, pushing prices down due to oversupply in the U.S. market. Posts on X reflect farmer concerns about low prices and potential bankruptcies if the trade war drags on.
• A resolution or truce could stabilize or even lift prices, but there’s no clear timeline for this.
• Brazil’s Dominance:
  • Brazil’s expected record crop in 2025-26 and favorable exchange rates will likely keep global soybean prices competitive, capping any significant price rallies.
• If Brazil’s production faces issues (e.g., weather or financial constraints for farmers), it could reduce supply and support higher prices.
• Global Demand:
  • China’s demand for soybeans remains strong, driven by livestock feed needs. However, with Brazil and Argentina as alternative suppliers, U.S. soybeans face stiffer competition.
• Any unexpected demand shocks (e.g., disease outbreaks like African swine fever) could alter China’s import patterns, as seen in 2018.
• U.S. Planting and Weather:
  • The USDA’s lower planting forecast (84 million acres) could limit supply, but higher yields might offset this. Weather disruptions in key U.S. growing regions could tighten supply and push prices up.
  • Conversely, ideal growing conditions could lead to a larger-than-expected crop, adding to downward price pressure.
• Currency and Input Costs:
  • A stronger U.S. dollar makes U.S. soybeans more expensive globally, potentially reducing demand. Meanwhile, Brazil’s weaker real gives it an edge.
• Rising input costs (fertilizer, equipment) are squeezing U.S. farmers’ margins, which could discourage planting and indirectly support prices if supply shrinks.

Price Outlook

• Short Term (Next 3-6 Months): Prices are likely to remain under pressure, potentially hovering around $9.50-$10.50 per bushel, unless there’s a major disruption (e.g., weather event or trade breakthrough). Support levels are near $10.00, with resistance at $10.50-$10.75.
• Medium Term (2025-26 Season): If trade tensions ease, prices could recover toward $10.50-$11.00 per bushel, especially if U.S. stocks tighten further. However, Brazil’s supply glut and global competition suggest a cap on major gains. A bearish scenario (continued trade war, bumper global crops) could push prices closer to $9.00 or below.
• Wild Cards: Geopolitical events, unexpected weather patterns, or policy shifts (e.g., U.S. farm subsidies or tariff exemptions) could swing prices in either direction.

My Take
The soybean market is stuck in a tough spot—trade wars are hitting U.S. farmers hard, and Brazil’s rise is keeping a lid on prices. I’d lean toward a cautious outlook: prices might stabilize near current levels but are more likely to dip than spike unless something unexpected shakes up supply or demand. Farmers are already feeling the pinch, and sentiment on X suggests growing frustration. Keep an eye on U.S.-China trade talks and Brazil’s harvest progress for the next big moves.

-Grok