3 Things To Watch In The Global Soybean Market This Winter

November 22, 2023

Once soybean harvest is complete across most of the U.S., speculation around domestic supply that has persisted throughout the growing season — and, more notably, how U.S. production totals affect the global market — is all but over. It marks a shift in energy and focus for grain economists like Matthew Elliott.

“[Soybean] futures prices somewhat stabilize at this point in time as we start looking at the next crop and getting into the next planting season,” says Elliott, who serves as SDSU Extension Agribusiness Specialist and Associate Professor in the Ness School of Management and Economics at South Dakota State University. “We typically have tighter ranges and less volatility; production is somewhat set and demand doesn't typically change overnight.”

But that’s not to say, however, that soybean market activity is entering a dormant phase. Far from it. Here are three things to watch as we settle into the winter months in South Dakota.

1. How is the South American soybean crop progressing?

Overall production totals in Brazil and Argentina can have a significant impact on global soybean prices. Those two South American countries account for roughly half of the world’s soybean production, so it stands to reason that their growing season is highly scrutinized by economists.

Right now, Elliott is paying close attention to weather conditions in Brazil during these early months of the soybean growing season. He cites reports that a lack of rain in parts of Brazil — including the critical Matto Graso region, where nearly a quarter of the country’s production takes place — has farmers and economists alike on alert.

“They really rely on those repeated, frequent rains in order to maintain vegetative growth during this early phase,” says Elliott. “We could see losses of acres and overall production in some of those major regions in Brazil.” Were that scenario to play out, Elliott believes U.S. soybean markets could expect to see additional export demand due to shorter supply in South America.

2. Which geopolitical factors should we watch?

At the time of this article’s publication, Argentina had just witnessed a historic national election. Argentina’s president-elect, Javier Milei, represents a more conservative, libertarian political viewpoint that greatly contrasts that of the country’s leadership over the past several decades. The political pendulum in Brazil, meanwhile, swung in the opposite direction with the return of Luiz Inácio Lula da Silva to the presidency earlier this year.

“It's not as direct as, say, weather impacts,” notes Elliott, “but we certainly see how political issues in South America impact production and export policies in those regions — and how that can influence global grain prices.”

If the last few years taught us anything about commodity markets, it’s that geopolitical events and other factors (COVID-19 and Russia’s invasion of Ukraine both come to mind) can make a big impact. The next few months will likely shed additional light on the evolving political landscape in South America and how that will affect global soybean prices.

3. What are soybean acre projections for 2024?

It’s still too early to tell how many acres will be planted to soybeans in the U.S. next spring, but that number will become clearer as winter progresses.

“All in all, corn looks like it's in a better supply position right now than soybeans,” says Elliott, suggesting that producers will likely find market-driven incentives to plant increased acres to soybeans in the coming year. “How all that works out — the projections and then what people actually end up planting — is somewhat dependent on weather and current market prices at that period in time. Those are the things that we're thinking about,” says Elliott.

Elliott is also watching how much demand for renewable diesel grows as soy crushing facilities expand capacity and new plants come online, although he cautions that a significant increase in soy crush capacity might not happen until the 2025 growing season.

“It's trending upwards, but we haven't seen a big one-year jump in crush numbers quite yet,” he says. “We're still reporting crush levels maybe just a little bit above where we've been.” The impact this will have on soybean markets is of particular interest to Elliott and other grain economists as domestic crush capacity continues to grow.

So much goes into the demand side of the equation

It’s important to note that many factors influence market demand for soybeans. To learn more about ways your checkoff is actively promoting demand for soybeans both domestically and around the world, visit sdsoybean.org or call (605) 330-9942.