U.S. Soybean Production Hits Record High, Concerns Arise as China Shifts to Brazilian Imports; Trump’s Victory May Trigger Trade War

On the price front, the November soybean futures on the Chicago Board of Trade (CBOT) closed at $9.70 per bushel on Friday, down 3.5% from a week earlier. Meanwhile, the average price of US Gulf soybeans for October shipping also fell 3.3 per cent to $10.35 a bushel. However, the soybean meal market is a little different, with the December soybean meal quoted up 0.2% to $315.6 per short ton. December soybean oil, on the other hand, was down 3.5 percent at 41.82 cents a pound.

In the rapeseed market, Euronext February rapeseed futures rose for the second week in a row to close at 505.75 euros per tonne, up 0.2%. In contrast, ICE January canola futures fell 0.4 per cent to C $624.5 a tonne. In addition, the FOB spot price of Argentina's Upper River soyabeans also fell 2.2 per cent to $406 a tonne, including 33 per cent export tax.

Meanwhile, the ICE Dollar index ended the week up 0.6% at 103.307. The move could have an impact on global commodity markets.

In terms of production forecasts, the International Grains Council (IGC) noted in a report released on October 17 that global soybean production is expected to reach a record 421 million tons in 2024/25, an increase of 26 million tons or 7 percent year-on-year. The IGC believes that this growth is mainly due to the bumper harvest expectations of major producers. At the same time, the IGC also predicts that global soybean consumption and trade will grow, and inventories will also reach a record high. Global soybean trade is expected to reach 179 million tons, with China taking the largest share.

Notably, the IGC's forecast for global soybean supply is in line with the USDA's forecast direction. The U.S. Department of Agriculture, in its monthly report on supply and demand on Oct. 11, expects global soybean production to reach a record 428.92 million tons, an increase of 34.21 million tons or 8.7 percent year-on-year. Meanwhile, global soybean ending stocks are also expected to reach a record 134.65 million tons, up 22.28 million tons or 19.8 percent year-on-year. Global soyabean stocks-to-use ratio is expected to be a very comfortable 23.05%, up from 23.02% forecast last month and 20.04% last year, and above the 10-year average of 19.25%, the highest since 2018/19 and the second-highest in the past 60 years.

In South America, the pace of Brazilian soybean planting is expected to accelerate, and the production outlook remains optimistic. In its October supply and demand report, the USDA forecast that soybean production in the three South American countries (Brazil, Argentina and Paraguay) would reach a record 231.2 million tons, an increase of 19.1 million tons or 9.0 percent, unchanged from last month's forecast. Brazil's National Commodity Supply Company (CONAB) said on Monday that the 2024/25 soybean sowing schedule in Brazil was 9.1 percent as of Oct. 13, down from 19 percent in the same period last year. However, on Tuesday, CONAB released its first official production forecast, predicting a record Brazilian soybean production of 166 million tonnes in 2024/25, up 12.7% from the previous year. Soybean planting area was estimated at 44.3 million hectares, up 2.8% year-on-year. However, the climate challenge remains the focus of attention. Silvio Porto, director of agricultural policy at CONAB, noted that La Nina and possibly irregular rainfall conditions could affect planting and crop yields. The eventual realization of soybean production will depend on favorable weather conditions.

The weather forecast for the next week in Brazil's soyabean regions is encouraging. Rain will continue to fall across much of the country, especially in the north-central region of Mato Grosso, where soil moisture is already above 80 percent. However, in the state of Minas Gerais, rainfall is likely to exceed 100 to 150 mm in the coming days, which could cause delays in field work. Rainfall is expected to be between 40 and 50 mm in the Goias region. Overall, rainfall will continue in all producing areas from October 24 to 28 with moderate rainfall that will not affect field work and is critical for early soybean growth.

In Argentina, farmers will start planting the first early-planted soybeans next week as long as soil moisture permits, technicians said Thursday. Argentine soybeans are usually planted from November to January and are expected to expand this year as poor corn yields and dry weather during the corn planting season may encourage farmers to switch more to soybeans. A weekly report from the Rosario Grain Exchange on Thursday also pointed to a large number of soybeans this year.

The Buenos Aires Grain Exchange's (BAGE) current forecast for Argentine soybean production in 2024/25 is 52 million tonnes, showing a year-on-year increase of about 3 per cent. The Rosario Grain Exchange forecast is more optimistic, predicting that Argentine soybean production will reach 52.6 million tons in the year, an increase of 5.1%.

The US Department of Agriculture's weekly Crop Progress report shows that as of October 14, the US soybean harvest progress has reached 67%, far more than a week ago 47%, and continues to be ahead of the five-year average of 51%. Meanwhile, the Drought Monitor report showed that as of October 15, the proportion of soybeans affected by drought had risen to 54 percent, up from 43 percent a week earlier and 53 percent a year earlier.

In addition, the National Oceanic and Atmospheric Administration's (NOAA) rainfall cloud map for the next 72 hours shows that light rain is expected in the northern and western Midwest between October 20 and 23. In its October supply and demand report, the USDA forecast that U.S. soybean production would reach a record 4.582 billion bushel, up 10 percent from a year earlier. Ending inventories are expected to be 550 million Pu, surging 60.8% year-over-year to the highest level in six years and the third highest inventory level in the past 60 years. The report also noted that the U.S. soybean stocks-to-use ratio will reach 12.5 percent in 2024/25, the highest level in five years and above the 10-year average of 9.1 percent.

From the perspective of domestic demand, the US soybean crushing industry showed a strong recovery in September. The monthly crushing report released by the National Oilseed Processors Association (NOPA) showed that soybean crushing in September rebounded sharply from a near three-year low last month, beating all analysts' expectations. NOPA member companies crushed 177.32 million Pu soybeans in September (equivalent to 5.32 million short tons), an increase of 12.2% month-on-month and 7.2% year-on-year. In its October supply and demand report, the US Department of Agriculture forecast that the US soybean crush in 2024/25 would reach 2.425 billion bustons, an increase of 6.0%. With the U.S. soybean harvest coming to market and continued improvement in crush margins in the fourth quarter, crush activity is expected to remain strong.

In terms of exports, it is the peak export period for US soybeans. The data showed that for the week ended October 10, net U.S. soybean sales for 2024/25 were 1.7 million tons, up 35% sequentially and 16% above the four-week average. Total US soybean sales for the year to date have reached 21.84 million tonnes, up 5 per cent year on year. The U.S. Department of Agriculture expects full-year soybean exports to rise 9.1 percent.

From the market price point of view, on October 17, the United States Gulf soybean price was 408 US dollars/ton, down 7 US dollars from a week ago. Brazilian soybeans were quoted at $424 / ton at the port of Paranagua, down $8; Argentine soybeans are quoted at $406 / ton, down $9.

It is worth noting that the United States will hold a presidential election on November 5, and the uncertainty of the outcome of the election has had a certain impact on the agricultural market. The latest opinion polls show Republican candidate Donald Trump leading Democratic candidate Mary Haigh, which has caused the Trump trade to become popular again. The market is concerned that Trump, if re-elected as president, could sharply raise tariffs on Chinese products, prompting China to turn to buying more Brazilian crops to avoid the risk of higher tariffs.

Looking back at historical data, since the US Trump administration launched a tariff war against China in 2018, China has implemented retaliatory tariff measures on US agricultural products. Since then, Brazil has gradually replaced the United States as China's main soybean supplier. According to customs data, China imported 62.24 million tons of soybeans from Brazil in the first nine months of 2024, up 13% year-on-year; In the same period, imports of 14.55 million tons of soybeans from the United States decreased by 15% year-on-year.

In terms of monthly data, China's soybean imports in September reached a near-record 11.37 million tons, most of which were Brazilian soybeans. That month, China's imports of 1.71 million tons of soybeans from the United States surged 13 times over the same period last year and maintained growth for the sixth consecutive month. In contrast, China's imports of 8.45 million tons of soybeans from Brazil rose 23 percent year on year.

A third of the U.S. soybean crop is still waiting to be harvested and production is expected to reach a new high. At the same time, the likelihood of La Nina weather is gradually decreasing. Most of the weather models of the Australian Bureau of Meteorology predict that La Nina will not occur this year, or if it does occur, it will be weak and short-lived. This has helped to reduce the risk of hot and dry weather in South America, particularly in southern Brazil and Argentina, thereby underpinning the bumper crop forecast for South American soybeans. Unless weather risks pose a serious threat to the soybean supply outlook, any rebound in soybean prices could be seen by farmers as a good time to clear inventories and price new beans.