Soybean Prices Explained

Soybean prices settled on their modest levels as strong production from Brazil, Argentina, and the U.S. resulted in a 26.6% increase in total output. On the demand side, China is expected to import 109 metric tons, 11.8% lower than its previous purchasing activity. 

On the demand side, grain experts cautiously watch how trade activities between the U.S. and China will shift under Trump’s administration. Soybean is the number 1 export commodity of the U.S. to China. However, the former has been losing gains to Brazil after China diversified its grain imports to avoid hefty tariffs.

On the application side, the soybean market relies on healthy ethanol production as the industry posted increased grain-crushing to 6.7%.

Why are soybean prices fluctuating?

Generally, the prices of other grains such as corn and wheat highly impact the soybean market value. However, economic and trade factors also get a hand. Here is a detailed explanation of how these factors affect soybean prices:

1. Weather Conditions

The successive droughts in the U.S. put a massive delay in American agricultural production. Additionally, the widespread effect of El Niño, particularly in Latin American countries will highly affect crop yields.

Thus, this put commodity prices rising and soybean is not an exception.

2. Global Demand

The growing global demand for soybeans makes its price high in the market. Major importers such as Japan and the European Union and the increasing Chinese demand push its price upward.

3. Ethanol Price

Corn is the key ingredient in making ethanol. However, soybeans are used as feedstock too. Therefore, an increase or decrease in ethanol demand and price directly affects both commodities’ prices.

4. U.S. Dollar

The U.S. is the number one soybean producer and most commodities are traded in its currency. Thus, soybean prices come after dollar fluctuation. A strong dollar means a decrease in soybean prices. Conversely, a weak dollar means an increase in its prices.

5. Alternative Oils

Soybean oil competes with other oils such as rapeseed oil, castor oil, cottonseed oil, and almond oil. Supply, demand, and price changes in any of these oils can ultimately affect each other’s value.

Which variables impact the price of soybean?

• Weather Conditions
• Global Demand
• Ethanol Price
• US Dollar
• Alternative Oils
• Oil Prices
• Currency Fluctuations
• Trade Policies

Where does soybean come from?

Generally known as a ”miracle crop” in the US because of its versatility in different climates, soybean originated in China in the 11th century B.C.

Soybean cultivation in America became possible in 1765 because of Samuel Bowen, a farmer. Bowen made it possible to grow soybeans in Savannah, Georgia and this culminated in the spread and massive cultivation of this plant across the state. Additionally, soybean proved their flexible usage in many ways:

1. During the Civil War, soldiers used soybeans as a coffee alternative.

2. During the Great Depression, it became an important staple in the American diet.

What are the uses of soybean?

This commodity largely serves two industries, the food and industrial sectors. Soybean is a versatile food ingredient that is used in a variety of products:

1. Soy milk – Soy milk is a dairy-free alternative to cow’s milk made from soybeans. Additionally, it is a good source of protein, calcium, and vitamin D.

2. Tofu – It is a hardened soy product similar to cheese in texture and consistency. Tofu is a good source of protein and iron.

3. Tempeh – It is a fermented soy product made from whole soybeans. Additionally, it has protein, fiber, and probiotics.

4. Edamame – Edamame is an immature soybean that is boiled or steamed in the pod.

5. Soybean oil – Soybean oil is a vegetable oil that is extracted from soybeans. It is a good source of essential fatty acids.

6. Feed – Soybean meal is a high-protein feed ingredient made from the byproducts of soybean oil production. Soybean meal is used in animal feeds such as poultry feed, swine feed, and cattle feed.

Soybean oil is used in numerous industrial applications, such as:

7. Biodiesel – Soybean oil can be converted into biodiesel, a renewable fuel used to power vehicles.

8. Soy ink – Soybean oil is important in the production of soy ink, a type of ink that is made from renewable resources.

Today, soybeans produce comes from its top exporters with the U.S. claiming the top spot with its yearly 120.1 million metric tons of production. Brazil, Argentina, India, and China follow distantly.

What is the future price of soybeans?

Soybean prices hang between shifting trade policies, the volatility of the grains market, and the increasing production of biofuel. 

Under Trump’s administration, the soybean trade market expects to face significant volatility due to potential trade tensions with China (the largest importer of U.S. soybeans).

Historically, trade disputes led to sharp declines in U.S. soybean exports to China. The country may retaliate by reducing its soybean imports from the U.S. if Trump imposes new tariffs on Chinese goods and will completely turn instead to Brazil (which already surpassed the U.S. as the top soybean exporter).

This will lead to an oversupply of soybeans in the U.S. market, driving prices down. However, the rising commodity imports from Mexico (the second-largest market for the U.S.) will offset the potential surplus. Mexico’s increasing demand for soybeans because of its growing livestock and poultry industries will help absorb some of the excess supply, stabilizing prices to some extent.

Also, the extensive production of ethanol will boost soybean prices. The U.S. is ramping up its ethanol production to meet renewable energy targets, with ExxonMobil investing heavily in biofuel projects. This increased demand for ethanol production will boost soybean prices.

Additionally, Brazil and the European Union support sustainable fuel production, fueling the global demand for soybeans. Despite potential trade tensions with China, the combined effects of rising imports from Mexico and the growing ethanol industry are expected to support soybean prices in the coming years.

Overall, the future price of soybeans in 2030 is expected to be significantly higher than today’s prices. Its top price movers are global economic growth, population growth, rising incomes, climate change, and supply constraints. Thus, experts believe that soybean prices will reach $15 per bushel by 2030.