Todd's Take

Soybean Bears Emerge as November USDA Report Nears

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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As recently as September, January soybeans on the Dalian exchange were making new highs, looking quite bullish. By late October, prices had fallen below their 100-day average and are now dropping lower, pestered by several bearish concerns. (DTN ProphetX chart by Todd Hultman)

It doesn't seem that long ago when I was at Husker Harvest in Grand Island, Nebraska, explaining the state of the grain markets to visitors. At the time, it was difficult to find anything bearish to say about soybeans. USDA had just estimated old-crop ending stocks at a historically tight, 175 million bushels (mb), and the new-crop estimate was only 10 mb higher.

With a new season just starting, it was difficult to know how many U.S. soybeans China would buy, but USDA was estimating China's soybean production would fall short of consumption by a record-high 3.63 billion bushels (bb), a strong argument for more U.S. purchases ahead.

The frosting on the cake that was especially bullish was China's own soybean prices. At the end of the second full week in September, November soybeans on the Dalian exchange were making new highs on the year, going for $19.76 per bushel. Having just purchased a large share of Brazil's record crop, to see China's prices still making new highs, looked crazy. Compared to $12.84 for November soybeans in the U.S., it was a matter of time before large shipments of U.S. soybeans would be making their way across the ocean.

At the time, I did mention a higher soybean crop estimate seemed likely, in the 4.40 bb to 4.50 bb range, thanks to late rains in western growing areas. That little bearish caveat, however, doesn't begin to explain the bearish changes that have hit soybean prices since.

The first bearish surprise was USDA's Sept. 30 Grain Stocks report, showing a much-higher-than-expected soybean total of 256 mb. I'll accept it for now, but I still have nagging doubts, explained Oct. 19 at:….

USDA's October World Agricultural Supply and Demand Estimates (WASDE) report added further bearishness, increasing the new-crop estimate of U.S. soybean ending stocks from 185 mb to 320 mb, based on a record-high crop estimate of 4.448 bb. Some think the yield estimate could go higher, but wet conditions in the eastern Midwest are also raising concerns about crop quality.

Whatever number USDA ends up with, it is a remarkable testament to soybeans' versatility to be talking about a record crop in a year when the northwestern Midwest had little rain to offer crops until late August.

In 2020-21, China bought 1.306 bb of U.S. soybeans, representing 29% of total U.S. demand. Trader sensitivity to news out of China is understandable, but the problem is that we don't always know what is happening inside China's borders and whether we can trust the reports we hear. China's news often seems to have a strategic purpose attached.

For much of the summer, we heard about outbreaks of the COVID-19 delta variant locking down areas in China and resulting in temporary port closures. As long as soybean prices on the Dalian exchange kept climbing higher, it was easy to overlook those concerns.

Last week, however, January soybeans fell below its 100-day average and slid to a new four-month low on Thursday, Nov. 4, ending at the equivalent of $17.69 per bushel.

The possibilities of problems happening within China are numerous. Outbreaks of the delta variant are still a concern, and China's financial sector has been strained by insolvency issues at one of its largest real estate developers. More recently, China appears to be in the midst of an energy shortage, lacking available supplies of coal and scrambling to import large quantities of liquified natural gas (LNG).

According to several media sources, soybean crush plants were closed temporarily in several provinces as part of a national effort to conserve energy. It appears the closures were temporary, but it is odd that soybean prices have fallen in the face of crush incentives that appear attractive, based on Dalian futures quotes.

On Oct. 17, China's National Bureau of Statistics said GDP was up 4.9% in the third quarter from a year ago, less than expected and slower than the second quarter's pace. Coinciding with the news, the Shanghai Composite Index also closed below its 100-day average at the end of October and appears due for a correction.

While U.S. soybean supplies are expected to be higher in 2021-22, Brazil's new soybean crop is off to an early start with the help of beneficial weather. Over half the crop is already planted, on track for a record harvest that could start becoming available by late January.

On Wednesday, Nov. 3, rumors circulated that China bought soybeans from Brazil for December through February, a disappointing development for U.S. export hopes, if true. Even if the rumors were false, FOB prices for January soybeans are cheaper in Brazil than at the U.S. Gulf, a bearish concern for U.S. exports.

The latest bearish straw for soybeans happened Thursday, Nov. 4, as December soybean oil fell back below its 100-day average, leaving behind a lower high in October. Soybean oil has been the main driver of higher soybean prices for over a year, and the future of biodiesel looks bright. However, bean oil prices are now heavily influenced by crude oil, a commodity with its own recent headwinds.

For crude oil prices, this week's drop happened at a time when U.S. production just returned to pre-Hurricane Ida levels and OPEC is expected to stick to its planned monthly production increases of 400,000 barrels per day. Add in China's slowing economy, and the latest rally could be over.

As bearish as the situation in soybeans has become, there is one fresh bullish development to note: After five months of sliding lower and playing second fiddle to soybean oil demand, December soybean meal is starting to turn higher with an impressive sign of end user demand lifting prices from their October low of $309.30.

Thursday's close of $335.80 in December soybean meal has not been strong enough to offset soybeans' other bearish factors, but it does contribute to an enticing crush estimate.

When I think of how bullish the market perceptions were for soybeans before USDA's Sept. 30 report, the speed of changing conditions has been dizzying. Tuesday's WASDE report will likely bring more changes and, to keep up with it all, I invite you to join us for DTN's noon CST WASDE webinar. Of course, you may still be harvesting, but register now at… and you will receive a link after the webinar to listen at your convenience.

The good news for U.S. producers is that this time of year still favors more U.S. soybean export sales ahead, but with Brazil's crops off to a good start, the window of opportunity for U.S. demand appears to be narrowing quickly.

Continue this conversation in person at this year's DTN Ag Summit in Chicago on Dec. 5-7. I will be there, talking about the challenges of markets in 2022. Even better, we have several distinguished speakers, covering lots of topics important to your farm. Find out more and register at


Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.

Todd Hultman can be reached at

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Todd Hultman