Canada Markets

Soybean prices jumped higher on Monday's release of USDA's first look at 2025-26 estimates in its latest World Agricultural Supply and Demand Estimates (WASDE). In short, the 295 million bushel (mb) ending-stocks estimate for 2025-26 surprised the market compared to estimates looking for 362 mb -- ensuring a volatile weather-related market lies ahead.

The glaring issue is the yield the already-tight ending stocks figure was based upon. At a record 52.5 bushels per acre (bpa), it may turn out to be far too optimistic, especially considering the drought conditions being experienced in the Western Corn Belt. To date, yield appears to have peaked at the current record of 51.9 bpa (set in 2016-17) and has trended steady to lower since with disease and insect pressure due to tight rotations potentially taking their toll. In fact, the last three years have failed to top 51 bpa with 2024 at 50.7, 2023 at 50.6 and 2022 at 49.6 bpa.

The accompanying chart shows in orange what the ending stocks would look like if yield in 2025 ended up at 51 bpa -- not a crop failure by any measure -- with all else equal. If yield turns out to be the highest in four years, ending stocks would still be the lowest seen since 2013-14, when prices spent time trading above $15/bushel.

There is another problem that the market may have to address. What if final seeded area falls below the planting intensions (83.5 million acres) that were used in the calculation of 2025-26 production?

With the U.S. and China embroiled in likely their worst trade conflict in history while early seeding was taking place, it would be understandable if seeded area falls even further in the June final seeded area report (due out June 30).

When U.S. tariffs on China topped out at 145% in early April, the November soybean/December corn price ratio plummeted to 2.19, suggesting it was much more profitable to grow corn than soybeans -- just as planters were about to hit the field. With the latest concern over the bullish soybean setup discussed in this analysis, November soybeans have rallied while December corn was falling, resulting in a significant recovery in the ratio to 2.38. Anything back over 2.3 suggests soybeans may be favored over corn (on those final flex fields), but it may be too late. (For more on the soybean/corn price ratio, see https://www.dtnpf.com/…).

The problem is excellent planting conditions this spring typically attract additional corn acres at the expense of soybeans. In fact, as of May 11, 62% of the corn crop was seeded compared to 47% last year and 56% on average. The soybean price rally may have come too late to save those flex acres from going into corn. As a side note, 48% of soybeans were seeded compared to 34% last year and 37% on average.

So not only may the market have to deal with lower yields, but it may have to consider the impact of lower acres as well. If supplies fall enough, demand will have to be rationed, typically through higher prices.

Crush is currently expected to increase 70 mb from 2024-25 levels on an expected increase in biofuel blending mandates currently being worked on. Even with the increased crush, soybean oil exports are expected to fall to 1.7 billion pounds from 2.4 billion pounds in 2024-25. With that, it might be difficult for soybean crush to be reduced.

On the export front, soybean exports are already expected to fall 35 mb from 2024-25 levels given the large South American crop. It is this area that is the most likely to have to see cuts if supplies turn out to be insufficient. But at what price?

Technically speaking, the monthly chart has been able to bounce off long-term support found at the $9.50/bushel area following a divergence bottom being left with December's reversal higher. On a move above this week's high of $10.82/bushel, the next significant resistance is not found until $12.58/bushel.

On the weekly chart, the rally is presenting as a bear market bounce so far, that will need to see a close over the 100-week moving average and minor resistance at old support at $11.50/bushel to confirm it has turned bullish.

On the daily chart, an interesting saucer formation has been developing with the help of the USDA-inspired rally off the 100-day moving average. Currently, Thursday's soybean oil related setback has done nothing to damage the picture, but bulls will want to see a close over the February high of $11.0475/bushel to confirm the bullish setup.

As far as markets participants themselves go -- no one has strong commitments either way with the managed-money traders back to being slightly net long.

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I welcome feedback along with any suggestions for future blogs. My daily comments can be found in Plains, Prairies Opening Comments and Plains, Prairies Quick Takes on DTN products.

Mitch Miller can be reached at mitchmiller.dtn@gmail.com

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