Canada Markets

You would never know tight soybean supplies could be a problem in the year to come based on market reaction recently; but there really is very little room for acres to fall further from the prospective plantings report estimate of 83.5 million acres. Yet we could see just that in Monday's acreage estimates.

Between early seeding, trade tensions and tariff wars with China (at a critical time) and the soybean/corn price ratio performance, all indications are that soybean area may come up short of early intentions.

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 from March intentions. 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 concern over the bullish soybean setup discussed in this analysis, November soybeans rallied while December corn fell by late April, resulting in a significant recovery in the ratio to 2.38 by mid-May. That only lasted for a few days and an increase in tensions between the U.S. and China resulted in a return to just over 2.3 for the remainder of seeding, suggesting little incentive to switch corn acres out in favor of soybeans. As a side note, anything over 2.3 suggests soybeans may be favored over corn (on those final flex fields). For more on the soybean/corn price ratio, see https://www.dtnpf.com/….

Another problem for the soybean market was the excellent planting conditions experienced this spring, typically attracting 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.

By the time the U.S. and China met in Geneva and agreed to de-escalate the tariff war, it was June 11 and 97% of the corn was planted with 90% of the soybean crop already in the ground.

Although the year started off with ideal planting conditions for most, it may have been dangerous to suggest that to producers in the Eastern Corn Belt states. A wet spring delayed seeding for them to the point where acres may have been eventually lost to prevented planting claims. As of June 15, only 75% of Kentucky soybeans had been planted with Tennessee only slightly better at 78%. Ohio had finally reached closer to normal levels (or given up) with 92% of intended soybeans seeded.

It's worth recalling that soybean prices initially jumped higher on the May 12 release of USDA's first look at 2025-26 estimates in its World Agricultural Supply and Demand Estimates (WASDE) update. In short, the 295 million bushel (mb) ending stocks estimate for 2025-26 surprised the market compared to estimates looking for 362 mb. That increased the significance of both yield and area developments for the remainder of the year.

The glaring issue was the yield that 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. 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 bpa, 2023 at 50.6 bpa 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 (at 51 bpa), ending stocks would still be the lowest seen since 2013-14 when prices spent time trading above $15/bushel (not adjusted for inflation). And that is based on 83.5 million acres planted.

As a review, soybean crush is expected to increase 70 mb from 2024-25 levels on an expected increase in biofuel blending mandates. Even with the increased crush, soybean oil exports are expected to fall to 1.7 billion pounds from 2.6 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?

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

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