Soybeans Rallying into Friday’s Midday Despite Higher Stocks Number

Soybean futures are trading 9-10 cents higher, with cash prices also gaining, despite a USDA report indicating an 8 million bushel increase in US production to 4.3 billion and a 10 million bushel rise in 2024/25 ending stocks to 300 million, defying market expectations for a reduction. This domestic supply increase, driven by higher acres, contrasts with a marginal reduction in global old and new crop soybean carryout estimates. Strong demand signals, including a recent export sale and anticipated robust August crush data, likely underpin the market's positive sentiment.

Analysis

Soybean futures are demonstrating notable strength, with prices gaining 9 to 10 cents despite a USDA report that was bearish on domestic supply. The USDA increased its US production forecast by 8 million bushels (mbu) to 4.3 billion bushels, directly contradicting analyst estimates that called for a 21 mbu reduction. This upward revision stems from a 0.21 million acre increase in both planted and harvested area, which more than offset a marginal 0.1 bushels per acre (bpa) cut to yield. Consequently, the 2024/25 ending stocks projection was raised by 10 mbu to 300 mbu, reflecting a 20 mbu cut to the export forecast and a 15 mbu increase in domestic crush. However, the market appears to be focusing on a tighter global picture and robust demand signals. The USDA trimmed the world's new crop carryout by 0.91 MMT to 123.99 MMT, following a 1.61 MMT reduction in old crop global stocks. Furthermore, a fresh private export sale of 22,000 MT of soybean oil to South Korea and trader anticipation of a strong August crush report (forecast at 182.857 mbu) are providing significant price support, suggesting demand is currently outweighing the larger-than-expected US supply.

Key Decisions for Investors

• Investors should closely monitor upcoming demand data, particularly Monday's NOPA crush report, as strong figures are currently outweighing the bearish USDA domestic supply revisions and supporting prices.
• Consider the divergence between the larger US supply and tightening global stocks; any deterioration in the South American crop outlook could significantly amplify bullish sentiment, providing a potential long catalyst.
• It is prudent to scrutinize weekly export sales data for validation of the USDA's projected 20 mbu cut to exports, as a sustained slowdown in foreign demand could shift market focus back to the larger-than-expected US supply and pressure prices.