US Soybeans Supported by Multiple Factors

In mid-July, the US soybean market trended stronger amid bullish WASDE reports, rising weather risk premiums and Chinese buying support. The USDA July supply and demand report maintained low US soybean inventories, setting a bullish tone for the market. Meanwhile, persistent heat and drought in the US Midwest added weather risk premiums to soybean futures. In addition, Chinese purchases of US soybeans and the first net buying by speculative funds in nine weeks jointly pushed the CBOT November soybean contract to its highest level since May this year. Nevertheless, expectations of a bumper US soybean crop and competition from South American soybeans capped upside potential.

The USDA July supply and demand report exerted a bullish impact on US soybeans, mainly because both old-crop and new-crop inventories came in below market expectations, reversing earlier pessimism. The report cut old-crop ending stocks for the 2025/2026 US soybean season from 340 million bushels to 310 million bushels, below the market consensus of 338 million bushels. Although the USDA raised new-crop production for the 2026/2027 season by 40 million bushels to 4.475 billion bushels, ending stocks for the new crop remained unchanged at 310 million bushels after export forecasts were lifted by 30 million bushels to 1.66 billion bushels, well below market expectations of 330 million bushels. Global soybean ending stocks were also lowered to 124.17 million tonnes. The tighter-than-expected US soybean supply-demand balance in the USDA report formed core support for soybean futures. However, the upward revision of new-crop output and ample long-term supply still limited price gains. After the report release, market focus shifted to the actual impact of Midwest weather on yields and the sustainability of Chinese purchases, with market sentiment improving markedly.

Weather conditions across US soybean-growing areas showed stark regional divergence in mid-July. Core producing regions in the US Midwest suffered widespread heat and drought. Temperatures in western growing belts including Nebraska and South Dakota repeatedly exceeded 32°C with sharply reduced rainfall and deteriorating soil moisture. Soybeans are highly sensitive to heat and water shortage during the critical flowering and pod-setting stage. Continued heat stress hinders flower bud differentiation and reduces pod counts, directly dragging crop condition ratings. USDA data showed US soybean good-to-excellent ratings stood at 65% for the week ending July 12, compared with 70% in the same period a year earlier. Markets widely expect the rating to slide further to 62%–63%, adding substantial weather risk premiums to soybean futures. Overall, short-term weather factors will keep US soybean futures in a firm oscillating pattern. If drought persists in growing regions, expectations of yield cuts will strengthen further; widespread rainfall, by contrast, will quickly erode weather risk premiums.

US soybean exports have become a key variable driving futures price movements at this stage. Since July 8, the USDA has confirmed more than 1 million tonnes of US soybean sales to China, including a single-day sale of 136,000 tonnes on July 13 for delivery in the 2026/2027 season. The USDA July supply and demand report lifted export projections for the 2026/2027 US soybean season, representing a 9.2% year-on-year increase and confirming improving export demand. Even so, US soybean export prospects face multiple headwinds. First, cumulative old-crop exports remain 17.6% lower year-on-year. As of July 9, cumulative export inspections totalled 38.28 million tonnes, fulfilling only 92.6% of the full-season target, marking the lowest export volume since the 2012/2013 season. Second, Brazil’s bumper soybean crop continues to erode US soybean export share. Brazil’s 2025/2026 soybean output hit a record 180 million tonnes, with July export estimates at 12.26 million tonnes. Its CNF offer to China stands 50–60 US cents per bushel below US soybeans, prompting Chinese crushers to prioritise South American supplies. Crushing margins are negative for near-month cargoes of US Gulf and US West soybeans, while Brazilian soybean crushing profits remain positive. This cost disadvantage is unlikely to reverse in the short run. Third, the Sino-US agricultural purchase agreement is merely a framework, with uncertainties over actual delivery schedules.

To sum up, the core underpinnings for the short-term firm oscillating trend of US soybean futures are confirmation of low inventories, weather risk premiums driven by drought in western US growing areas, and periodic bulk buying from China. The combined effect of these three factors lifted soybean futures to a 阶段性 high. However, ample long-term supply amid expectations of a large US soybean harvest, Brazil’s cost advantage and sluggish old-crop exports act as drags, restricting the upside room for US soybean futures.