Why are soybean prices falling?

By Augustus Bambridge-Sutton

- Last updated on GMT

Soybean prices are falling. Image Source: Getty Images/Drs Producoes
Soybean prices are falling. Image Source: Getty Images/Drs Producoes

Related tags Soybean commodities Brazil

Despite challenges from regulation and climate, soybean prices have spent the last year falling. What accounts for this?

Soybean is one of the most prominent commodities in the food industry. Fuelling both the animal-feed and plant-based industries, it forms a significant portion of the supply chain for both meat and plant-based food.

While a range of commodities have been increasing in price, data from Trading Economics suggests that, for soybean, the price has been falling steadily for the past year.

While disruptions from the flooding in Rio Grande do Sul​ have hindered this price fall, how significant is it in the long term?

Why are soybean prices falling?

According to the website Trading Economics, soybean prices have been falling steadily since this time last year. While on 17 June 2023 soybean prices were $1470 per bushel (USD/Bu), on the same day this year they were $1160.

Prices are falling due to increased production, suggested Roxanne Nikoro, market analyst for market intelligence firm Mintec.

“The year-on-year (y-o-y) decline in soybean prices can be attributed to the anticipated large total South American crop this season. This is largely due to the initial estimate for huge crops in Brazil for the 2023/24 season, coupled with ample carry-in from the previous season,” she told FoodNavigator.

“Expectations of a 100% y-o-y recovery in Argentina's crop to 50 million metric tonnes, following a significant decline last season, also put downward pressure on prices.”

How did the flooding in Brazil affect soybean prices?

In April and May this year, flooding swept through the Brazilian state of Rio Grande do Sul, one of the country’s key producers of soybean. Cities and farms were submerged under water, and many people died.

The state is Brazil’s second largest producer of soybeans, but the flooding set it back, damaging soy crops and reducing the supply. This saw price rises in May, a process known as ‘sogflation’ (when high rainfall causes commodity price rises).

How the commodity exchange affects prices

While prices on the ground are different to those paid in futures contracts on the commodity exchange​, the former is definitely influenced by the latter.

Prices agreed on the ground will refer to the exchange price. The difference between the two prices is known as a basis.  

“The flooding in Rio Grande do Sul, Brazil’s second largest soybean producing state which occurred during the later stage of the harvest led to losses to some of the unharvested crop, damages to beans in silos, and presented logistical challenges,” Nikoro told us.

While the United States Department of Agriculture (USDA) suggested that the country’s stocks of the crop had decreased by a mere one million tonnes, some market players suggest that the losses following the flooding could be in the range of 3-4m tonnes.

“Notably, the USDA is usually more cautious with its revisions as other agencies such as the Brazilian National Supply Company (CONAB) pegged the crop at 147.4 million metric tonnes in June. This led to a rally in the soybean and derivative (oil and meal) markets.”

This, Nikoro told us, led to the Mintec Benchmark Prices for Soybean Oil FOB Brazil reaching its highest level since November 2023 at $967.5/mt on 29 May 2024.

Flooding in Brazil had a significant affect on soybean prices. Image Source: Getty Images/Marco Henz

However, this is only a short-term obstacle to soybean prices’ march downwards, suggested Nikoro.  

“Soybean and soybean oil prices have begun to retreat from the rally with market players remaining optimistic about a huge South American supply despite losses due to the flooding, with Brazilian origin beans still expected to remain competitive vis a vis US origin.”

Will soybean prices continue to fall?

Despite its links to deforestation, the soybean sector continues to thrive. Production is rising, and by consequence prices are likely, Nikoro suggested, to continue to fall.

“Market players anticipate prices to remain lower y-o-y due to the expected increase in production from key producers – Brazil, US and Argentina for the 2024/25 season,” she told us.

Food commodity price rises

A range of food commodities have not seen the falling prices that soybean has. In fact, many have seen rising prices.

While they have fallen from their peak, cocoa​ prices have dramatically risen in recent months due to crop losses. Tea​ prices have risen as well, due in part to geopolitical pressures in the Red Sea. Changing climatic conditions, including drought, have hit olive oil production​, putting prices up.

This does not mean that it’s all plain sailing for soybean producers, however. “This outlook is largely dependent on various factors such as weather conditions (with focus now on US planting progress), biodiesel and governmental policies.

“The Argentinian soybean market has been particularly dynamic in the past months with the oilseed industry striking against proposed tax regulations by President [Javier] Milei’s government.” Soybean workers in Argentina have gone on strike in recent months in protest against President Milei’s proposed income tax and work rule changes.

Furthermore, in the long term, yields could be impacted by climate change. While research suggests that soybean yields respond well​ to an increase of carbon dioxide in the air, in the long-term​ water and heat could negatively impact yields.

“The exact impact of climate change on soybean prices is difficult to quantify and is dependent on its severity across the key producers. However, studies suggest that much steeper declines in yields could happen in the long term, and therefore pose upside risk to prices,” Nikoro told us.

On top of this, consumer demand could play a role as well.  “Consumer demand and willingness-to-pay for soybeans and derivative products (oil and meal) will be watch points.”

How will the EUDR affect soybean prices?

The upcoming European Union Deforestation Regulation (EUDR)​, which will come into force on 30 December this year, singles out soybean as a key commodity that manufacturers must prove is not linked to deforestation.  

This could, Nikoro told us, impact soybean prices in the future. “Regarding the EUDR, market players expect huge exports to the EU before the implementation of the policy in 2025, which could in turn pose upside price risk to prices, particularly amid supply concerns of alternative oilseeds/oils – sunflower seed and rapeseed.”

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