Brazil’s decision to pump the brakes on soybean production could help the slide in prices, but according to a Reuters report, it may not produce the desired results for bullish soybean traders and investors.
Soybean prices have fallen about 20% for the year despite harsh weather conditions and infestations adding pressure to Brazilian farmers. Nonetheless, it hasn’t made a large enough dent in the supply to help investors looking for a potential entry point for soybean prices. Investors can implement a buy-the-dip strategy, but a supply glut could keep prices depressed for some time.
Due to its large scale production, Brazil is the top producer in soybeans,. surpassing the United States in 2019. Given its aggressive plantings in the last several years, it doesn’t appear that it will give up that top spot anytime soon.
“Brazil’s soybean plantings have doubled in the last 15 years, reaching a record 46 million hectares (113.7 million acres) in 2023-24,” Reuters noted. “That compares with 35.2 million hectares sown to soy this year in the United States, the No. 2 bean exporter.”
Certain areas in Brazil have exhibited exponential growth. As mentioned in Reuters, Northern Brazil has seen the largest plantings in the last few years.
Chinese Demand Can Help Sustain Prices
If soybean prices rise, it will need the requisite demand in order to do so. That said, demand from China can help sustain prices though the country is still working through the economic doldrums stemming from a real estate development crisis a few years ago. The country has been injecting stimulus measures into the economy to try and revitalize growth. Should those measures prove to be successful, it could help bump up demand to absorb the excess supply.
“With global soybean prices near four-year lows and both Brazil and the United States set to harvest record soy crops in 2024-25, producers in both countries may need to ease back on plantings for 2025-26 and beyond, especially if Chinese demand continues to lag,” added Reuters.
If investors see an ideal entry point for soybean prices, an easy way for exposure is via the Teucrium Soybean Fund (SOYB ). The fund provides similar exposure to what investors could obtain by trading in soybean futures contracts. SOYB is also an option for longer-term buy-and-hold investors who want to diversify their current portfolios with commodities exposure. Additionally, if short-term traders want to take advantage of upside in soybean prices, SOYB can serve that purpose as well.
For more news, information, and analysis, visit the Commodities Channel.
