The soybean market, both domestically and internationally, has recently experienced a pattern of initial gains followed by a decline. Following the release of the positive impact from the USDA's May supply and demand report, soybean futures prices in the U.S. briefly surged to a near two-month high. However, prices subsequently retreated sharply due to U.S. soybean export data hitting a new low for the year, strong expectations for a bumper South American soybean harvest, and a seasonal slowdown in U.S. soybean crushing. Domestically, soybean inventories are at a multi-year high for the same period, downstream purchasing remains cautious, and the supply-demand structure is weak. While domestic soybean futures prices have followed the fluctuations of U.S. prices in terms of timing, their overall performance has been weaker than the external market.
U.S. Soybean Prices: A Rally and Retreat The USDA's May supply and demand report, serving as the first balance sheet for the new 2026/2027 crop year, was generally characterized by increased production and decreased ending stocks. Data indicated a rise in new-crop soybean planted area to 84.7 million acres and production to 4.435 billion bushels, yet ending stocks fell to 310 million bushels. U.S. soybean crush was revised upward to 2.75 billion bushels, and exports were raised to 1.63 billion bushels. Consequently, total U.S. soybean usage grew by 218 million bushels, significantly outpacing the production increase of 173 million bushels. Post-report, U.S. soybean futures were buoyed by positive sentiment, reaching a near two-month high. Speculative funds' net long positions once reached as high as 236,600 contracts, with the market fully pricing in optimistic expectations for a surge in biofuel demand, Chinese purchases, and tightening supply.
Overall, the USDA's May report established a near-term floor of support for the U.S. soybean market but also sowed the seeds for potential future discrepancies between expectations and reality. The report data did not fully account for the negative impacts of high fertilizer prices and low-temperature frosts in the Midwest on yields, leaving room for potential adjustments in the June acreage report and weather-related speculation from July to August. After the positive news from the USDA report was realized, market logic swiftly reverted to weaker fundamentals. With persistently soft U.S. soybean export demand, intensified competition from an anticipated bumper South American crop, a seasonal decline in U.S. soybean crushing, and the influence of profit-taking by funds, U.S. soybean futures prices have experienced a significant pullback, with short-term volatility expected to intensify.
El Niño: The Key Variable The El Niño phenomenon stands as the core variable influencing soybean growth throughout the 2026/2027 season, with a complex mechanism of action characterized by significant lag and asymmetry. The U.S. CPC predicts an 82% probability of El Niño occurring from May to July, persisting into the Northern Hemisphere winter; the European Centre for Medium-Range Weather Forecasts anticipates El Niño's influence reaching historically strong levels before November.
For U.S. soybeans, the impact of El Niño exhibits a notable temporal mismatch. During the U.S. soybean planting period, El Niño typically brings wetter conditions to the U.S. Midwest, which is beneficial for maintaining soil moisture and facilitating planting progress. Current U.S. soybean planting progress is at 49%, already ahead of the five-year average. As the crop enters its critical growth stage from July to August, if El Niño's intensity exceeds expectations, it could lead to high temperatures and drought in the U.S. Midwest, potentially threatening U.S. soybean yield potential. If El Niño triggers extreme weather, it could set the stage for subsequent adjustments in the acreage report and weather-related market activity from July to August.
For the domestic soybean market, if U.S. soybean futures begin to accumulate weather-related risk premiums, the cost of imported soybeans arriving in China would climb. This would directly increase the production costs for soybean meal and soybean oil, providing support for domestic soybean product prices in the longer term. However, the weak supply-demand structure for imported soybeans in the domestic market is unlikely to change in the near term.
Overall, El Niño constitutes a significant component of the strong expectations for the soybean market. However, its actual impact will only become verifiable during the critical U.S. soybean growth period from July to August. In the short term, it manifests more as market sentiment volatility but could emerge as a key variable disrupting the globally loose soybean supply格局 in the medium to long term.
Overall Pressure on Soybean Products The current domestic soybean market is characterized by ample supply, weak demand, and inventory accumulation. Imported soybean arrivals in May are expected to exceed 10 million metric tons, with total second-quarter arrivals projected at 33 million metric tons, essentially solidifying the ample supply outlook. Oil mill operating rates have recovered to 65%-70%, soybean crushing volumes continue to increase, and both port soybean and soybean meal inventories are at multi-year highs for the period, poised to enter an accumulation phase. Concurrently, the National Grain Trade Center has resumed auctions of imported soybeans, further adding to market supply.
Demand remains persistently sluggish. Downstream feed enterprises are extremely cautious in their purchasing, primarily opting to buy as needed with minimal speculative stocking意愿. Spot withdrawals have declined month-over-month, and trading in near-month contracts is lackluster, standing in stark contrast to the surge in basis trading for deferred contracts. Oil mills are utilizing favorable crush margins in the futures market to lock in forward profits, while mid- and downstream enterprises are adopting a wait-and-see attitude towards high prices in near-month contracts, reflecting strong risk-averse sentiment. Currently, domestic oil mill crushing margins are generally negative, dampening their operational积极性.
Recently, the trading logic in the soybean market has shifted from expectation-driven to fundamentally-driven. Overall, the medium-term outlook for the domestic soybean market—characterized by ample supply and weak demand—is difficult to alter, placing overall pressure on soybean product prices. Subsequent focus should be on the pace of imported soybean arrivals, oil mill operating and shutdown schedules, and the recovery of demand from the livestock sector.
In summary, the USDA's May report set the tone of increased production and lower stocks. Following the realization of its positive impact, volatility in U.S. soybean futures has intensified. El Niño has become the core variable贯穿 the U.S. soybean growing season. The domestic soybean supply-demand structure remains weak, and market trading logic has shifted from expectation-driven to reality-driven.
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