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Tight soybean ending stocks offer a buying opportunity, analyst says

Bullish fundamentals support a rally to $9.18, basis November futures.

The May USDA Supply & Demand, report, this week, was considered supportive for soybeans, but not enough to spark much buying.

U.S. soybean production for 2020 was pegged at 4.125 billion bushels, as compared with the average trade estimate at 4.14 billion bushels.

The 2020/21 U.S. soybean ending stocks came in at 405 million bushels, as compared with trade expectations for near 432 million bushels, with estimates ranging from 300 million to 683 million. Ending stocks for 2019/20 were pegged at 580 million vs. 495 million bushels expected (range 430 to 549 million) and from 480 million in the April report. As a result, ending stocks are down to 405 million bushels, from 580 million, 909 million, and 438 million bushels for the past three years.

If we adjust yield to 48 bushels per acre, still up from 47.4 million last year, ending stocks come in at just 254 million bushels. 

World Soybean Numbers 

World ending stocks came in at a five-year low of 98.39 million tonnes vs. expectations near 103.5 million tonnes. For 2019/20, world ending stocks came in at 100.27 million tonnes vs. 100.5 million in the April report. The USDA forecast Brazil’s 2019/20 soybean production at 124 million tonnes (vs. estimates at 123.13 million) and pegged Argentina’s 2019/20 soybean production at 51 million tonnes vs. estimates at 51.36 million.

In contrast to other grain markets, soybean prices held within an inside-day session before finishing Tuesday with a mild loss. A Chinese agency estimated its nation’s 2020/21 soybean imports at 93.6 million tonnes, which would be a nearly 3% increase over the previous season. China import demand was pegged at 96 million tonnes, up from 92 million this year.

The Brazilian agency, Conab, cut its estimate for Brazil’s 2019/20 soybean production by 1.7 million tonnes to 120.3 million, which also provided the soy complex early support.

Market Ideas

With a significant tightening of ending stocks for the new crop season (405 million bushels vs. 580 million this year) plus news of China ramping up buying of U.S. soybeans, consider buying November soybean futures on a minor set-back to near $8.46, looking for a rally to near $9.18½. The charts turn bearish on a close below $8.44.

The December soymeal futures contract is still operating under the positive influence of the May 5 key reversal. Close in support comes in at $296.00 and $294.10 per short ton, with $309.50 as an initial upside target.


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