The recent surge in November soybean prices to contract highs is driven by a unique combination of factors, including robust domestic biofuel crush demand, geopolitical energy shocks restricting supply, and recent Chinese buying sprees.
Why Soybeans Are Rallying
The biofuel demand is a key driver of the rally, as crude and heating oil prices have surged due to conflicts in the Strait of Hormuz and related tensions. This has made the economics for biomass-based diesel (renewable diesel and biodiesel) highly profitable, leading commercial traders to lock in long positions.
Supply disruptions and weather concerns are also contributing to the rally. Geopolitical turmoil, particularly in the U.S.-Iran and Russia-Ukraine regions, has restricted global grain transportation, injecting a general war-risk premium into agricultural commodities. Weather concerns, such as hot, dry soils, in critical growing regions are also mitigating downside risks and encouraging aggressive commercial buying.
Could Prices Crater from Here?
A seasonal sell-off is a distinct possibility, and if the market turns, it could experience a sharp drop. A crop size reality check is in order, as despite tightening old-crop balance sheets, the market may still be looking at historically large U.S. and global production figures. If ideal summer weather persists without major August droughts, yields could expand, easing current supply anxieties.
Managed money’s neutral, equal-long-and-short positioning means they are not currently driving the market. However, if any bearish news (e.g., beneficial rain or a cancellation of export sales) causes prices to break technical support levels, these trend-followers could quickly liquidate, exacerbating a swift downward move.
Technical Picture
November beans have a textbook uptrend, with higher highs and higher lows accompanied by a rising daily 50 simple moving average (SMA). However, some factors are emerging that could turn the market quickly. A trend change may be necessary before entering a short position.
Disaggregated Commitment of Traders Report
The Disaggregated COT report shows a divergence in managed money sentiment. Typically, managed money traders are trend followers. However, as prices have traded higher since January 2025, managed money has kept a bullish posture. Now that prices are at contract highs, managed money is not impressed with the idea of higher prices.
Seasonal Pattern
While the news and price action are currently bullish, let’s face it: grains decline into harvest more often than they don’t. And a contract trading at contract highs before a seasonal decline is hard to ignore. A 15-year pattern shows that prices typically decline abruptly during the optimal seasonal window. Through historical testing and hypothetical trading, MRCI has found that the November soybean contract has closed lower on August 06 than on July 28 for 14 of the past 15 years, a 93% occurrence.
There is a 47% historical track record of no daily closing drawdowns during the optimal seasonal window. This is a seasonal pattern worth paying attention to, to see whether a significant opportunity can arise from this year’s out-of-character price behavior.
Assets to Trade the Soybean Market
Soybean futures contracts, traded on the Chicago Board of Trade (CBOT) through CME Group, are standardized contracts that allow buyers and sellers to agree on a price for soybeans to be delivered on a future date. Soybean options contracts give speculators the right, but not the obligation, to buy (call) or sell (put) soybeans at a specific price before or at expiration. Agricultural ETFs (SOYB) provide exposure to soybeans without direct futures trading.
