Demand for Biofuels Could Boost Soybean Prices in 2024

The global demand for alternative energy sources can help boost soybean prices in 2024, especially when it comes to increased use of soy-based biofuels.

A recent Reuters report noted that U.S. farmers, in particular, could be planting more soybeans in the new year, which can help balance the effects of potentially more harsh weather. The El Nino weather conditions have been affecting the supply of crops for much of the year in various parts of the globe. But increased demand for alternative energy sources like soy-based fuels can help buoy soybean prices. More specifically with regard to harsh weather conditions, parts of Latin America have been hit with a lack of rainfall.

“U.S. farmers are likely to plant more soybeans in 2024 as rising demand for soy-based biofuels should boost profits, and many plan to cut back on corn acreage with futures prices for that grain hovering around three-year lows,” the Reuters report said. It further noted that increased “soybean crop would help meet booming demand for renewable diesel fuel and animal feed at a time when drought is slashing soybean production in Brazil, the world’s top supplier. Another top supplier, Argentina, lacks soybeans after a severe drought last year.”

Soybean Momentum Heading Into 2024

If the El Nino weather pattern persists and demand for biofuels continues to see an uptrend, that should provide plenty of momentum for soybean prices heading into the new year. This provides an opportunity for investors to shore up their portfolios with commodities like soybeans that are uncorrelated to the stock and bond markets.

As mentioned, U.S. farmers planting more soybeans can help meet demand should Latin America falter once again in soybean production due to ongoing droughts.

“That’s everyone’s line of thinking as we look out there,” said Iowa State University Extension economist Chad Hart. “I would say the futures market is preparing for that, USDA and their projections. And every time I talk to farmers is that’s been the deal (to plant more soybeans).”

With so many factors weighing on soybean production, the uncertainty could make for a volatile soybean market,. That should appease short-term traders as opposed to buy-and-hold investors looking at the long-term investment horizon. If that’s the case, they may want to consider using the Teucrium Soybean Fund (SOYB). The fund provides similar exposure to what investors could obtain by trading in soybean futures contracts.

For more news, information, and analysis, visit the Commodities Channel.