Record Harvests May Lower on Soybean Prices

A record soybean harvest could continue to put downward pressure on soybean prices. Year-to-date, soybean futures contracts via the Chicago Board of Trade (CBOT) exchange are down about 10%.

Supply Fluctuations

In the long-term horizon (the past five years), however, futures prices for soybeans are up over 30%. Prices reached a peak near the end of May last year with Russia’s invasion of Ukraine fueling the surge.

Russia’s occupation of the Black Sea constricted the outflow of commodities like soybeans before an agreement brokered by the United Nations and Turkey last year alleviated supply buildup. Since then, soybean prices have been in a steady downtrend. Increased supply from record harvest could allow this trend to persist.

“A record crop of soybeans is expected in the United States,” an All About Feed article noted. “The eyes of the oilseed market are therefore focused on sowing activities there. The planting is going well. As of May 14, 49% of US soybean acreage was sown. The 5-year average is 36% on the same reference date. According to the US Department of Agriculture (USDA), America expects soybean production of 122.7 million tons this season.”

A potential catalyst to provide support for prices was the lack of an extension for the aforementioned Black Sea grain deal. With the extension reached, the downtrend could accelerate as supply continues to meet demand.

“The Ukraine Black Sea grain deal has been extended for two more months, in what U.N. Secretary-General Antonio Guterres hailed as ‘good news for the world,’ a day before Russia could have quit the pact over obstacles to its grain and fertilizer exports,” a Reuters report said.

Soybean investors wary of the short-term events can still hope for long-term bullishness and the recent price retreat could offer value. If the long-term upside can persist in the five-year time frame, soybean exposure can still provide a portfolio diversification tool and a counterpunch to inflation.

Looking to Add Soybean Exposure?

Investors looking to add soybean exposure as a non-correlated asset to their traditional portfolio can look at the Teucrium Soybean Fund (SOYB). SOYB can essentially provide similar exposure to what investors could obtain by trading in soybean futures contracts themselves.

This offers short-term traders or longer term buy-and-hold investors with easy ingress when it comes to soybean price exposure. SOYB provides this level of exposure in a dynamic investment product, as a tactical trading tool or hedge against inflation.

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