From weather to global trade relations, there are a variety of factors that market participants should consider when thinking about risks in the soybean market this year. 

As of the beginning of August, there was no consensus on the size of Brazilian soybean production in 2024. South America’s surplus will be large in almost any scenario, but there’s currently a discrepancy of 5.3 million tons between the Brazilian government (CONAB), which projects production at 147.7 million tons, and USDA, which estimates production at 153 million.

Some in the trade are still forecasting Brazilian soybean production in 2024 at 145 million tons or less, while others forecast production above 155 million tons. The actual size of Brazil’s soybean crop in 2024 is unlikely to be known until early 2025. In recent years, the market can only work out Brazilian supplies once Brazil’s exportable surplus is exhausted. Yet, a Brazilian crop below 147 million tons implies the U.S. will be at the center of world trade between September and December, while a Brazilian crop above 155 million tons implies there’s not much need for production growth in the U.S. or elsewhere. So far, the Brazilian cash market is behaving as though the Brazilian government is correct with its 147.7-million-ton estimate.

Renewable diesel production in the United States exploded in 2022 as California’s clean air policies mandated greater renewable fuel production and consumption. Since, states along both coasts have adopted similar measures, with California and Oregon providing credits for the use of biofuel and renewable diesel, which is chemically identical to conventional diesel. Soybean oil consumption followed, with soybean oil prices reaching record highs in April 2022 as the market feared supplies would decline to near zero. 

The U.S. reduced its soybean oil exports and  became a net importer of vegetable oils – used as cooking oil in particular. Soybean oil was then forced to share the biofuel market with waste oils and animal fats. 

In January, soybean oil accounted for only 31% of total biofuel production. Soybean oil’s share collapsed, while the use of animal fats exploded. Waste oil’s share of production has been steady, and a large portion of U.S. renewable diesel production is now being satisfied with imported used cooking oil. Whether this changes in summer and autumn is important. Is there enough used cooking oil in the world to satisfy additional growth in the U.S. biofuel sector? Soybean oil stocks typically decline during the summer months, and the speed of this decline is critical.

While the size of Brazilian soybean production and exports in 2024 is most important, demand for U.S. soybeans from China warrants monitoring. Given that China is by far the world’s top importer and consumer of soybeans, the growth in world soybean trade is centered on U.S. and Chinese trade relations.

China prefers to import soybeans from Brazil and Argentina exclusively. In 2024, this will not be possible, requiring China to purchase soybeans from the U.S. By the middle of May, China would have typically secured at least one million tons of U.S. soybeans for delivery in the following marketing year. This year, their first purchase didn’t come until July.