Soybean Market Trading Logic Shifts: Prices Under Pressure After Bullish Factors Fade, El Niño a Key Variable

Global soybean markets have experienced a rally followed by a pullback in recent days. After the bullish impact of the U.S. Department of Agriculture's May World Agricultural Supply and Demand Estimates report was priced in, Chicago Board of Trade soybean futures briefly rose to near two-month highs. However, prices subsequently fell sharply due to record-low U.S. soybean export data, strong expectations of a bumper harvest in South America, and seasonal slowdowns in U.S. soybean crushing. At the same time, soybean inventories in China remain at multi-year highs for the season, while downstream buyers adopt a cautious purchasing stance. With a generally weak supply-demand structure, Chinese soybean complex futures have followed CBOT prices directionally but have underperformed their overseas counterparts.

U.S. Soybean Prices Rally Then Retreat as Report's Bullishness Is Absorbed

The USDA's May WASDE report, the first supply-demand balance sheet for the 2026/2027 marketing year, generally pointed to higher production and lower ending stocks. According to the report, new-crop soybean planted area increased to 84.7 million acres, with production rising to 4.435 billion bushels, yet ending stocks unexpectedly fell to 310 million bushels. U.S. soybean crush was raised to 2.75 billion bushels, and exports were increased to 1.63 billion bushels. As a result, total U.S. soybean use grew by 218 million bushels, exceeding the production increase of 173 million bushels.

Following the report's release, CBOT soybean futures hit nearly two-month highs on bullish sentiment, with speculative fund net long positions reaching as high as 236,600 contracts. The market fully priced in optimistic expectations of surging biofuel demand, Chinese purchases, and tightening supplies.

Analysts noted that the May report provided a temporary floor for the U.S. soybean market but also left room for subsequent expectation-driven trading. The report's figures did not fully account for the negative impacts of high fertilizer prices and low-temperature frost in the Midwest on yields, leaving room for the June Acreage report and July–August weather speculation.

After the bullish factors were priced in, market logic quickly reverted to weak fundamentals. Persistent weakness in U.S. soybean export demand, intensified competition from South American harvests, seasonal declines in U.S. soybean crush, and profit-taking by funds have all contributed to a sharp pullback in CBOT soybean futures, with near-term volatility expected to increase.

El Niño the Key to Breaking the Deadlock, but Impact Awaits July–August Confirmation

El Niño is seen as a core variable running through the 2026/2027 soybean growing season. The U.S. Climate Prediction Center estimates an 82% chance of El Niño emerging during May–July and persisting through the Northern Hemisphere winter. The European Centre for Medium-Range Weather Forecasts expects the El Niño event to reach its strongest level on record by November.

For U.S. soybeans, the impact of El Niño exhibits a clear temporal mismatch. During planting, El Niño typically brings wetter conditions to the U.S. Midwest, helping soil moisture and planting progress. Current U.S. soybean planting is 49% complete, ahead of the five-year average. However, if El Niño's intensity exceeds expectations during the critical July–August growing period, it could bring hot, dry weather to the Midwest, threatening U.S. soybean yield potential. This lays the groundwork for subsequent acreage reports and weather-driven price volatility in July and August.

For China's soybean market, if CBOT soybean futures begin to accumulate a weather risk premium, China's import cost for soybeans will rise, directly increasing the production costs of soymeal and Soybean Oil and supporting longer-term Chinese soybean complex prices. However, in the near term, the weak supply-demand balance for China's imported soybeans is unlikely to change.

Overall, El Niño is an important component of the strong market expectations, but its actual impact will not be verifiable until the critical July–August growing period for U.S. soybeans. In the short term, it is more a driver of market sentiment; over the medium to long term, it could become a key variable that breaks the current global soybean supply glut.

China's Soybean Complex Under Pressure as Fundamentals Drive Trading Logic

China's soybean market currently features ample supply, weak demand, and rising inventories. May soybean arrivals are expected to exceed 10 million tonnes, with total arrivals in the second quarter projected at 33 million tonnes, essentially confirming a loose supply pattern. Crusher operating rates have rebounded to 65%–70%, soybean crush volumes are rising, and both port soybean inventories and soymeal stocks are at multi-year highs for the season, with further stockpiling expected. At the same time, the National Grain Trading Center has resumed auctions of imported soybeans, adding to market supply.

Demand remains sluggish. Downstream feed mills are extremely cautious in their purchasing, adopting a hand-to-mouth approach with very little speculative stocking. Spot pickup volumes are down month-on-month, and nearby-month contract trading is thin, in stark contrast to a surge in basis trading for deferred-month contracts. Crushers are locking in forward profits using favorable on-screen crushing margins, while mid- and downstream players are waiting on the sidelines regarding high nearby-month prices, reflecting strong risk aversion.

Crushing margins for Chinese Soybean Processors are currently generally negative, discouraging crusher operating incentives. Recently, soybean market trading logic has shifted from expectation-driven to fundamental-driven. Overall, the medium-term outlook for China's soybean market remains one of ample supply and weak demand, putting sustained pressure on soybean complex prices.

Going forward, market attention should focus on the pace of imported soybean arrivals, crusher startup and shutdown schedules, and the recovery of demand from the livestock sector.

Conclusion

The USDA's May WASDE report signaled higher production and lower ending stocks. With the bullish news priced in, CBOT soybean futures have become more volatile. El Niño has emerged as a core variable running through the U.S. soybean growing season, though its actual impact remains to be seen. Meanwhile, China's soybean market has a weak supply-demand structure, and trading logic has shifted from expectation-driven back to reality-driven. Global soybean markets have entered a new phase of heightened volatility, where expectations and reality are increasingly intertwined.