When looking at a “pending” China deal while facing down a pending harvest, the market reality is an abundant supply of soybeans with an underwhelming customer base.
Iowa farmer Matthew Kruse, president of Commstock Investments, sees the soybean market trapped in a well-defined bear channel, with futures steadily dropping as farmers anxiously await resolution to ongoing trade disputes with China.
"The challenge that we see is that China has consistently on average bought almost a billion bushels from us each year," Kruse notes in an Ag Marketing IQ video. "On the low end they bought 450 to 500 million bushels. There's been years when they bought 1.3 billion bushels of soybeans from us—and the rest of the world combined really can't make up that loss."
While progress has been made on a trade agreement with Japan and Mexico has a 90-day cease fire in this trade battle, the more complex China negotiations appear unlikely to conclude before late fall. And China is the greater issue for soybeans. This timing creates significant risk for soybean prices, as Kruse sees a future in which USDA revises export projections downward.
In the scenario, the potential impact on ending stocks is severe. Current USDA projections place 2025-26 soybean ending stocks at 310 million bushels. Without substantial Chinese purchases, analysts estimate an additional 500 million bushels could be added to carryover.
"You're talking about as much as 500 million bushels that I don't think there's a house for," Kruse says. "Ending stocks in July was at 310 million bushels for the 2025-26 season. … Tack on 500 million bushels to that, it takes us to 800 million bushels in ending stocks."
This scenario has historical precedent. "In the 2018 season, we saw ending stocks go to 900 million bushels. So, while it's rare, it's not unprecedented and it has happened before. And in that year, soybean prices went to $8."
Hear more from Kruse regarding how the numbers look and why in this Ag Marketing IQ video.