Trade policy uncertainty, geopolitical developments in the Black Sea region, and speculation about weather impacts, both domestically and in South America, dominated market conversation over the last week. Those factors look to remain in the discussion for the near future. The December WASDE report comes out today. Expectations are for limited changes across most agricultural crops as we wait for final production numbers and the December stocks data in January.
Wheat Market Outlook
The wheat market remains focused on working through the large supply produced around the globe this year. Geopolitical events and weather look to be price drivers over the near term. Hard red wheat prices continue to react to events out of the Black Sea region. Uncertainty around the Russia-Ukraine conflict remains high and a resolution to the conflict seems remote. Discussion around La Nina climate conditions will repeatedly crop up in discussions about not only U.S. wheat production but the crop season in South America over the near term. At present, the forecast is for a very mild La Nina episode.
KC hard red winter wheat prices rose slightly over the last week. The March contract closed at $5.26 on Monday. March HRW futures prices sit in the lower end of the $5.20-$5.55 range that they have been in since late October. July harvest contract prices closed at $5.50 near the low end of the $5.45-$5.75 range they have experienced over the same period. Cash prices reflect the ample stocks on hand in Oklahoma and the narrow band HRW prices in the state have seen over the last month.
Export inspections continue to place wheat on track for USDA’s forecast this marketing year. Through December 4, wheat export inspections are 501 million bushels, up around 21 percent from last marketing year. Hard red wheat exports sit at 138 million bushels and require 4.9 million bushels per week to hit USDA’s 325-million-bushel forecast. The WASDE report due out tomorrow is not expected to have major adjustments to wheat balance sheets, but it still bears monitoring.
Recent rains and cooler temperatures bring renewed speculation on the winter wheat crop across the Southern Plains. As of December 2, 35 percent of the winter wheat acreage came in with various levels of drought as estimated by the USDA. At the same time last year, 29 percent of the crop had drought conditions after the huge rains in November of 2024. Unlike last year, the level of extreme and severe drought is more prominent this year. Drought conditions combined with the La Nina climate story create the potential for a weather rally given the right conditions. Early season weather and crop conditions can impact final yield and abandonment, but the final outcomes are highly dependent on weather early in the subsequent year. Wheat prices look to remain rangebound as we approach the end of the year without a significant development in trade negotiations or a shock from outside markets.
Soybean Market Outlook
At present, soybean markets depend on trade policy, biofuel policy, and South American weather. None of the three look particularly supportive currently. Soybean prices broke sharply lower last Friday as the U.S. trade representative indicated that the U.S. and China have yet to reach an actual purchase agreement for soybeans. Trade data from export inspections through December 4 indicate soybean exports are still well behind last year at 474 million bushels, down approximately 391 million bushels from last year. China showed up on the export inspections with 4.4 million bushels shipped during the week. Known Chinese purchase sit at approximately 3.07 MMT (113 million bushels) of the 12 MMT (440 million bushels) indicated in the new deal. Of particular concern to those with hopes for fulfillment of the trade deal with China is that the window keeps moving out. The latest timeline for initial purchases is the end of February when the initial agreement said the end of 2025. The possibility of moving that quantity of soybeans by the end of the year was always shaky but the lack of buying is undermining the soybean market.
South American weather shows signs of a minor La Nina event with dryness predicted in southern Brazil and Argentina over the next few months. Argentina growing areas are predicted to remain dry. The Brazilian weather supports the forecasts of 175 MMT by the USDA as major growing regions received adequate moisture.
USDA still lags on reporting soybean crush numbers and will report September data for oilseed crushing on Wednesday. The market has been working off the processor association data in its absence. The WASDE report on December 9 will finalize old crop soybean oil and meal balance sheets with the limited data they have in place. Old crop crush came in at 2.445 billion bushels. Thus far in the current marketing year, crush sits at approximately 440 million bushels through September and October from NOPA. We are on pace for a massive crush this marketing year but there are concerns about soybean oil usage for biofuels that is driving this crush expansion.
September data for biomass-based diesel feedstock was reported by EIA at the end of November. Soybean oil usage for the 2024/25 marketing year came in at 11.759 billion pounds, below USDA’s downward revision from November’s WASDE report. While those numbers are not enough to move the outyear forecast, EPA’s data on biomass-based diesel production does not show signs of soybean oil usage in biofuels picking up in October. This could be concerning for the crush forecast in the long run. It is still early but a lowering of the 15.5-billion-pound soybean oil usage for biofuels and the implications for crush need monitoring given the lack of clarity on Renewable Fuels Standard policies and no timeline for an announcement from the EPA.
January soybean futures dropped to $11.05 on Friday on the negative trade news and carried through on Monday to close at $10.93. November 26 prices for new crop harvest fell to $11.01 over the same period and are looking to stabilize at the bottom of the range the prices have been in since early November. Further weakness may see a negative bias in the market. Oklahoma prices sit at $10.13 with basis around 82 cents under the January contract. A rally requires issues in South American weather or certainty shows up in trade policy.
