Soybean traders are in familiar territory. The combines are back in the barn, bins are full, and the market is working through what to do with one of the largest crops ever recorded. The latest USDA report put U.S. production at 4.5 billion bushels, slightly trimmed from earlier estimates, but still sitting near record territory. Yields came in at 51.7 bushels per acre.

Despite challenging weather across key growing states, farmers maintained an impressive harvest pace, with 94% of the crop now in bins, running well ahead of the five-year average. October’s warmer than normal temperatures, particularly across the upper Midwest and great plains, helped push the harvest to completion even as yields disappointed in several major producing states.

With total planted acreage unchanged, this year’s harvest underscores how resilient U.S. farmers remain. Even with slight reductions in yield, it’s hard to ignore that this level of production has only been matched once before. The market, though, doesn’t tend to applaud large supplies. It reacts to what’s left over.

Exports Struggle to Gain Momentum

On the demand side, exports have been slower than many hoped. Outstanding sales as of the end of October stood at 15.6 million metric tons—an improvement from last year but well below the average of the past three seasons. Lower supplies have trimmed the USDA’s export estimate for the marketing year to 1.8 billion bushels.

China, the perennial wild card in the soybean equation, continues to exert outsized influence. While its demand remains robust, recent tensions around trade policies and economic slowdowns have created uncertainty. Traders recall how swiftly Chinese buyers shifted their purchases to South America during past disputes with the U.S. With a record 105.5 million metric tons expected to leave Brazilian ports this year, U.S. exporters have their work cut out for them.

Even so, the Chinese market isn’t likely to fade into obscurity anytime soon. Rising middle-class incomes and increased livestock production ensure soymeal, the byproduct of crushing soybeans, remains in high demand. As one analyst noted recently, “If China sneezes, the soybean market catches a cold.”

However, a significant development is emerging from Pakistan, where the recent approval of genetically modified soybean imports could reshape regional trade flows. This policy shift, ending a ban that severely restricted imports since October 2022, opens new possibilities for U.S. exporters looking to diversify their customer base.

Price Pressure Meets New Demand Stories

The domestic picture isn’t without its opportunities. The push for renewable fuels continues to expand soybean oil’s role in biodiesel production. This demand has kept oil prices firm, even as stocks for the marketing year are forecast to remain at 1.5 billion pounds.

Soybean meal exports, on the other hand, have faced headwinds. Lower-than-expected livestock feed demand has capped growth, and the USDA’s forecast reflects this, lowering the domestic crush estimate by 15 million bushels to 2.4 billion. Even so, soybean meal exports are still expected to reach a new high of 17.4 million short tons, signaling strong international interest in protein-rich feed products.

What Traders Are Watching

The latest Commitment of Traders report provides a snapshot of market sentiment, and it tells a story of caution. Managed money holds 109,617 long contracts, 149,318 short contracts, and 96,402 spread contracts, representing 12.7%, 17.3%, and 11.2% of open interest, respectively. This positioning underscores a bearish lean among speculators, as short positions outweigh longs by a wide margin. The shift from the previous week—where short positions decreased by 7,008 contracts—suggests some covering, but not enough to flip the sentiment. Meanwhile, producer and merchant short positions are at 364,683 contracts, reflecting strong hedging activity in the face of abundant supplies. With open interest standing at 862,260 contracts, traders remain split on whether recent price movements are a floor or just another waypoint in a bearish trend. This hesitancy may persist until clearer signals emerge from export markets or South American planting progress.

Weather forecasts for Brazil and Argentina will dominate discussions in the coming months. Brazil’s early planting conditions have been favorable, but dry weather in Argentina is raising questions about the potential for yield reductions. For now, U.S. farmers are looking toward spring planting decisions, weighing input costs and crop rotation plans as they watch prices settle into winter trading ranges.

Soybean futures are unlikely to stay quiet for long. History shows that even when the market feels well-supplied, it doesn’t take much to shake things up. Traders who know where to look—and when to act—will find plenty of opportunity.

Trade Example

Markets tend to oscillate within predictable ranges, and understanding these ranges is critical for managing risk and identifying opportunities. For soybean futures, the 1-standard-deviation range for the March contract, approximately 90 days out, is $8.98 to $11.00. This range represents the likely boundaries for prices over the period, assuming historical volatility remains consistent.

An example trade as of November 20, 2024, would be an iron condor targeting this range. The trade involves selling the $9.00 put and buying the $8.40 put, while also selling the $11.00 call and buying the $11.60 call. This structure offers a maximum profit of $500, with an approximate margin requirement of $600 and a maximum risk of $2,500. The trade is designed to profit if prices remain within the defined range, while limiting downside exposure if prices move beyond these levels.

This approach illustrates how traders can balance potential returns with controlled risk, aligning their strategies with the realities of the market.