Crush the 2025 Soybean Market! Brazil’s Surge & Seasonal Downtrend Are Open Doors—Dive Into COT Data Today

The 2025 soybean crop in South America, which accounts for about 55% of global supply, is on track for a record harvest despite weather challenges. Brazil, the world's top soybean producer, expects a production of 169 million metric tons for the 2024/25 season per the USDA, a significant jump from last year, driven by a 3 % increase in planted area to around approximately117 million acres. Argentina, the third-largest producer, the USDA projects 49 million tons, subject to ongoing adjustments due to the varying impacts of weather conditions across the country. There was indeed an expansion in planted area for the 2024-25 soybean crop, reaching 44.2 million acres, the most significant increase since the 2015-16 season. According to trading data, these robust South American outputs exert downward pressure on global soybean prices, which dropped to $ 10.20'4 per bushel as of July 21. Over the past month, soybeans have been down about 3.5%, while year-to-date, they're about unchanged.

U.S. soybean exports are facing challenges, particularly with China, their largest buyer, which accounts for about 60% of U.S. soybean exports. For the 2024/25 marketing year, U.S. exports are forecast at 1.75 billion bushels, down 70 million bushels from earlier estimates due to increased competition from Brazil's record crop and a favorable Brazilian real exchange rate. A December 2024 report by the USDA Foreign Agricultural Service (FAS) mentions that the market expectation is for the Brazilian real to continue trading at around R$5.5 to USD 1 in 2025, and that this exchange rate is highly favorable for Brazilian soybean exports. The 2023/24 season saw U.S. exports at 1.789 billion bushels, a 14% decline from the previous year, while Brazil's exports surged 40% to China. The possibility of a slowdown in China's demand and its impact on U.S. acreage is a relevant concern. China's decreased soybean demand in 2025 is noted, driven by sufficient domestic reserves and ample supplies from Brazil.

Source: Barchart

November soybeans have been range-bound since the beginning of the year. After probing the channel high of $10.75, the market has retreated, creating a price action downtrend of lower highs and lows. The recent attempt at a price rally failed near the July 07 gap down, indicating the remaining supply is near the origin of the gap.

Will this downtrend be the catalyst for breaking out of the year-long channel?

Source: CME Group Exchange

The managed money traders' COT report has some fascinating insight. While the graph looks noisy and unclear, the internal numbers may tell what the managed money traders think.

In the last three months, managed money has quietly been building a short position. Looking at the Percent of Open Interest column, we can see their short positions now make up 12.5% of the open interest, up from 7.7%, marking an increase of about 5%. At the same time, their long positions dropped from 10.2% to 9.7%. This increase in selling (red lines) began when prices (yellow line) were near the top of the $10.75 channel high.

Another fact is that the Number of Traders column reflects that 58 managed money traders were short three months ago. Today, that number has increased to 73. While the number of long-positioned managed money traders was 76, today, it has dropped to 62.

Slowly and diligently, managed money appears to be scaling into a much bigger soybean short position.

Source: Moore Research Center, Inc. (MRCI)

MRCI's extensive research details the price action and 15-year seasonal pattern (blue line) and the upcoming seasonal window (yellow box). In the previous paragraph, I commented on how the soybean market had traded in a channel since the beginning of the year. Seasonally, MRCI reveals that channel price action has been the norm over the past 15 years rather than the exception. The upcoming seasonal window has historically been when the November soybean contract has accelerated its downside move.

Revisiting the COT report details, can you see why the managed money traders may be building their short positions? With the supporting fundamentals of soybean supply, price action following its seasonal pattern this year, and the daily trend turning down, we may soon see more downside price action.

The seasonal window dates reflect that November soybean futures have closed lower on August 12 than on July 21 for 13 of the past 15 years in hypothetical trading. For four years, there was never a daily closing drawdown.

Source: MRCI

During this hypothetical testing and research period, the average profit for this trade was about 31 cents, or $1,550 per standard contract. The Worst Equity Date column alerts us that the market typically rallies for a couple of days after entering the market and then declines.

As a crucial reminder, while seasonal patterns can provide valuable insights, they should not be the basis for trading decisions. Traders must consider various technical and fundamental indicators, risk management strategies, and market conditions to make informed and balanced trading decisions.  

Soybean Futures Contracts – Standard (ZS) Mini (XK):

• Soybean futures, traded on the Chicago Board of Trade (CBOT) through CME Group, are standardized contracts that allow buyers and sellers to agree on a price for soybeans to be delivered on a future date (e.g., November 2025 futures).

Soybean Options Contracts:

• Options on soybean futures, also traded on CBOT, give speculators the right, but not the obligation, to buy (call) or sell (put) soybeans at a specific price before or at expiration. These are useful for seasonal trading, allowing speculators to capitalize on price volatility (e.g., weather-driven spikes in June) with defined risk.

Agricultural ETFs (SOYB):

The 2025 soybean market is at a crossroads, with South America's record harvests and shifting trade dynamics with China creating challenges and opportunities. Prices are under pressure, and the seasonal window suggests potential for further declines, as managed money traders quietly build short positions. But here's the deal: markets reward those who do their homework. Dive into the data—study the COT reports, track price action, and weigh the fundamentals like Brazil's exchange rate and China's demand. You've got the tools to navigate this. Whether you're eyeing futures, options, or ETFs, trust your ability to analyze and act. The market's moving—will you move with it?

On the date of publication, Don Dawson did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com