Introduction: The Great Divergence
As we close the books on the 2025 U.S. harvest, the soybean market finds itself in a state of historic bifurcation. On one side, the domestic engine is firing on all cylinders: U.S. processors are crushing beans at a record annual pace, driven by the biofuel mandates cemented in the expansion of the 45Z Clean Fuel Production Credit. On the other side, the export door is closing. With China shifting its procurement strategy almost exclusively to South America, the U.S. soybean farmer is increasingly reliant on the local crusher rather than the export terminal.
For traders and hedgers, the next three months will be defined by this tug-of-war: Can domestic renewable diesel demand chew through the supply faster than the loss of exports piles it up?
Current Market Conditions
1. U.S. Balance Sheet: Adequate but Heavy
According to the USDA’s December 2025 WASDE report, the U.S. soybean crop settled at 4.253 billion bushels with a yield of 53.0 bushels per acre—slightly below trend but sufficient to keep pipelines full. The concern lies with the carryout. Exports slashed to roughly 1.64 billion bushels, ending stocks are creeping comfortably to 300 million bushels.
2. The South American Juggernaut
The bear case is anchored in Brazil. Conab’s latest estimates peg the 2025/26 Brazilian crop at a staggering 177.6 million metric tons (MMT). Despite a choppy start to planting caused by La Niña-induced dryness in Mato Grosso, recent rains have stabilized yield potential. Brazil is projected to export over 112 MMT, aggressively undercutting U.S. offers in the Asian market.
3. Crush Margins & Biofuel Policy
The extension of 45Z tax credits has put a premium on U.S.-origin soybean oil over imported feedstocks. This has kept Board Crush margins resilient near $1.20–$1.45 per bushel despite the glut of soybean meal, as the oil share remains historically elevated.
3-Month Forecast: Dec 2025 – Feb 2026
Soybeans
● Price Target: $10.60 – $10.20 per bushel (March 2026 contract).
● Rationale: The seasonal window for a post-harvest rally is narrow. Typically, January brings a “South American Weather Premium,” but with Brazil’s acreage increasing by ~3.6% to 49 million hectares, weather would need to be catastrophic to justify prices above $11.00. The sheer volume of Brazilian supply hitting the market in February alongside the U.S. Dollar remaining elevated could possibly act as a massive lid on beans.
Soybean Meal
● Price Target: $305 – $280 per short ton.
● Rationale: With crush rates maximizing oil output for renewable diesel, the U.S. is flooding the market with meal. Unless Argentina suffers a late-season drought (reducing their meal exports), U.S. meal values can possibly struggle to find a floor.
Soybean Oil
● Price Target: 53¢ – 56¢ per pound.
● Rationale: This is the only product with structural support. The revised 45Z guidance favors domestic row crops & as refiners ramp up production to meet 2026 mandates, soybean oil’s share of the feedstock mix is rising. We are expecting oil share (the value of oil relative to the whole crush) to remain historically high.
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● For Producers: The upside could be capped by the looming Brazilian harvest. Use any weather scares price spikes in December/January to price remaining old-crop inventory.
● For Traders: The “Long Oil / Short Meal” spread possibly remains the most fundamental trade on the board, aligned with the 45Z policy incentives.
● End Users: Meal buyers should remain patient; the “wall of supply” from U.S. crushers shouldn’t be going away anytime soon.
Vincent Giampietro, Commodity Broker
Contact Vincent
Phone: 312-957-4731 ext 3110 or 800-556-9411
Email: vgiampietro@walshtrading.com
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