Soybean Futures: Betting on US-China Trade Truces and the Q3 Harvest Surge

The U.S.-China trade relationship has long been a barometer for global agricultural commodity prices, and soybeans sit at the epicenter of this dynamic. Recent diplomatic signals—such as the June 2025 tariff truce and high-level talks—have injected volatility into soybean futures markets. For investors, the question is clear: Can renewed U.S.-China trade cooperation, combined with tight inventory levels and seasonal demand, drive a sustained rally in soybean prices ahead of the Q3 harvest?

The Diplomatic Pivot: Lower Tariffs, Higher Hopes

The May 2025 U.S.-China trade deal marked a critical shift, slashing tariffs on agricultural exports from 145% to 10% for U.S. goods and reciprocally for Chinese imports. While this truce remains fragile—accusations of tech export breaches and unresolved IP disputes linger—the immediate impact on soybean futures was dramatic. . The Chicago Board of Trade's July soybean contract surged 12% in the week following the deal, reflecting renewed optimism about Chinese purchases.

Historical trade data underscores the opportunity. In April 2025, U.S. soybean exports to China hit 11 million metric tons—a 15% year-over-year increase—despite lingering tariffs. However, May saw a 50% drop from April's peak, as China's massive soybean stockpile (36% of global supplies) and Brazil's competitive pricing weighed on demand. The key now is whether the truce will sustain a rebound in Q3.

Inventory Tightening: A Bullish Foundation

The USDA's June 2025 WASDE report revealed critical supply-demand dynamics. U.S. soybean ending stocks for 2025/26 are projected at 295 million bushels—a 16% drop from the prior year—driven by strong domestic crush demand (soybean meal/oil production) and export activity. This tight inventory aligns with a bullish technical setup: soybean futures are testing resistance at $11.00/bushel, with an inverse head-and-shoulders pattern suggesting a potential $12.50 breakout.

The data shows a clear correlation between lower ending stocks and higher prices. With 2025/26 stocks at a three-year low, the stage is set for a price rally—if demand holds.

The Brazil Factor: A Double-Edged Sword

Brazil's record 2025 harvest (projected at 155 million metric tons) has long been a thorn in U.S. farmers' sides. Lower tariffs and infrastructure investments—like the expanded Santos port—have made Brazilian soybeans cheaper and faster to deliver to China. However, Brazil's dominance isn't insurmountable. Flooding in Argentina (a key competitor) and logistical bottlenecks in South America could disrupt global supplies, creating a “buy-the-dip” opportunity for U.S. farmers.

Q3 Risks: Weather, Politics, and Port Capacity

The bullish case isn't without pitfalls. First, U.S. port capacity remains strained: the Port of Oregon reported a 51% export drop in 2025, complicating delivery logistics. Second, geopolitical tensions could reignite. If China imposes new restrictions or the U.S. reimposes semiconductor export limits, soybean prices could collapse. Lastly, the U.S. Midwest's weather in July–August—a critical pollination period—could impact yields.

Investment Strategy: Position for the Harvest Surge

For investors, the Q3 soybean futures market offers a compelling risk-reward trade. Here's how to play it:
1. Buy Soybean Futures (ZS/XK): Target the July contract near $10.50/bushel, with a stop-loss below $9.85. The $12.50 resistance level, if breached, signals a multi-month uptrend.
2. Use Options for Leverage: Consider a bull call spread on the November 2025 contract, capitalizing on seasonal price spikes during harvest.
3. Diversify Geographically: Allocate 10–15% of an agriculture portfolio to soybean ETFs (e.g., SOYB) while monitoring Brazil's weather and China's stockpile drawdowns.

Conclusion: The Truce Isn't Perfect, but It's a Start

While the U.S.-China trade relationship remains fraught with geopolitical landmines, the June 2025 truce has created a window of opportunity. Tight U.S. inventories, Brazil's logistical hurdles, and the looming Q3 harvest suggest soybean futures could rise 20–25% by year-end. Investors who combine this bullish thesis with disciplined risk management stand to profit—even if the truce falters.

As the old adage goes: “The market climbs a wall of worry.” For soybeans, that wall is U.S.-China distrust. The question now is whether the truce can hold long enough for the harvest to do the rest.