Soybean Rally: Can Strong Demand and Weather Risks Sustain the Rally? Analyzing the Outlook for 2025 and Beyond

The soybean market has been on a tear this year, with prices climbing to multiyear highs amid tight global supplies, geopolitical shifts, and weather-related uncertainties. But can this rally hold? Let's dissect the key drivers—export dynamics, the Vietnam trade deal, and weather risks—and assess whether soybeans are primed for a sustained rally or due for a correction.

The Rally So Far: Strong Demand Meets Tight Supplies

Soybean futures have surged over 20% year-to-date, driven by robust export sales and dwindling U.S. ending stocks. The USDA's June WASDE report highlighted that U.S. old-crop exports for 2024/25 were raised by 25 million bushels, while new-crop 2025/26 projections now sit at 1.815 billion bushels—slightly lower than last year but still historically robust.

The bullish case hinges on tight global ending stocks: the USDA forecasts 2025/26 U.S. ending stocks at 295 million bushels, far below the 380 million bushels traders had anticipated. This tightness, combined with record global crush demand (2.49 billion bushels for domestic processing), has fueled optimism.

Export Dynamics: Vietnam's Deal and Competing Supplies

The U.S.-Vietnam trade agreement, finalized in 2025, is a game-changer for soybean demand. While exact tariff details remain vague, the deal grants U.S. goods “total access” at “zero tariffs,” giving American soybeans a price edge over rivals like Brazil. Vietnam, which imports 2 million tons annually, has already seen U.S. soybean shipments surge to 414,000 tonnes in Q1 2025—a 46.9% year-on-year jump—while Brazilian imports collapsed by 51%.

However, Brazil's record 2025 crop (projected at 175 million metric tons) looms large. Its lower prices and proximity to Asian markets could cap U.S. gains. The USDA notes that global soybean stocks will hit a record 124.33 million tons in 2025/26, but the stocks-to-use ratio is tightening to 29.2%, signaling a balance where supply shocks could spark volatility.

Weather Risks: The Wildcard in the Soybean Equation

The U.S. Midwest's weather is now the key variable. Ideal spring planting conditions have so far supported yields, but summer heat and rainfall patterns will determine if the 2025 harvest meets expectations. A dry spell or excessive rain could crater yields, sending prices soaring.

Meanwhile, Brazil's 2025/26 crop is already in the ground, and dryness in key producing regions like Mato Grosso could reduce output from the record highs.

Near-Term Volatility vs. Long-Term Fundamentals

Short-Term (1–3 Months):
Investors should brace for volatility. The USDA's weekly export reports will dominate headlines, with any slowdown in shipments (as seen in recent weeks) or weather alerts spiking prices. A “buy the dip” strategy could work here, but stop-losses are critical.

Consider using puts to hedge against a weather-driven correction or call options to speculate on a rally. The upcoming July WASDE report and weekly export data releases are key catalysts.

Long-Term (1–3 Years):
The bullish fundamentals remain intact. Vietnam's growing protein demand, China's import needs (projected at 112 million tons in 2025/26), and the U.S.'s competitive position in the trade deal argue for a steady upward trajectory.

Investors should overweight soybean-related equities like Archer-Daniels-Midland (ADM) or Bunge Limited (BG), which benefit from price increases and global trade flows. Physical soybean ETFs like SOYB or futures contracts could also be held for a core position.

Risks to the Bullish Case

• Brazilian Oversupply: If Brazil's record crop hits the market without logistical hiccups, it could flood Asian markets and undercut U.S. prices.
• Trade Policy Shifts: Geopolitical tensions (e.g., China's tariffs or Vietnam's renegotiation) could disrupt export flows.
• Weather Failures: A U.S. yield surprise or Brazilian drought could backfire, creating a “scare rally” that exhausts buyers.

Final Recommendation: Position for Volatility, Bet on the Long Game

The soybean rally has legs, but near-term risks demand caution. Aggressive traders can go long on futures or options ahead of the July WASDE report, while conservative investors should accumulate positions on dips below $14 per bushel.

For the long term, soybeans are a buy. The structural demand from Asia, U.S. export momentum, and tight global stocks suggest prices will trend higher over the next three years. Keep an eye on weather forecasts and weekly export data—these will be the market's pulse points in 2025.

Stay tuned for our next analysis on corn and wheat, where similar dynamics may play out with distinct risks.