Soybeans Climb Amid Trade Tensions, but US-China Conflict Caps Momentum

Soybean futures rose for a second consecutive session this week, reaching $1,065 per bushel as of May 3, 2025. However, gains remain constrained by the escalating US-China trade war, which continues to cloud market sentiment and amplify price volatility. While strong export data and improving US crop conditions provided short-term support, the unresolved tariff battle between the world’s two largest economies threatens to cap further upward momentum.

The Soybean Rally: A Fragile Uptick

The recent price rebound follows a prolonged period of downward pressure, with soybeans trading near multi-month lows of $1,044.50 per bushel earlier this month. This week’s gains were driven by two key factors:

1. Improved Export Demand: USDA data revealed a 5-week high in US soybean export sales for the week ending April 10, 2025, with Mexico and the Netherlands purchasing 156,800 and 127,100 metric tons (MT), respectively. While “unknown” destinations saw net reductions of 170,000 MT, the overall 554,800 MT total signaled renewed buyer interest.

2. Supply Concerns: Despite ample global inventories, traders remain wary of weather risks in both the US and South America. Favorable US crop conditions, reported by the USDA, were offset by uncertainty around Brazil’s ongoing harvest and Argentina’s drought-stricken fields.

Yet, these positives are outweighed by the looming trade war, which has injected unpredictability into commodity markets.

The Trade War Ceiling: Tariffs and Tradeoffs

The US and China have engaged in a tariff escalation spiral since early 2025, with both sides imposing punitive measures that distort global trade flows:
- US Actions: President Trump’s 145% tariffs on Chinese imports, including agricultural goods, have reduced demand for US soybeans in China, traditionally a top buyer.
- Chinese Retaliation: Beijing’s 125% tariffs on US goods, coupled with blacklisting 18 US firms, have further strained bilateral trade.

While both sides have granted exemptions for critical products like semiconductors and pharmaceuticals, the broader impact remains negative. China’s April factory activity slowed to a 10-month low, reflecting trade tensions’ drag on economic growth. Meanwhile, US exports to China dropped sharply, with soybean shipments falling by 30% year-on-year in Q1 2025.

Market Outlook: Volatility Ahead

Analysts forecast soybean prices to stabilize around $1,136.67 per bushel by Q2’s end, but risks remain skewed to the downside:
- Supply Overhang: South American harvests are adding to global inventories, with Brazil’s 2024/25 crop projected to hit a record 158 million MT.
- Trade Uncertainty: Negotiations between the US and China remain stalled. While behind-the-scenes talks suggest a potential easing, public posturing—such as Trump’s claim that tariffs will “come down”—has yet to translate into concrete action.

Conclusion: Caution Amid Crosscurrents

Investors should expect soybean prices to remain range-bound, with gains capped until the trade war eases. Key data points to watch include:
- US Crop Reports: The USDA’s May 10 planting intentions report will clarify supply prospects.
- Trade Developments: A tariff rollback or new exemptions could trigger a rebound.

Historically, soybean prices have averaged $1,085.30 over the past decade. With trading economics models projecting a 12-month price drop to $1,085.30—a level near long-term averages—the market appears poised for consolidation. However, should trade tensions escalate further, prices could test the $1,000-per-bushel support level.

For now, soybeans are a tale of two markets: short-term optimism from export activity versus long-term pessimism from geopolitical headwinds. Investors should tread carefully, hedging against the unresolved conflict that continues to loom over the sector.