Soybean byproducts face opposing realities in the market

The global backdrop remains dominated by political and trade uncertainty. The U.S. government's recent announcement of a second wave of tariffs, including Brazil among the affected countries, has added additional volatility to the market, with a possible entry into force as early as August 1st. The main concern is the inflationary impact in the U.S., which could force the Fed to maintain high interest rates, jeopardizing expectations for a September cut.

In the foreign exchange market, the dollar is devaluing against other currencies. This movement has a direct impact on Brazil, where the real remains strong, challenging the competitiveness of Brazilian soybeans in international markets.

The global climate context, under a neutral ENSO pattern, contributes to climate stability in the Northern Hemisphere, favoring crop development in the US and reducing the typical volatility of the climate market at this time of year.

Soy Complex

Brazil

Given this context, the 2024/25 harvest is practically consolidated at 170 million tons, with exports potentially reaching a record 109 million tons due to strong Chinese demand. Crushing remains strong and is being boosted by the introduction of B15 (biodiesel blend) starting in August.

For the 2025/26 harvest, the discussion is already centered around a new production level: between 180 and 185 million tons, if climate and technology advance together.

Luiz Roque, Market Intelligence Coordinator at Hedgepoint Global Markets, believes the second half of the year will be marked by a battle between exports and the domestic market. Crushing margins have been falling, although within seasonal patterns. The decision between selling soybeans or corn is also on the table: corn may be retained for longer, favoring soybean supply. "High premiums (basis) are currently supporting prices, partially offsetting Chicago and the exchange rate in price formation," he says.

Processing Industry

Crushing margins under pressure, although within seasonality.

Bran: Uncertainties regarding exports due to Argentina's return and possible increase in American supply.

Oil: more positive outlook with B15 and potential increase in domestic demand.

Argentina

In Hedgepoint's assessment, Argentina is regaining market relevance after the 2022/23 crop failure. Production in 2024/25, while below potential, reached consistent levels (~50 million tons), which should allow exports of up to 8 million tons of grain. Reforms by the Milei administration and a more stable exchange rate favor Argentina's competitiveness.

For 2025/26, a shift in soybean acreage to corn is projected due to the grain's improved profitability, which should reinforce Argentina's focus on crushing and exporting meal and oil, putting pressure on competitors like Brazil and the US. The processing industry remains robust and focused on exporting byproducts.

China

China maintains stocks exceeding 40 million tons for the third consecutive harvest, reinforcing its food security strategy. According to market data analyzed by Hedgepoint Global Markets, this position reduces the sense of urgency in purchases, which, combined with unattractive crushing margins, should limit demand in the short term. Ending stocks are estimated at 43,5 million tons for 2024/25, representing a stock-to-use ratio of 34%. For 2025/26, stocks are projected at 43,4 million tons, with a stock-to-use ratio of 33%.

Imports for 2024/25 were revised downward from 108 to 106,5 million tons, reflecting reduced appetite due to inventory rebuilding and weaker crushing margins. Nevertheless, the USDA projects an increase to 112 million tons in 2025/26, although this projection depends on improved crushing margins and domestic demand.

Chinese crushing continues to expand, estimated at 103 million tonnes for 2024/25 and 108 million tonnes for 2025/26, but with limited profitability.

United States

The 2025/26 harvest remains at the center of market discussions, with particular focus on the favorable weather that supports expectations of record productivity, even with a reduced area. According to the USDA, 70% of crops are in good or excellent condition (compared to 68% in 2024), signaling a "full harvest." "However, we must remember that August is a decisive month for soybean development," he emphasizes.

The EPA's (US Environmental Protection Agency) proposal to increase mandatory biofuel blending by 67% is a key factor. Soybean oil accounts for approximately 70% of biodiesel and renewable diesel production. If approved, according to the analyst, the proposal could result in an increase in crushing of between 2,5 and 5 million tons, potentially reducing US ending stocks to between 4 and 7 million tons.

"In the case of bran, the increase in supply is unlikely to be accompanied by increased demand. Herds are stable and unable to absorb the potential additional volume. The result: projected stocks are three times higher, with a natural downward bias," he says.

"As for oil, potentially growing demand, tight inventories, and positive margins create a bullish outlook. Funds have maintained a long position in oil, unlike grain and bran," he explains.

Oil Share (oil's share of the crush margin) is now close to 50%, the highest level since the 2021/22 season, which historically would theoretically justify soybean prices above $12 per bushel in Chicago. However, the market continues to trade between $10,00 and $10,50, indicating some disconnect between fundamentals and pricing.

Palm Oil in Indonesia and Malaysia

The 2025/26 season points to increased production and exports in the two largest global producers, Indonesia and Malaysia. The big news is in India, the world's largest palm oil importer, which has reduced import taxes and is expected to increase its purchases from 7,8 to 8,7 million tons in 2025/26.

According to the Hedgepoint analyst, the spread between palm oil and soybean oil prices is likely to narrow, with room for palm oil prices to appreciate. Global demand for vegetable oils is expected to grow, with India's recovery as a key driver of consumption.