Hot Weather, Biofuel Demand & Short Positioning Drive Soya Market Volatility

The global soya market is in a phase characterised by significant uncertainty and heightened volatility as both fundamental and speculative drivers collide. On the production side, output forecasts paint a nuanced picture: in Europe, the upcoming soya bean harvest is set at just 5.7 million tonnes, sharply down from 6.6 million tonnes last year – a clear reflection of adverse weather, particularly drought impacting sunflowers, a key rotational crop. Especially in southern regions, the stress from persistent dryness highlights ongoing climate vulnerability, and while sunflower losses are more acute, the broader oilseed context puts a cautious undertone on soya yield expectations.

Across the Atlantic, the US soya market remains dominated by biofuel policy and demand: government estimates indicate over half of domestic soya oil will feed into fuel production next year, sustaining a price rally for soya oil that keeps contracts on the Chicago Board of Trade (CBOT) near long-term highs, despite recent minor setbacks. Hedge funds and other speculators have further stoked volatility by expanding net short positions in beans and meal, even as record yields are priced in. The critical August weather period is just beginning, with forecasts of heat stress in the US Corn Belt threatening this bullish consensus. Market participants are highly sensitive—a reversal in weather luck could ignite another leg higher in prices if crop prospects falter.

📈 Prices: Key Exchanges & Physical Market

Exchange	Contract	Closing Price	Weekly Change	Sentiment
CBOT Soybeans	Nov 25	1,028.50 USc/bu	-0.70%	Bearish/Volatile
CBOT Soya Oil	Aug 25	55.58 USc/lb	-0.43%	Neutral/High Prices
DCE Soybeans No.1	Sep 25	4,198 CNY/t	+0.10%	Stable
Physical (FOB US)	No. 2	0.35 EUR/kg	0.0%	Stable
Physical (FOB IN)	Sortex Clean	0.71 EUR/kg	0.0%	Stable
Physical (FOB UA)		0.34 EUR/kg	0.0%	Stable
Physical (FOB CN)	Yellow, Organic	0.77 EUR/kg	+1.3%	Firming
Physical (FOB CN)	Yellow	0.68 EUR/kg	0.0%	Stable

🌍 Supply & Demand Drivers

• Lower EU Output: 5.7 Mt in 2025 vs. 6.6 Mt last year. Below-average yield prospects and rotational impact from drought-hit sunflowers.
• US Biofuel Demand: Over half of US soybean oil is set to be consumed by domestic biofuel producers in 2025. Government policy remains a central pillar.
• Global Inventories: Remain moderate but closely linked to the US August weather outcome. Any significant crop stress could tighten stocks swiftly.
• Speculative Positioning: Funds increased net short positions in soya beans (+26,062 contracts) and meal, suggesting downside risk but also scope for short-covering rallies if weather disappoints.

📊 Market Fundamentals

• World Production: Brazil, the US, and Argentina continue to account for over 80% of global soya production. Brazil remains the largest producer, but the US weather in August is key for near-term market direction.
• Trade Flows: China remains the leading importer, with the EU and Southeast Asia also key demand centres. Margins for crushers and refiners are stable but could become pressured if US prices rise further.
• Stock Levels: Moderately comfortable but sensitive to US weather. Previous reports indicated a similar balance, with no major gain in global surplus.

🌦️ Weather Outlook

• Corn Belt (USA): Vaisala forecasts point to rising temperatures from next week, elevating heat stress risk during the key pod-filling stage for soya. If realised, this could harm yields and trigger renewed price rallies.
• South America: Conditions are mainly average, as harvests are complete. A shift in weather is not expected to immediately impact supply before the next planting season.
• Black Sea/EU: Persistent dryness, especially in southern regions, reduces the 2025 yield outlook. Further rainfall deficits could exacerbate deficits in the coming weeks.

🌐 Global Production & Stock Snapshot

Country	2025 Est. Production (Mt)	2024 Production (Mt)	Trend
Brazil	156	154	↑
USA	114	112	↑
Argentina	50	51	→
EU	5.7	6.6	↓
Ukraine	3.9	4.3	↓

📆 Trading Outlook & Recommendations

• Watch US weather in August closely—above-average temperatures could quickly reverse short speculative positioning and lift futures prices.
• Physical buyers should consider forward cover; upside risk outweighs downside, especially for EU crushers exposed to imports.
• Crushers/refiners: Monitor crush margins—if soya oil prices stay firm due to biofuel demand, bean values will stay supported.
• Speculators: Volatility is likely; be prepared for short-covering rallies on adverse weather news.
• Long-term importers/importers: Keep close tabs on South American planting intentions and Chinese import pace post-US harvest.

🔮 3-Day Price Forecast (Key Exchanges)

Exchange	Direction	Expected Change	Rationale
CBOT Soybeans	Sideways to Higher	+0.5-2%	Weather risk premium likely on rising heat risk.
DCE Soybeans	Stable	0%	Local demand steady, global cues neutral.
Physical EU/UA FOB	Stable	0%	Ample old crop but watch currency volatility.