Soybeans Surge on Thin Ice: Lessons from 2019Soybean prices have surged nearly 8% in two weeks, driven by renewed US-China trade tensions. While this looks like a familiar, event-driven rally, the fundamentals tell a different story.
Conflicting Weak Fundamentals
China has not purchased any US soybeans for the 2025/26 marketing year. In 2024/25, Chinese buying stalled after May. That’s unusual given that the prior year saw over 500,000 tons of late-season sales. The slowdown dropped China’s share of total US soybean commitments to 45% from 55%, the lowest since 2018.
Source – Reuters
That matters because 2018 marked the last time soybeans became a trade weapon. Back then, US soybean exports fell 18% from 2017/18 to 2018/19 despite record production. Exports recovered briefly in 2020-21 but have since declined again. If history rhymes, the 2025 conflict could have longer-term consequences for US producers and exporters.
The puzzle is that prices have climbed despite worsening fundamentals. Futures rose after the latest escalation, hinting that traders may be pricing in an eventual resolution. If tensions ease before the seasonal export peak over the next two months, demand could lift prices further. If not, the current rally may prove unsustainable. The key uncertainty lies in timing - whether a diplomatic thaw comes soon enough to coincide with US export strength.
Source – Kansas City Fed
Performance and Parallels with 2019
The structure of this year’s rally mirrors the 2019 pattern. Then, too, optimism around US-China negotiations drove soybean futures higher. On 13 December 2019, as the Phase-One trade deal was announced, CBOT soybean futures rallied about 9.8% for the month. That uptrend persisted until the onset of COVID-19, which derailed demand and disrupted logistics, preventing the expected rebound in US exports.
The technical setup also echoes that period. In both 2019 and 2025, the Relative Strength Index (RSI) crossed into overbought territory above 70-a rare signal under normal conditions. Between 2020 and 2022, RSI readings were inflated by one-off global shocks. In contrast, the 2019 and 2025 spikes both stem from optimism around de-escalation, underscoring how trade détente tends to trigger strong momentum buying.
Today, market sentiment again hinges on reports that China may resume US soybean purchases. Investors are reacting to statements and commentary including remarks from industry figures suggesting Beijing could pivot back toward US supply as signs that tariffs or import restrictions may soften. If these expectations materialize, the rally could extend into early 2026, though the fundamental picture remains weak.
Historical Trade Example
To illustrate how optimism-driven price spikes have historically translated into trade outcomes, consider the 2019 example.
A trader buying one CBOT soybean futures contract (5,000 bushels) at $8.70 per bushel in early December and exiting at $9.50 in early January would have captured a 9% gain.
Entry: 870 cents/bushel
Exit: 950 cents/bushel
Profit/Loss: 80 cents/bushel = USD 0.8/bushel
Each contract of Soybean futures provides exposure to 5000 bushels:
Profit/Loss per Contract = 0.8 x 5000 = USD 4,000
Traders can express the same view using CME Micro Soybean Futures, which provide exposure to one-tenth of the standard contract’s notional value and require lower margin.
The 2025 setup resembles that pattern. If de-escalation signs strengthen into year-end, a similar short-term momentum trade could play out. However, if diplomatic talks stall or China delays purchases, prices could quickly retrace.
The recent rally has also occurred on low trading volume, with limited activity during the upward move and higher volume concentrated near resistance levels. Additionally, the price action around these resistance levels shows long wicks, suggesting a failed breakout and indicating weak momentum.
In essence, this rally is speculative optimism priced into a weak fundamental base. For traders, it is a short-duration opportunity with defined risk: the thesis hinges on improved trade headlines within the next two months. For producers and longer-term investors, the focus should remain on export commitments and Chinese buying patterns rather than short-lived technical surges.
History suggests that while geopolitical relief rallies can deliver sharp gains, they often fade once the narrative loses momentum. The 2025 soybean rally may yet prove another example of that cycle - strong on hope, but fragile on fundamentals.
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