With the pace of imported soybean auctions significantly accelerating, expectations of supply growth are increasingly strengthened, with crush plants' "break-even point" serving as the core anchor for soybean meal prices.
On one side, there is the prospect of ample supply driven by the continuous release of soybean reserves and the impending arrival of new South American crops. On the other side, crush plants are struggling with profit margins, operating on the edge of immediate losses. The interplay between this cost line and supply pressure will determine the lower boundary for soybean meal prices.
I. Supply increase: Accelerated Auction Pace and Sustained Supply Release
Recently, the frequency of imported soybean auctions has noticeably increased, accelerating from "once a week" to "twice a week," promoting the faster release of reserve soybeans into the market.
(1) On December 11, 512,500 tonnes were auctioned, with 397,000 tonnes actually sold. The average transaction price was Yuan 3,935.2/tonne, with a clearance of 77.5%.
(2) On December 16, 513,800 tonnes were auctioned, with 323,100 tonnes actually sold. The average transaction price was Yuan 3,852.1/tonne, with a clearance of 62.90%.
(3) On December 19, the National Grain Trade Center plans to auction another 550,000 tonnes.
The delivery dates for these auction lots are generally concentrated between December 22, 2025 and March 31, 2026, meaning a substantial amount of soybean reserves will gradually enter the crushing process in the coming months.
Currently, China's policy-driven purchases of U.S. soybeans have reached approximately 7.6 million tonnes, with the overall procurement pace quickening. To make room for the newly arrived U.S. soybeans, the release of soybean reserves is expected to continue. If auctions persist for one month, the total volume could reach 4 million tonnes. Coupled with approximately 4 million tonnes from oriented purchase by state-owned enterprises, which will also enter commercial crushing.
Meanwhile, buying of South American soybeans is steadily advancing. According to shipping schedules, South American soybean arrivals from January to March 2026 are projected to be close to 10 million tonnes. Adding the aforementioned 12 million tonnes from policy-driven purchase, the total supply of imported soybeans in Q1 2026 is estimated to be around 22 million tonnes, with an average monthly supply forecast exceeding 7 million tonnes. For comparison, soybean arrivals from January to March 2025 totaled 20.07 million tonnes.
Currently, domestic soybean meal stock is expected to reach the million-tonne level by year-end, representing a year-on-year increase of approximately 70%. This overall reflects a well-supplied fundamental picture for both soybeans and soybean meal markets.
II. Loosening Cost Support: crush plants stuck in a "break-even Dilemma"
From the perspective of market participation structure, the main buyers in recent auctions have been foreign-invested enterprises. Most private and state-owned enterprises have not entered the auction on a large scale. Furthermore, trades have been concentrated in northern regions, with no large-scale reserve releases in southern China, indicating differentiation among market demands and regional disparities. The following profit calculations for auctions are based on two major regions, Shandong and Tianjin.
From December 11 to 16, the highest transaction price in Shandong and Tianjin fell from Yuan 4,040/tonne and Yuan 4,010/tonne to Yuan 3,960/tonne and Yuan 3,920/tonne, respectively. This reflects that, under the pressure of continuous auction supply, bullish sentiment has weakened, and buying has become more rational.
Calculations of crushing profits for imported soybean auctions show that, corresponding to the forward-month basis, the profit margins generally ranged between Yuan -30 and -230/tonne. Based on auction price, crush plants still face pressure from "spot losses." Soybean meal spot prices of Yuan 3,040-3,100/tonne struggle to cover the full cost after accounting for "soybean cost + transportation and processing fees." Only the calculations using the lowest prices of Yuan 3,870/tonne in Tianjin and Yuan 3,800/tonne in Shandong on December 16 placed crush margins around the break-even line. Moreover, the recent soybean meal M2605 contract has been fluctuating around Yuan 2,750/tonne, not providing good arbitrage opportunities.
Market behavior further confirms the industry's current dilemma. In the two completed auctions, a certain foreign enterprise purchased approximately 310,000 tonnes. On December 17, this same enterprise saw a significant increase in trade for Jan-Feb basis contracts: 25,000 tonnes at North China 05+400, 3,000 tonnes equivalent at Shandong 05+340, 40,000 tonnes equivalent at East China 05+320/330, and 30,000 tonnes equivalent at Guangdong 05+310, totaling 98,000 tonnes, accounting for 97% of the national crush plants' far-month basis trade that day.
Whether considering previously purchased Brazilian soybeans or recently auctioned reserve soybeans, the full soybean cost, including transportation and processing fees, exceeds Yuan 4,000/tonne. By selling soybean meal basis contracts at North China 05+400 (flat price Yuan 3,150/tonne) and Shandong 05+340 (flat price Yuan 3,090/tonne), crush plants are operating at a loss. Furthermore, against the backdrop of ample soybean supply, some crush plants facing soybean meal inventory build-up and delivery pressure, the current basis prices remain in a relatively high range, carrying certain downside risks. If subsequent market demand weakens or supply pressure persists, crush plants will be caught in a "break-even dilemma," and overall industry profit margins are expected to further narrow.
III. Contrarian Participation Amid Loss Risks: Market Feedback on crush plant Auctions
Crush plants' continued participation in auctions despite the high soybean cost environment has drawn varied market opinions:
(1) Auctioned soybeans offer quality advantages. The recently released reserve soybeans are primarily from the U.S. West Coast, characterized by low moisture content at the time of storage. Additionally, longer storage leads to further moisture reduction, with common moisture content around 10%, about 3% lower than currently arriving Brazilian soybeans. This translates to an approximate quality premium of Yuan 100/tonne for crush plants, creating a certain cost discount space.
(2) Fulfilling supply obligations for previously sold basis contracts. Some crush plants, having advance sold Jan-Mar basis contracts but not yet completed corresponding vessel buying, still need to supplement raw material supply through auctions to ensure no production and delivery.
(3) Structural opportunities arising from regional spread. As soybean meal spot prices show some resilience near the break-even point, and given differences in inventory pressure and distribution across regions, crush plants can purchase raw materials appropriately based on their own sales rhyme and regional market situation to capture stage margin windows.
(4) Arbitrage and operational opportunities in futures markets. The market views the recent increase of the soybean meal M2601 contract to around Yuan 3,100/tonne before expire time as squeezing short activity, coinciding with the soybean auction timing, thus providing arbitrage opportunities for crush plants.
IV. Summary
Although in the current loss environment, crush plants maintain a strong inclination to support prices, with the theoretical soybean meal break-even price around Yuan 3,100-3,200/tonne, the continuous auctioning of imported soybeans will increase market supply, maintaining downward pressure on the cost side. High price basis contracts are for mid-and-down streams. With soybean meal' ending stock keeps over one million tonnes, feed enterprises predominantly adopt "hand to mouth" strategies. In the short term, Yuan 3,000/tonne for spot prices in coastal areas will be a critical level. Spot basis is at a relative high level and may gradually go down by Yuan 200-250/tonne. The downside room for soybean meal prices may be limited, but the overall trend is expected to remain under pressure. Pay attention to subsequent auction clearance and average trade price changes; if they continue to decline, they may gradually approach crush plants' break-even point.
Written by Stacy Chen, chenyijuan@mysteel.com
