China Soybean meal price rises despite record inventories

China's soybean meal prices have continued to climb against record-high inventory levels, with domestic crushing plants' in-plant soybean meal inventory approaching 1.20 million tonnes, surging 71.18% year-on-year, according to Mysteel's data.

On January 8, the soybean meal 05 contract closed the day session at Yuan 2,802/tonne, up Yuan 83/tonne or 3.05% from the pre-holiday low. In the spot market, in Guangdong, the price on January 8 was Yuan 3,110/tonne, up Yuan 90/tonne or nearly 3% from the pre-holiday low of Yuan 3,020/tonne.

This seemingly contradictory trend can be attributed to a complex of causes, including broader commodity rallies, upstream margin recovery efforts, post-holiday stockpiling, and shifts in import policies, which collectively shape today's soybean meal market.

I. Microeconomic environment: Resonance Effect Amid a Broad Commodity Rally

This soybean meal rally is not an isolated event but part of a broader macroeconomic backdrop. Since the beginning of 2026, factors such as fluctuating global inflation expectations, a resurgence of geopolitical risk premiums, and marginal improvements in demand expectations for some overseas economies have contributed to a generally upbeat sentiment in the international commodity market.

In the domestic futures market, industrial and agricultural sectors have both shown synchronized rallies. This warming of macro sentiment has directly boosted the soybean meal futures. As a highly liquid and financially sensitive product within the agricultural sector, soybean meal futures are susceptible to shifts in overall commodity market risk appetite.

When capital flows into commodities seeking allocation or hedging, soybean meal futures also benefit from liquidity support. The strength in the futures market, in turn, reinforces bullish outlook in the spot market, creating a positive feedback loop for synchronized price increases. To some extent, this has temporarily "shielded" the market from the direct pressure of high inventory.

II. Mid and Upstream Strategy: Support Price to Protect Profits

Faced with high inventory, the market players' intuitive reaction is often to cut prices to boost sales. However, in this round of price action, crushing plants and soybean meal traders, after enduring prolonged periods of low or even negative crushing margins, have developed a particularly strong desire to restore profitability.

Many crushing plants have begun adopting strategies such as "controlling sales pace and raising basis." They are seizing the opportunity presented by the rising futures market to actively support spot prices rather than hastily destocking for cash flow.

Behind this behavior lies the expectation of rising raw material costs and confidence in the ultimate pickup of downstream demand. By buying time, they await profit recovery. This shift from passive pressure-bearing to active price management by industry players has become a key force supporting firm spot prices.

III. Downstream Drivers: Post-Holiday Demand Release and Concentrated Pricing Demand

The demand side has also provided "fuel" for the rally. After the New Year's Day holiday, feed mills showed rigid demand for raw material replenishment. Although opinions differ on the medium to long-term trend of livestock inventories and feed demand, short-term restocking activity is tangible.

More importantly, some downstream companies were with pricing needs for their previously purchased basis contracts for February-March or February-April 2026. As the futures prices began to rise, some of these companies chose to execute pricing during the rally to avoid potentially higher future purchase costs.

This pricing-related buying activity in the futures market created technical buying pressure, further pushing up futures prices, which, through basis transmission, has been feeding back into the spot market. This formed a short-term cycle of "price increase – triggering pricing needs – further pushing up prices."

IV. Policy Pause: Support from the "Absence" of Imported Soybean Auctions

A temporary "pause" on the policy front has also supported market sentiment. According to historical experience, the policy-based imported soybean reserves auction is taken to moderate price volatility.

However, recently, the anticipated imported soybean auctions did not materialize as expected. On one hand, it may suggest that the current price increase does not yet constitute an overheating situation requiring urgent intervention; on the other hand, it has provided temporary relief by removing a potential, foreseeable source of supply pressure. The temporary fading of this policy headwind has alleviated a concern for price increases, making speculative long positions more willing to enter the market.

In summary, the current high inventory in the soybean meal market reflects physical supply abundance, while the rising prices are trading on multiple economic drivers and expectations.

The warm macro-environment wind, the profit-protection strategies of industry players, the concentrated release of downstream rigid demand and pricing needs, and the short-term policy calm have collectively formed a powerful force that has temporarily offset and outweighed the apparent bearishness of high inventory.

The ebb and flow of these four forces will determine how far this "inventory-defying rally" in soybean meal can go and when it might revert to a state more aligned with the fundamental inventory level.

However, overall, it is understood that despite this market rally, buying interest has not been strong, and downstream players have been relatively rational. It is expected that the futures market will struggle to continue its upward breakthrough and may transition into a consolidation phase, awaiting a later release of inventory pressure before attempting another upward move.