Soybean meal prices caught between cost support and supply pressure

The domestic soybean meal market has remained caught by the mixture of bulls and bears. On the one hand, Middle East tensions have lifted crude oil and fertilizer prices, while potential El Niño risks to US soybean planting provide cost-side support. On the other hand, Brazil's bumper harvest is materializing, and surging soybean arrivals in China point to ample supply, which is a near-certainty.

In this case, the spot prices of soybean meal along coastal areas have fallen continuously since late March, touching Yuan 2,850/tonne on April 27, 2026, down more than Yuan 500/tonne month-on-month, suggesting market sentiment poised for the bear side.

In breakdown, the ongoing geopolitical conflicts have kept crude oil high, directly increasing fuel costs for soybean shipping and inland transport. Meanwhile, higher crude prices have lifted fertilizer costs such as urea and phosphates, raising input costs for US and Brazilian farmers. Although the market is currently focused on near-term supply pressure, the upward shift in costs will provide long-term price support for soybean meal.

In addition, the US soybean planting peak over May-June and critical growing period during July-August coincide with a developing El Niño. The World Meteorological Organization indicates El Niño could re-emerge as early as May, potentially affecting rainfall and temperature patterns. Historically, El Niño brings more rain to the US Midwest, but uneven distribution can cause local droughts or floods, driving yield volatility.

Currently, weather premium is not fully priced in. Once adverse weather appears in US growing regions, CBOT soybeans and domestic soybean meal futures will react quickly, a key driver for potential periodic rebounds.

When it comes to the supply side, Brazil's soybean harvest is nearly complete, and Argentina's harvest is underway, with Southern Hemisphere bumper crops materializing. Benefiting from traditionally favorable crush margins in Q2-Q3, Chinese crushers have booked large volumes early. Vessel monitoring shows average monthly soybean arrivals from April to June are expected to exceed 10 million tonnes, potentially a record for the period.

Currently, due to customs clearance issues, many crushers still face soybean shortages and temporary shutdowns in the first half of May. National crush rates have not yet fully ramped up, and soybean meal inventories have fallen to 510,000 tonnes as of the time of this writing.

However, from the second half of May onward, crushers are expected to run at full capacity, with monthly crush volumes approaching 10 million tonnes, ushering in the true peak of soybean meal supply.

At present, the soybean meal spot prices continued to decline through April, with distributors cutting prices preemptively. Pre-holiday stockpiling has offered brief support, but the medium to long-term sentiment remains firmly bearish.

On the demand end, the hog inventories remain high, and warmer weather brings aquatic feed into peak season. Despite losses in hog farming profitability, the large livestock base ensures rigid soybean meal consumption will not drop sharply.

Moreover, the sustained decline in soybean meal prices has narrowed the spread against rapeseed meal and cottonseed meal, improving soybean meal's cost competitiveness. Some duck feed producers have already increased the proportion of soybean meal in the feeds. Given its strong cost-performance ratio, soybean meal is also expected to replace miscellaneous meals in aquatic feed further. This demand shift should help absorb some excess supply and slow inventory accumulation.

On the inventory front, through April, feed mills continuously reduced positions, with some operating on a rolling 8-10 days equaling total position. When the current spot prices near Yuan 2,850/tonne are approaching psychological lows, the downstream mills slightly increased just-in-time restocking to 13-15 days ahead of the Labor Day holiday. However, post-holiday purchases are expected to remain hand-to-mouth, with mills reluctant to build inventories. While crush rates stay moderate, crushers are unwilling to cut spot prices further, leading to a standoff.

Currently, the crushers are actively selling far-month basis contracts (Aug-Sep and Oct-Jan). However, feed mills show low willingness to buy far-month contracts due to widespread losses from basis purchases over the past two years, and general expectations that basis will continue weakening in a large-supply environment. Moreover, some mills have previously purchased May-July basis contracts, already establishing some bottom positions.

With supply increasing, spot positions will remain lean on a rolling basis for an extended period. Spot prices are expected to test Yuan 2,800/tonne in the second half of May, with basis prices gradually moving toward historically low levels.

Looking ahead, over the May-June period, with heavy soybean arrivals and crush rates fully recovering, soybean meal inventories will accumulate rapidly. Strong support is expected at Yuan 2,800/tonne, with extreme lows potentially testing the annual low of Yuan 2,750/tonne.

However, low-priced, high-value soybean meal will also trigger active downstream buying, allowing spot prices to recover from lows. Flat spot prices are expected to fluctuate at the bottom of the Yuan 2,800-2,900/tonne range for an extended period. Basis may hit record lows, with negative basis likely becoming the norm.

In July-September, the weather in U.S. soybean producing regions becomes the key variable. El Niño' uncertainties might exert premium to CBOT soybean and then leads to a rebound in domestic soybean meal futures, allowing spot prices and basis to stabilize or bounce from lows. If weather stays favorable, soybean meal will continue its weak downtrend in search of a bottom.

In the medium to long-term, the livestock feed demand will slowly improve month-on-month, and substitution for miscellaneous meals will continue. However, this will not fully offset massive supply. Market rebalancing will depend on crushers actively reducing operating rates or adjusting import schedules. But with high temperatures in Q2-Q3 and high-moisture Brazilian soybeans, crushers will likely maintain operations as much as possible to avoid heat damage. Consequently, soybean meal is set to enter a long-term inventory accumulation phase.