Entering July, China's domestic soybean meal market has reversed its previous weakness and shown a strong upward trend. As of July 20, the DCE soymeal futures M2609 contract peaked at Yuan 3,112/tonne in the morning session, up 2.84% compared with July 6. At the same time, the soymeal spot market followed suit. Despite accumulating inventories, spot flat prices rose steadily, while basis prices did not come under significant pressure.
The primary driver behind the recent rally comes from the rise in U.S. soybean prices, that is, the cost-side support. The USDA July supply and demand report lowered 2025/26 U.S. soybean ending stocks from 340 million bushels to 310 million bushels, below market expectations; global soybean stocks were also revised downward. Although new-crop production estimates were slightly raised, the unexpectedly tight inventory data constituted a material bullish factor, driving the CBOT soymeal benchmark contract up 4.7% on June 10 to a one-and-a-half-month high on July 11.
Meanwhile, the U.S. soybean export demand expectations continue to improve. Sino-U.S. tariff negotiations are progressing, with the U.S. unilaterally stating that China has committed to purchasing soybeans. On July 10, the USDA reported that private exporters have sold 264,000 tonnes of soybeans to China for delivery in the 2026/27 marketing year; earlier this week, private exporters reported cumulative soybean sales to China of 608,000 tonnes and sales to unknown destinations of 120,000 tonnes. The consecutive soybean export announcements have bolstered confidence in U.S. soybean demand prospects.
Lastly, the hot weather in the U.S. has caused disturbances to crop development, and the U.S. soybean condition rating has been revised down somewhat. However, the USDA maintained its U.S. soybean yield forecast at 53.0 bushels/acre in the July report. So far, the weather impact on actual production has been insignificant, and expectations of a bumper U.S. soybean crop remain intact.
In contrast to the relatively strong expectations in U.S. soybean, the domestic soybean spot market is facing tangible supply pressure. Currently, it is the peak arrival period for South American soybeans, with soybean inventories building heavily. With high temperatures affecting some soybean storage and causing carbonization/heat damage, domestic crushers are maintaining a "no shutdowns unless absolutely necessary" strategy, keeping operating rates and crushing volumes elevated.
Theoretically, soybean meal inventories should accumulate rapidly, but the actual situation differs. The pace of accumulation has been far slower than in previous years, and the overall inflection point for stockpiling has been delayed by at least one month. Crusher inventory pressure has not fully materialized, and widespread forced delivery calls have not been particularly aggressive.
Behind the slow accumulation is resilient demand acting as a floor. Although hog farming is loss-making, herd sizes have not declined year-on-year; it is understood that from start of the year, feed demand has increased by approximately 12% compared with last year. More critically, soybean meal prices are relatively low, offering an advantageous price-performance ratio, which has significantly increased the inclusion rate of soybean meal in feed formulas. The broiler feed soybean meal inclusion has reached 32%, duck feed 8%, while substitution by other meals remains limited, supporting solid soybean meal demand.
In the short term, weather disturbances in the U.S. soybean-growing region will remain the dominant factor for U.S. soybean prices. During the critical July–August growing period, if high temperatures and drought persist, the crop condition rating could be further revised down, potentially pushing CBOT soybean prices toward the 1200-1220 cent/bu range. The upside ceiling depends largely on the actual weather impact on U.S. production; conversely, if effective rainfall improves soil moisture, the market could pull back to the 1160–1180 cent/bu support level.
Domestically, crushers' soybean meal inventory accumulation will continue, with peak pressure expected around mid-August, keeping basis prices under pressure. Short-term feed demand is unlikely to fluctuate significantly, but soybean meal will require additional variables to offset potential demand erosion from reduced cost competitiveness after price increases.
The DCE M2609 contract remains constrained by near-term supply abundance, with a projected trading range of Yuan 3,050-3,120 /tonne; the M2601 contract is relatively stronger, supported by Q4 import cost expectations, with a projected range of Yuan 3,030-3,230/tonne. The DCE M2609-M2701 spread is likely to widen further. In the near term, coastal soybean meal spot flat prices are expected at Yuan 2,850–2,950/tonne, following futures higher but with a narrower upside; the spot basis is expected to remain within Yuan -200/tonne to Yuan -150/tonne over M2609 in the short term.
Overall, Q3 is characterized by a "strong external, weak domestic; strong futures, weak spot" pattern, while soybean meal spot price centers are likely to shift modestly higher in Q4 as supply pressure eases at the margin.
