Soybean meal holds momentum despite high domestic inventories

In the early hours of September 11, the USDA released its September supply and demand report. The report showed that U.S. soybean harvested area was raised by 100,000 acres to 85.9 million acres, while yield was unexpectedly raised by 0.1 bushel per acre to 52.8 bushels per acre, pushing production up by 16 million bushels to 4.535 billion bushels. U.S. soybean exports were also raised by 25 million bushels to 1.685 billion bushels, which lowered ending stocks by 10 million bushels from 320 million to 310 million bushels, though this remained above the average estimate of 290 million bushels. The report was neutral to bearish. CBOT U.S. soybeans fell from highs but quickly rebounded on persistently improving demand.

The DCE M2701 contract likewise quickly recovered its losses, and long funds re-entered after the bearish report was digested. As of September 17, the soybean meal main contract closed at Yuan 3,477/tonne, with the intraday high even breaking through Yuan 3,500/tonne.

The momentum stems primarily from the U.S. soybean exports, South American weather premiums, and news of planned tariff cuts between China and the U.S., which are all giving funds room to maneuver, and the bullish setup has yet to reverse.

First, continuously strong U.S. soybean export demand remains the core driver. Recently, U.S. soybean export sales data has been strong. USDA daily export sales reports showed that private exporters sold 272,000 tonnes of soybeans to China and 206,500 tonnes to unknown destinations, both for delivery in the 2026/27 marketing year.

Since July 8, the U.S. Department of Agriculture has confirmed cumulative soybean sales to China of about 13 million tonnes through daily export sales reports. Traders estimate that China purchased about 1 million tonnes of U.S. soybeans in the week ending September 18, with the purchasing pace clearly accelerating before China's visit to the United States. In addition, market rumors suggest the two sides may also reach an agreement at the meeting to reduce tariffs on raw materials imported by Chinese manufacturers.

Second, the surge in crude oil provides an additional catalyst. Escalating tensions in the Middle East pushed international crude oil futures sharply higher, and crude oil gains provided support to CBOT soybeans and CBOT soybean oil through the biofuel demand pathway.

Third, forecasts show that severe rainfall in parts of the U.S. Midwest may slow harvest progress, jointly providing support to U.S. soybeans. In addition, U.S. domestic soybean crush data was unexpectedly bullish for U.S. soybean meal. The NOPA monthly report showed that U.S. soybean crush in August was 205.456 million bushels. Although this was down 5.2% month-on-month, it was still up 8.2% year-on-year. The slower-than-expected crush pace instead drove U.S. soybean meal futures up 2.5%, which in turn drove CBOT soybean futures higher. From an annual perspective, U.S. cumulative soybean crush from January to August 2026 was 1.762 billion bushels, an increase of 114 million bushels year-on-year, or 6.9%. The USDA has raised its full-year crush forecast to a record high of 2.655 billion bushels.

Domestically, although the external cost-side driver is strong and spot soybean meal flat prices have risen with the futures market, the domestic soybean meal market itself still faces considerable pressure in its own fundamentals, mainly reflected in two dimensions: ample supply and weak demand.

On the supply side, China's domestic soybean meal inventories remain at a high level. As of the week of September 11, domestic soybean meal inventories were 1.11 million tonnes. Although this was down from 1.14 million tonnes the previous week, the absolute level remained high for the same period in history. National soybean inventories at port were 9.577 million tonnes, up 102,000 tonnes month-on-month.

In mid-August, national port soybean inventories once climbed to near 9.7 million tonnes, up 61% year-on-year, a new high for the same period in nearly five years. Oil mills' operating rates remained elevated, and the phenomenon of urging shipment pickup continued. Inventory pressure in the Guangdong market was particularly evident.

On the domestic demand side, losses in the breeding sector have dampened feed purchasing enthusiasm. Downstream hog farming remains in a state of deep losses. According to Mysteel survey data, as of the week of September 18, the average loss per head for domestic self-breeding and self-raising was Yuan 128.52/head, down Yuan 24.45/tonne from the previous week; the average loss per head for purchased piglet finishing was Yuan 79.28/tonne, down Yuan 3.74 per head month-on-month.

Feed enterprises' purchasing strategy is mainly based on rigid demand, lacking the impetus for concentrated restocking. National feed enterprises' physical soybean meal inventories stood at 8.37 days, up only 0.27 days month-on-month, indicating flat willingness to restock. More noteworthy is the trend of formula adjustments. Affected by rising soybean meal prices and the improved cost-effectiveness of miscellaneous meals, Shandong duck feed basically does not use soybean meal, and soybean meal usage in chicken and pig feed is also being reduced. In South China, rapeseed meal has an obvious substitution advantage.

Overall, in the short term, the bearish USDA report has already been fully digested by the market, and the DCE M2701 contract has strong support in the Yuan 3,360-3,500/tonne range. At this stage, the core driver of the market is soybean import cost, and the strong support from current import costs provides a floor for prices.

However, the absolute level of domestic soybean meal inventories is relatively high, and deep losses in the breeding sector constrain demand growth, so resistance in the Yuan 3,550-3,600/tonne range above is relatively obvious.

Recently, market attention has focused on China's upcoming visit to the United States for consultations. U.S.-China agricultural trade policy is an important variable affecting the forward pricing of soybean meal. In addition, China is about to usher in the Mid-Autumn Festival and National Day holidays, and funds may have a risk-aversion sentiment. Market players are advised to stay alert to a market correction caused by long funds leaving before the holiday.

In the medium term, the market focus will gradually shift from North American supply to the South American planting season weather. A super El Nino may cause excessive rainfall or even flooding in the core production areas of southern Brazil and Argentina, raising the risk of a delayed planting window. Once South American weather premium starts, combined with expectations of tighter supply formed by the domestic forward vessel purchase gap, the upward elasticity of soybean meal prices will clearly strengthen. In the future, it is necessary to closely monitor key variables such as U.S. soybean harvest progress, China's purchasing pace, South American planting weather, and the progress of China-U.S. tariff consultations.