Chinese Soymeal Stocks Triple, Drive Down Futures

China’s soymeal inventories have tripled in the last three months as large volumes of soybeans arrived in the country where demand for the animal feed ingredient is weak, analysts and traders said.

The high stocks, combined with a global fall in soybean prices, pushed China’s soymeal futures down nearly 6% on Thursday.

The most active soybean contract on the Dalian Commodity Exchange closed down 5.5% to 3,891 yuan ($580.59) a tonne in the biggest daily decline since February 2013.

China’s weekly soybean meal inventories climbed by 14% at the end of last week from the previous week to 1.09 million tonnes, more than triple levels in late March, data from Mysteel, a China-based commodities consultancy, found.

Hog farmers in the world’s top pork producer have been mostly losing money since mid-2021, with heavy losses in the first five months of this year.

Some farmers began making money this month, but their profits are not yet enough to spur strong demand, traders have said.

“Domestically, soymeal inventories have been rising and pressure has been quite massive,” said Zou Honglin, analyst with the agriculture section of Mysteel, a China-based commodity consultancy.

Global edible oils markets turned bearish in early June, pulling back from high levels reached after top exporter Indonesia banned palm oil exports.

“After edible oils plunged, the whole market direction has changed,” said Zou.

Chicago soybean prices have dropped by 20% in the last two weeks.

The most active soybean oil contract on China’s Dalian exchange fell 4% on Thursday to 10,238 yuan a tonne, its biggest fall since last October.

The high soymeal inventories, unless they fall quickly, could further reduce the world’s top soybean importer’s appetite for the oilseed.

Industrial feed output in May rose 4.6% from a month ago to 23.52 million tonnes. But the figures were still down 11.5% from the previous year, official data showed.

Hog margins have recovered from record losses in March, but are still not enough, a purchase manager with a feed producer in northeastern China said.

Crushers in Rizhao in Shandong province, a main processing hub in northern China, lose 345 yuan on each tonne of soybeans crushed.

Tags: China, pork, prices, soybeans, stocks, futures, soymeal, animal feed, demand, hog, inventories