Soybean meal faces pullback pressure after weather hype

In the past two months, the soybean meal futures contract has rebounded rapidly after a sharp fall, and the current price is close to the high point at the beginning of the decline, does it mean that the soybean meal market has been reversed?

First of all, analyze the reasons for the decline of soybean meal in the early stage: first, the low domestic demand for soybean meal leads to a drop in prices. The demand of aquaculture industry is low, which restricts the consumption of soybean meal. In China, the stock of live pigs and breeding sows decreased significantly compared with the same period last year; the price of meat, eggs and poultry was low, and the breeding loss was serious; the demand for aquatic products slowed down, which restricted the demand for protein meal. Second, the supply of soybean meal has greatly increased, spot prices have fallen sharply, and some basis contracts face the risk of default, resulting in a sell-off.

Let's take a look at the reasons for the rapid rise of soybean meal. The author believes that, on the one hand, the rise of soybean meal comes from the price return after the early overfall; on the other hand, the rainstorm weather in the main soybean producing areas of the United States leads to the hype that the market is worried about the planting area and excellent and good rate of American beans. The acreage data and weekly soybean yield data released by the United States Department of Agriculture on June 30 confirm the market's concerns about the cultivation of American beans. These data will also support the high volatility of US soybeans in the short term, which will significantly push up the cost of imported soybeans in China, forcing oil factories to passively raise the prices of soybean meal and soybean oil.

But in the short term, the impact of bad weather on planting speculation may cool down, loose fundamentals will put a lot of pressure on soybean meal prices.

From the perspective of soybean meal supply, the global soybean supply is abundant. Following the record high soybeans in the United States last year, soybean production in Argentina and Brazil also reached record highs, which will depress soybean prices in the medium to long term. Domestically, China's soybean imports may reach 8.53 million tons in June and 8 million tons in July, and the soybean source is very abundant. At present, the operating rate of domestic oil plants is maintained at an ultra-high level of about 54 percent, and the supply of soybean meal has recently remained high. The quantity of domestic rapeseed meal and imported DDGS remained high, which suppressed the price of plant protein.

On the demand side, although there is a demand for replenishment in the pig farming industry, the real consumption of soybean meal may have to wait for the rebound of pig stock data before it can be confirmed. Meat and egg breeding industry is still in the doldrums, due to excess supply and demand, early meat and poultry prices and egg prices fell sharply, a serious blow to the enthusiasm of breeding enterprises to fill the fence. In terms of aquatic products, due to the sharp drop in prices due to the oversupply and demand of aquatic products last year, the stock of fish fry in the south is relatively high this year, which restricts the release of fish fry. Recently, there is more rainfall and less material in the reservoir, which is bad for meal consumption. In the later stage, with the large sales of fish in ponds, the demand for protein meal in newly released fish fry may be greatly reduced, so the demand for protein meal in aquaculture in the later stage is also worrying.

Based on the information of supply and demand, the author believes that the supply and demand of soybean meal remains loose, and after the rainstorm in the United States, the short-term soybean meal price will return to fundamentals and there may be a shock correction.