China's domestic soybean meal demand increases and exports may decline in the second half of the year.

China's soybean meal exports tripled in the first half of this year compared with the same period last year, but the supply of Chinese soybean meal exports is likely to decrease as domestic soybean crushing profits improve and domestic demand for soybean meal increases, according to traders and analysts.

The decline in Chinese soybean meal exports will allow traditional exporters such as Argentina and Brazil to regain market share and boost international soybean meal prices, analysts said. Singapore traders said that in terms of soybean meal exports, China's exports have reached a peak and are expected to slow from next month.

According to Chinese customs data, China exported 1.36 million tons of soybean meal in the first half of 2014, twice as much as the same period last year, with exports rising more than fourfold in May from a year earlier. Japan, South Korea, Vietnam, Indonesia and Malaysia account for most of China's soybean meal exports, and China also exports some soybean meal to Europe.

The surge in China's soybean meal exports is mainly due to China's large soybean imports and weak domestic demand for soybean meal.

China's soybean imports have been at an all-time high in recent months. China imported 34.2 million tons of soybeans in the first half of this year, up 24.4 per cent from a year earlier. At the same time, due to the slowdown in economic growth and the decline in demand for meat, domestic demand for soybean meal has decreased, resulting in a large supply of soybean meal in the hands of crushers.

But traders say the fundamentals of the soybean meal market have changed. First, soybean crushing profits began to improve, with some crushers making as much as $10 a tonne, compared with a loss of $80 a tonne at the start of the year.

Analysts said that soybean crushing profits will increase slightly in the third quarter of this year, as the holiday is approaching, soybean prices have fallen recently, and demand will show seasonal growth.

Singaporean traders said that when Chinese soybean meal was the cheapest supply, a large number of shipments were exported to Southeast Asia, but Argentina's soybean meal export prices are now more competitive. Last week, a Thai feed processor bought 150000 tons of soybean meal from South America at a CIF price of $500 to $505 a tonne, with a shipment scheduled for December 2014 to February 2015. By comparison, Chinese soymeal is quoted at US $570 per tonne and CIF in Southeast Asia. The recent shipment of Indian soybean meal is quoted at US $610 per ton, FOB.

CBOT soybean meal futures have fallen more than 20 per cent in the past three months, while soyabean prices have fallen nearly 20 per cent over the same period. Soybean meal prices are likely to fall further as US soybean production is expected to hit an all-time high this year, further boosting global soybean supply. Over the same period, the futures price of soybean meal on the Dalian Commodity Exchange fell only 8%.

Traders point out that Brazil and Argentina will dominate the Asian soybean meal market in the next two months, given price competitiveness. The Asian region imports about 18 million tons of soybean meal a year, accounting for about 30 per cent of global trade. But considering the logistics advantages, China will continue to export soybean meal to Japan. China will remain Japan's soybean meal exporter, traders say, because Japanese buyers usually prefer to buy only 2000 tons of soybean meal at a time.