SunSirs: 2023 China Soybean Meal Market Analysis (Fundamentals)

In 2023, the soybean meal market weakened, experiencing the first round of diving and two rounds of roller coaster trading, with an overall oscillating decline of 15.38%.

The first round of diving market: After New Year's Day, the soybean meal market rebounded weakly and began to plummet from the high platform. The price continued to fluctuate and fall, with a decline of nearly 18%. The average price of soybean meal in the market fell by over 800 RMB/ton, falling to the front line of 3,800 RMB/ton. On January 1st, the average market price of soybean meal was 4,682 RMB/ton. On March 31st, the average market price of soybean meal was 3,844 RMB/ton, with a price drop of 17.9%.

The first round of roller coaster market: April May. After April, the soybean meal market bottomed out and rebounded, oscillating upwards until May 13th. The average price of soybean meal in the market was 4,492 RMB/ton, an increase of 16.86%. In mid May, the soybean meal market surged and fell back, falling all the way to the end of May, dropping to 3,770 RMB/ton, a decrease of 16.07%.

The second round of roller coaster market: June to December. In the second half of the year, the soybean meal market experienced a sharp rise and fall, staging a roller coaster ride. From June to August, the average market price of soybean meal increased to 5,026 RMB/ton, an increase of 33.32%. Starting from September, the soybean meal market entered a downward trend, with prices continuing to decline. Until the end of December, the average price of soybean meal in the market fell below the 4,000 RMB mark, a 21% decline.

The fundamental analysis of soybean meal in 2023 is as follows:

Supply side: From January to November 2023, the cumulative import of soybeans was 89.625 million tons, a year-on-year increase of 13.3%. In the first half of the year, the quantity of imported soybeans as raw materials continued to increase. In May, imported soybeans reached a new high, with imports reaching 12.02 million tons, an increase of 65.4% compared to the previous month. From June to August, imported soybeans remained at a relatively high level. Starting from September, the quantity of imported soybeans declined, with only 5.158 million tons in October. In November, imported soybeans returned to a high level, reaching 7.92 million tons. In 2023, the loose supply of imported soybeans suppressed the rise of soybean meal market.

Inventory: According to the statistics of domestic soybean meal inventory from January to December, it can be seen that soybean meal inventory slightly increased from January to February, at the forefront of 600,000 tons. Entering March, soybean meal inventory began to rapidly decline, and inventory levels continued to decline. After May Day, the inventory of soybean meal has dropped to the first tier of 200,000 tons, a decrease of over 100% compared to the first quarter.

Starting from the second half of the year, the overall decline in soybean meal inventory is not significant and continues to remain high. From June to August, soybean meal inventories continued to show a fluctuating upward trend. After September, soybean meal inventory returned to the front line of 700,000 tons. During the Double Festivals period, soybean oil factories gradually shut down for maintenance, and soybean meal inventory decreased slightly, still approaching 700,000 tons overall. From October to November, although soybean meal inventories have declined, the overall situation remains high. In December, soybean meal inventory continued to increase, reaching 840,000 tons in the first tier. Due to the high level of soybean meal inventory in 2023, the soybean meal market has been dragged down.

Futures: In 2023, the trend of soybean meal futures market is similar to that of spot market, and the fluctuation range of spot market is significantly larger than that of futures. From January to May, due to the abundant production of South American soybeans in the external market, with concentrated listings and loose supply, the soybean futures market on the market was not good. Starting from late May, due to the delayed arrival of imported soybeans at the port, spot inventory remained in a historical position, and the soybean meal futures market experienced a significant increase, rising until the end of June. In the third quarter, the performance of soybean meal futures market remained average, with overall high level oscillation being the main trend. Entering the fourth quarter, American soybeans were concentrated on the market, and supply pressure remained. Soybean meal futures showed a downward trend. The soybean meal futures market in 2023 has limited impact on the rise of spot prices.

Demand side: The overall performance of the soybean meal terminal feed industry in 2023 is sluggish, with pig production capacity being reduced and soybean meal procurement demand continuing to be sluggish. In the first half of the year, due to the high price of soybean meal, feed companies were constantly adjusting the proportion of soybean meal usage, resulting in a decline in market transactions. In the second half of the year, the terminal feed industry entered the off-season, and terminal entry into the market remained cautious, with on-demand procurement and poor demand, which dragged down the soybean meal market in 2023.

Agricultural product analysts from SunSirs believe that the poor soybean meal market in 2023 is mainly due to the doubling of supply pressure, high inventories, sluggish demand, limited boost to futures markets, and multiple negative factors, resulting in insufficient upward momentum and sustained weakness in the market. As the New Year's Day and Spring Festival approaches in the first quarter of 2024, soybean oil factories will shut down for maintenance, leading to a tightening of supply. In terms of futures, Brazil's soybean production is expected to decline, and favorable factors are coming. Soybean meal is expected to experience an upward trend in the first quarter.

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