Limited Short-Term Drivers

Affected by Sino-US trade friction, the correlation between CBOT soybeans and domestic soybean meal has weakened since April. Overseas soybean markets have shown weakness due to concerns over reduced US soybean exports, while domestic soybean markets have been supported by expectations of rising import costs. By late October, phased consensus emerged in Sino-US trade negotiations, reinforcing the linkage between domestic and international soybean markets. In the near to medium term, with limited drivers on both fronts, soybean meal futures may continue narrow-range fluctuations. Longer-term attention should focus on weather developments in South America.

CBOT soybean futures began rising in mid-October, primarily driven by China's gradual procurement of U.S. soybeans. According to U.S. statements, China will purchase 12 million metric tons of U.S. soybeans by January next year, followed by 25 million metric tons annually over the subsequent three years. This volume aligns with China's typical annual procurement levels. Consequently, U.S. soybean exports for the 2025/2026 marketing year are expected to remain stable, with ending stocks projected at 290 million bushels—a slight decrease from last year's 316 million bushels. However, the USDA's November and December monthly supply and demand reports did not revise upward the U.S. soybean export figures. The latest estimate of 1.635 billion bushels represents the weakest export projection since May this year. Market participants believe that although China has begun purchasing U.S. soybeans, the increased FOB pricing for U.S. soybeans makes them less cost-competitive compared to Brazilian soybeans. Consequently, global buyers outside China may reduce their purchases of U.S. soybeans. If China does not fully meet its procurement targets, the outlook for U.S. soybean exports remains unfavorable.

According to shipping data from international agency McDonald Pelz, as of December 9, China has procured 1.743 million metric tons of U.S. soybeans for December shipment, 2.952 million metric tons for January shipment next year, and a small quantity for February-March shipment, totaling 5.739 million metric tons. Based on the timeline, the current procurement pace appears reasonable, making it quite likely that China will complete its 12 million metric ton purchase target by late January next year. Additionally, potential bullish factors on the supply side of U.S. soybeans warrant attention. Since mid-August, dry weather in major U.S. soybean growing regions has gradually reduced the crop's good-to-excellent rating, which now stands below last year's levels for the same period. The current yield estimate of 53 bushels per acre is significantly higher than last year's 50.7 bushels per acre. The January report may feature minor downward revisions to both yield and production estimates. Overall, despite recent declines in international soybean prices driven by export concerns, the fundamental outlook for this year's U.S. crop remains positive, with strong downside support.

Since China resumed purchasing U.S. soybeans, domestic soybean meal futures contracts have reverted to pricing based on CBOT soybean costs. However, last week's domestic market performance significantly outperformed international markets. This strength stems from two factors: first, market rumors indicating extended customs clearance times for some imports, potentially exceeding 20 days; second, last week's state reserve soybean auction, which saw better-than-expected transaction volumes and prices. Specifically, the first round of auctions on December 11 offered 512,500 metric tons of imported soybeans, with 397,000 metric tons sold—a 77.5% success rate. The average transaction price was approximately 3,935 RMB/ton, representing a significant premium over the auction floor price range of 3,810-3,880 RMB/ton. However, it is worth noting that according to data from SteelHome, current port soybean inventories exceed 9 million tons, the highest level for this time of year in nearly a decade. Even if customs clearance times are extended, the actual impact would be limited. Regarding the auction window, which may persist for over a month, subsequent transaction enthusiasm is likely to wane. Overall, the pressure from elevated soybean meal spot inventories remains, casting doubt on the sustainability of this rebound. However, strong support from overseas markets limits downside potential, suggesting narrow-range fluctuations in the near to medium term.

Future focus should be on South American weather conditions. Brazil has completed most of its new crop planting. Over the next two weeks, rainfall above historical averages is expected from the central state of Mato Grosso to the southernmost state of Rio Grande do Sul, supporting expectations for a robust Brazilian soybean harvest. While Argentina's main production areas face somewhat dry conditions, they are still in the mid-to-late planting phase and have not yet entered the critical growth stage.

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