China soymeal stocks sink to 2-yr low amid low soybean imports

Soybean meal stocks level in China plunged since the start of 2022 as feed companies ramp up purchases to replenish their stocks in fear of slow soybean imports amid supply disruption from Covid outbreaks globally.

Commercial stocks of the key animal feed ingredient slumped to less than 300,000 tons as of the beginning of this week, according to market sources.

This was largely caused by a strong demand from downstream companies including feed makers and animal farming companies that have been boosting their inventories ahead of the week-long Lunar New Year holiday.

Despite the seasonal factor, slow soybean imports in southern China which have led to a low soybean stocks level in China amid robust crush volume.

“The south is in a difficult position. The arrival of soybeans at crushers have been abnormal and stocks are tight,” said one China-based trader.

“We are seeing a normal stock replenishment before the holiday in the north, but the south is slow,” said a second trader at a major trading house.

Soybean and soymeal stocks in southern China have been low in recent weeks with spot domestic basis shooting to 500 yuan/ton (US$79/ton) over DCE soymeal futures, up about 60% from a month ago.

However, the impact of Covid outbreaks on China’s domestic logistics has been relatively small.

“Impact from the epidemic is not as noticeable and testing has been very convenient,” said another trader. The view was echoed by two other market sources.

Analysts expect China’s tight soybean situation to at least last until the end of the Winter Olympics in late February due to negative crush margins, strong state-back purchases, and volatile freight market.