Soybean meal prices will continue to fluctuate

The recent soybean meal prices were mainly fluctuating and fell. The main contract of the 1109 contract has fallen by more than 10% since February 10. Spot market prices in East China, Shandong, and North China have fallen more than 12% since the beginning of February. Although there has been a rebound in recent days, it is expected that the price of soybean meal will continue to be dominated by shocks before mid-April. In the coming year, due to the reduction in the planting area, the supply will be reduced, and the long-term trend of soybean meal prices is expected to continue to rise.

The domestic soybean meal spot market has been under pressure of oversupply, coupled with the recent earthquake and tsunami in Japan and nuclear leakage issues, resulting in light trading in coastal areas, and pressure on the inventory of soybean meal in crushing plants is difficult to digest. In particular, some of the spot dealers still have a lot of previous high-priced contracts not yet implemented.

So far, the shipment prices of soybean meal from domestic large-scale coastal factories have fallen by 200-300 yuan/ton compared with that before the earthquake in Japan in early March, and have generally fallen by 400-500 yuan/ton from the highs in February. Soybean oil prices have also been relatively lower. The recent drop in the prices of oil-battery prices has made the crushing plant's profit losses more severe. The current offshore plant's actual crush profits have already reached a level of RMB 200/ton. This directly led to a substantial reduction in the operating rate and the willingness to ship for most of the crushing companies. Corporate stocks are not digested and will put pressure on soybean meal prices in the short term.

The recent feed companies mainly focus on digesting inventory. As the price of soybean meal falls, the willingness of purchasers to wait and see is very strong. However, the current aquaculture industry has good economic returns. As of now, the average national pig breeding profit has remained at more than RMB 300/ton. In addition, with the arrival of the peak period of the breeding industry, feed companies will gradually digest and increase the expected peak season demand for feeds. Enterprises will gradually enter the market to purchase. With soybean meal prices gradually stabilizing, it will usher in the peak period for feed companies to restock, which will promote soybean meal prices.

Therefore, as the consumption of inventories of consumer companies is exhausted in the later period and the stocks of crushing enterprises' soybean meal are slowly digested, the low operating rate at this time will lead to partial supply of tension in the later period, which will be the trigger for the rebound of soybean meal prices.

At the same time, the Ministry of Agriculture recently conducted a survey of farmers' intentions throughout the country. The results show that the area under which oil is planted will be reduced this year. It is expected that soybean area will be reduced by 11.2%. With a simple forecast for 2010, the national soybean production will be reduced by about 1.6 million tons. At the same time, the Ministry of Agriculture also expects the global intention of planting oil to reduce by 0.6%. Due to high corn prices, soybean and corn prices are out of balance, and the USDA's planting intention report at the end of the month is also expected to reduce soybean planting area. Combining the reduction in the output of fishmeal in South America in the earlier period and the recent earthquake and nuclear pollution in Japan affecting the production of fishmeal in Japan, the supply of high-protein feed ingredients will be insufficient this year.

Therefore, comprehensively, the soybean meal market supply and demand structure will not be conducive to soybean meal price rise in the short term, but with the arrival of the peak period for consumer companies to make up the storage in the later period, soybean meal prices may usher in a wave of rise. However, this needs the cooperation of the macroeconomic environment. At present, the main concern of the macro environment is the turmoil in the European economy and the political situation in North Africa. Therefore, if companies encounter a deterioration of the macro environment when restocking, they will not be able to make up large amounts of stocks and purchase long-term stocks. At this time, the rebound in soybean meal prices is expected to decrease substantially.

Therefore, the author suggests that investors should continue to focus on short-term operations and do not recommend long-term positions. Long-term investors should pay attention to the structure of supply and demand of soybean meal while paying close attention to changes in the macro environment.