Chang'an Futures Liu Lin: Multiple Positive Factors Boost Soybean Meal Valuation Recovery

Recently, soybean meal prices have surged strongly, mainly due to the dual impact of the US-Iran geopolitical conflict and fundamental factors. Over the past period, global soybeans and domestic protein meals have seen prices fall to low levels after several years of bumper harvests. Soybean meal futures prices around 2700-2800 are undervalued, indicating the market’s full anticipation of abundant supply pressure. At this time, three factors are driving prices higher: first, US biodiesel policies pushing soybean meal above 2800; second, US-Iran conflict boosting major commodity prices, combined with rising freight costs, continuing to support soybean meal prices; third, expectations of Trump’s visit to China in early April strengthening US soybean prices, with cost support still evident. Meanwhile, issues with Brazilian soybean quarantine certificates have slowed the pace of soybean arrivals, causing futures prices to rise and break through 3200.

Geopolitical conflicts have temporarily benefited the market, but uncertainties remain

The US-Iran geopolitical situation affects domestic soybean meal prices through three channels. The first is sentiment-driven, where a sharp rise in crude oil prices boosts multiple commodity sectors, making protein products highly attractive for capital inflows. The second is via rising energy prices increasing transportation costs. After the US-Iran conflict, Iran announced the closure of the Strait of Hormuz, causing ship insurance rates to soar over 60%, and freight costs to increase by more than 250%. For example, transporting soybeans from South America, previously costing about $100 per ton, could now rise to $300-400 per ton. Ships docking in Singapore face immediate refueling issues. The third is through biodiesel substitution to address potential crude oil shortages, with the US and Indonesia accelerating biodiesel testing, boosting demand for soybean raw materials. Therefore, before a ceasefire, soybean meal may struggle to break above the lows seen after the New Year.

The March USDA report remains neutral, with focus shifting to the end-of-quarter stocks and planting intentions reports at the end of March

The USDA March supply and demand report maintains the 2025/2026 US soybean ending stocks forecast at 350 million bushels, above analyst estimates of 343 million bushels. Brazil’s soybean production remains at a record 180 million tons, while Argentina’s forecast has been lowered from 48.5 million to 48 million tons. Globally, soybean ending stocks for 2025/2026 are expected at 125.31 million tons, down 200,000 tons from February. Overall, the data adjustments are minor, reinforcing the view of ample global soybean supply.

As the long-term supply abundance logic develops, demand and new planting intentions will increasingly influence US soybean prices. Optimistic expectations for US biodiesel policies continue to support soybean crushing demand, while Middle East conflicts sharply raise international crude oil prices, also pushing up freight costs from South America to Asia, providing cost-side support for US soybeans. Additionally, market optimism about Trump’s China visit in April boosts US soybean export expectations. Therefore, US soybean prices remain relatively firm. Planting in the US is expected to begin in Q2, with the USDA’s Economic Outlook Forum estimating 85 million acres of soybean planting in 2026, up 4.7% year-on-year. Attention will then shift to the quarterly stocks report and planting intentions at month’s end.

Brazilian soybean quarantine certificate issues provide short-term support for soybean meal prices

Recent news on Brazilian soybean procurement and quarantine has been frequent. Last week, Cargill suspended soybean exports to China citing difficulties in implementing the new inspection procedures by Brazil’s Ministry of Agriculture and Food Supply, leading to market expectations of delayed soybean arrivals from Brazil. Only five shiploads of soybeans have been traded between Brazil and China, below the volume during the Lunar New Year, causing liquidity to drop significantly. Major traders like Cargill, Olam, and Amaggi have also stopped providing price references, halting market transactions. To ease the situation, Brazil’s Ministry of Agriculture and Food Supply issued a new notice on March 13, relaxing shipping requirements and removing an outdated technical regulation, which may help restore normalcy. Additionally, Brazil plans to hold a meeting within March involving multiple government departments and Chinese customs to align quarantine and inspection procedures, resolving long-standing disputes and improving market liquidity. However, due to heavy rains, soybean harvesting progress in Brazil remains slow; currently, about 57.43% of the expected 2025/2026 soybean planting area has been harvested, compared to 66.03% at the same time last year. Coupled with quarantine certificate issuance issues, Brazilian soybean arrivals may be delayed in the short term.

Domestic soybean procurement is slow, with phased supply possibly below expectations

Domestic port soybean stocks stand at 5.794 million tons, down about 500,000 tons week-on-week, driven by post-holiday resumption of work, but up nearly 1.8 million tons year-on-year. Various agencies’ estimates for mid-term soybean imports are relatively loose. Data from Grain & Oil Business Network shows imports of 6.55 million tons, 12.2 million tons, and 13.5 million tons from March to May, respectively, while Steel Union reports 6.73 million, 9.5 million, and 11 million tons, all significantly higher than last year. This indicates a relatively loose supply expectation domestically. However, geopolitical conflicts have driven oil prices higher and freight costs sharply up, leading to expectations that transportation costs could rise from about $100/ton to $300-400/ton. Meanwhile, Brazil’s slower harvest may delay domestic arrivals. Additionally, recent import soybean procurement in China has been slow; as of early March, about 74% of March’s shipments were procured, with 35% for April-May, indicating cautious market sentiment for longer-term supply and prices. Overall, soybean supply before May may fall short of expectations.

Monthly soybean arrival forecasts

Source: Mysteel

Soybean meal may enter a seasonal de-stocking cycle, supporting prices

Steel Union data shows that feed mill stocks have decreased to 9.14 days, reflecting cautious demand expectations. In week 10, mainstream domestic oil mills operated at 50.47%, up from 16.19% the previous week. Soybean crushing volume reached 1.833 million tons, up from 1.5886 million tons last week and 1.5165 million tons a year ago. Soybean meal stocks are at 760,500 tons, up about 60,000 tons week-on-week and 160,000 tons year-on-year. Operating rates and crushing volumes have recovered past last year’s levels, suggesting short-term stock accumulation. However, influenced by US-Iran conflict and delayed arrivals, the pace of inventory buildup may slow, entering a seasonal de-stocking phase.

The basis may weaken, and long-term valuation is slightly undervalued

Driven by multiple bullish factors, soybean meal spot and futures prices have surged significantly. Domestic 43% protein soybean meal spot prices range from 3,320 to 3,500 yuan/ton, weekly gains of 250-350 yuan/ton, with fluctuations of 10-50 yuan/ton compared to last year. Futures prices for the main contract have risen sharply, reaching a high of 3,204, the highest in seven months, with a weekly increase of 213 yuan/ton (+7.31%). However, concerns about future supply pressure persist, with distant-month contracts generally declining last Friday. This suggests that the main rally in soybean meal is primarily driven by multiple positive news and capital inflows.

The basis, calculated from settlement prices, has slightly strengthened but remains below last year’s levels, indicating market expectations of ample seasonal spot supply and the influence of market sentiment and capital. As these factors fade, fundamentals will regain importance, and under weak cash flow, the basis may weaken further. From valuation perspectives, with spot prices rising sharply and crushing margins recovering to around 300 yuan/ton, while deferred contracts show losses of 120-150 yuan/ton, and considering the limited downside in US soybeans amid policies, geopolitical tensions, and Trump’s China visit, the September 2023 soybean meal cost is around 3,300 yuan/ton. Current prices near 3,000 yuan/ton appear undervalued, leaving room for upside.

Summary and outlook

Overall, the long-term market logic may undergo a fundamental shift from the bearish outlook of Brazil’s bumper harvest to a focus on US soybean exports and new planting intentions. If La Niña transitions to El Niño, it could impact soybean meal prices. During this period, geopolitical conflicts, biodiesel policies, Brazilian quarantine and customs clearance issues, and Trump’s China visit have supported valuation recovery, and short-term sentiment remains positive. However, upside potential for soybean meal is limited. Market participants should await the end-of-March planting intentions and quarterly stocks reports.

Looking ahead, geopolitical risks persist with ongoing US-Iran tensions, high uncertainty, and volatile crude oil prices, which will continue to influence market sentiment and capital flows, adding volatility to soybean meal. Fundamentally, South American bumper harvest expectations are priced in, and supply pressure may gradually translate into actual oversupply, potentially dragging down spot prices. The May contract may anchor near spot levels, with upward movement under port pressure. Short-term delays in Brazilian quarantine certificates and harvest progress may also limit supply, shifting focus to new planting intentions and quarterly stocks reports. With US soybean production expected to increase, early April US-China talks are likely to further boost export expectations and support futures from the cost side. Without downward drivers, soybean meal is unlikely to see significant declines. The May contract is expected to trade between 3,000 and 3,200 yuan/ton. The September 2023 contract, with its undervalued valuation, may present buying opportunities on dips, especially if US soybean prices remain stable.

Liu Lin, Researcher at Chang’an Futures, holds a Master’s degree in Statistics from Northwest University. Since entering the futures market, she has focused on agricultural product futures research, with a systematic understanding of the spot market. She is skilled at analyzing the agricultural supply chain using statistical theory and forecasting market trends based on fundamentals and policy guidance.