Abundant soymeal supply led to decreasing prices, but uncertain supply in the latter period to limit the downside potential

With the rapid recovery of soybean imports, the operation rate of oil factories continued to increase, and soymeal supply soared, leading to a sharp drop in price. The average price of soymeal in May was 2,846 yuan/ton, down 333 yuan/ton from the previous month. Considering the current and future supply and demand, we believe that soymeal is actually in ample supply, but various uncertainties will cause panic of tight supply from time to time. 
 
Frist, soybean imports and arrivals began to rebound greatly in April. According to the sail schedule, the average soybean arrivals from May to August are estimated to be at a high level of 9 to 10 million tons. The average monthly crushing quantity is also likely to remain at or above 8 million tons, which will lead to a rapid increase in soymeal stocks and the possibility of a bloated stockpile. At the same time, the adverse impact of the epidemic on meat demand gradually emerged, and the recovery rate of livestock and poultry breeding was not as fast as the growth rate of soymeal production, further inhibiting the price and terminal demand of soymeal.
 
Second, COVID-19 outbreak in South America has affected the logistics and port operations, notably in Brazil, if the epidemic continues to spread rapidly, the later soybean export will probably be influenced. Furthermore, Hong Kong issue increased the uncertainty in China-US trade relation, making the players in the market increasingly worried. 
 
At present, domestic soymeal supply can meet the demand in the second and third quarters, and the weak market will continue for a period of time. Soybean supply in the fourth quarter is uncertain, but demand from livestock and poultry breeding will increase significantly, providing some support for soymeal market.