Heavy soybean meal supply pressure, sell on rebounds

On the 11th, the soybean meal 1509 contract showed an oscillating trend. As of the close, the soybean meal 1509 contract edged lower, settling at 2733 yuan/ton, down 0.11% from the previous day's settlement price, while open interest increased by 45980 contracts to 4101558 contracts. Before the USDA released its latest soybean supply and demand report, market participants were relatively cautious.

Heavy domestic soybean meal supply pressure

At present, spot inventories of soybean oil and palm oil remain tight. On the one hand, total commercial soybean oil inventory stands at about 620,000 tons, and spot soybean oil supply at many oil mills is still tight; some plants in the south require queuing to pick up goods and mainly sell later-period contracts. On the other hand, palm oil inventory is only just over 400,000 tons, at its lowest level in recent years. The author believes that it will still take time to ease the tight oils and fats supply situation, which requires an increase in the soybean crushing operating rate and the arrival of imported oils and fats.

The domestic market expects that from May to July, more than 22.5 million tons of low-cost soybeans may arrive at ports successively. Among them, about 7 million tons of soybeans arrived at ports in May, about 8.2 million tons in June, and about 7.5 million tons in July. As low-cost soybeans arrive at ports successively, oil mills will gradually start up, and in mid-to-late May the oil mills' operating rate may recover to an ultra-high level, with spot soybean meal supply increasing accordingly. In addition, oil mills are currently actively preselling forward contracts and forward basis, and prices are continuously declining, which also lays the foundation for soybean meal to run at low prices later.

Weather speculation may gradually emerge

⟦NL> From a time-cycle perspective, the market's focus has begun to turn to U.S. soybean planting and growing conditions. As of May 3, 13% of soybean planting in the U.S. Midwest was completed, higher than 2% a week earlier, and also higher than 5% in the same period last year and the average pace of 9% for the same period over the past 5 years. The author believes that future weather conditions will determine U.S. soybean planting and growing conditions. Both NOAA and the Australian Bureau of Meteorology have stated that a relatively strong El Nino phenomenon may occur in 2015.

In addition, as recent domestic macroeconomic expectations are relatively warm, from the perspective of phased long positioning allocation, funds are prone to choose oils and fats with strong financial attributes and relatively good fundamentals for allocation. Because the fundamentals of oils and fats are better than those of soybean meal, some funds will engage in supporting oils and selling meal, thereby pressuring soybean meal. However, against the backdrop of weather speculation factors, domestic soybean meal may follow U.S. soybeans in a weak rebound.

In short, domestic soybean meal currently faces relatively heavy pressure. In the coming months, U.S. soybeans will be in the planting and growing stage, and weather uncertainty factors may bring opportunities for market speculation. Domestic soybean meal can be sold short on rebounds, entering when the market's technicals are weak.