The Surplus Dilemma: China’s Excess Stockpiles Spell Trouble for American Farmers

China, the world’s largest soybean importer, is facing an oversupply of domestic soybean meal. This has raised concerns about weak demand for US soybeans during the year-end marketing peak.

According to trade sources, record soybean imports in early 2025, coupled with weak demand from feed producers, have led to a significant increase in China’s soybean meal inventories. This development is putting pressure on domestic crushing plants, forcing some facilities to temporarily halt operations due to a lack of storage capacity.

The spot price of soybean meal in northern China is currently quoted at around RMB 2,925 per ton (equivalent to $408), a decrease of about 6.5% from the same period last year, according to Wang Wenshen, an analyst at Sublime China Information Consulting (Shandong). He predicts that if soybean prices remain weak and crushers are unprofitable, soybean purchases in the fourth quarter are likely to be lower than expected – a critical period for US exports.

Meanwhile, soybean futures prices in Chicago have fallen for two consecutive weeks due to expectations of a bumper US crop, and weak demand from China could continue to put pressure on this market.

China’s soybean import volume hit a record high in May and nearly peaked in June, boosting crushing activities and increasing soybean meal inventories. This has led many crushing plants, especially in southern China, to cease small-scale operations due to excessive soybean meal stocks.

At the Jiaxing processing hub, crushing margins have been negative since mid-May. Weak pork consumption has also contributed to reduced demand from feed producers, a sector that accounts for a large proportion of soybean meal consumption.

Cheang Kang Wei, Vice President of StoneX Singapore, warns that Chinese crushers will continue to face significant pressure in the next one to two months due to high inventories. This disruption not only affects production but also hinders plans to expand farming capacity as pork prices have plummeted this year.

Notably, despite the domestic surplus, China continues to import soybean meal from Argentina, which is not subject to the same high tariffs as the US. According to a Singapore-based trader, imports from Argentina remain profitable, further exacerbating the domestic oversupply.

However, the market dynamics could change if China and the US reach a new trade agreement. Johnny Xiang, founder of AgRadar Consulting in Beijing, states that if tariffs are removed, Chinese buyers are likely to return to the US market in the fourth quarter when prices are competitive.