Lack of coordination in the short-term rebound of corn

Recently, corn prices have remained weak, but the rate of price decline has slowed down, with some regions even rebounding. In addition, the frequent opening of large quantities and reserves of North Grain, which exceeded one million tons in a single week, has improved market confidence. However, trading entities with strong "water storage" capabilities may still be unable to rebound in the short term due to a strong wait-and-see atmosphere, considering that the benefits of hoarding grain are insufficient to cover costs and risks.

1、 Stock preparation and storage jointly support the narrowing of spot price decline

In November, due to concerns about poor supply of grain from the north to the south and difficulty in finding imported goods after the weather turned cold, enterprises in the sales area began actively purchasing corn from Northeast China. The surge in stocking drove a massive increase in corn production in Beigang. However, due to the lack of trading entities hoarding grain in the production area, the effective supply of new season corn was sufficient, and the listing progress was fast. The corn market showed a trend of both buying and selling. At the same time, there are constantly new notices of increasing corn storage and opening warehouses, enhancing the confidence of purchasing entities in the production area market, and slowing down the downward trend of corn prices in the production area.

In terms of specific prices, the decline in corn prices in northern China has significantly narrowed compared to the previous month, with a decline rate less than half of that in October. As of the end of November, the mainstream purchase price for corn deep processing enterprises in Heilongjiang and Jilin was between 1860-2000 yuan/ton, a decrease of about 40-50 yuan/ton from the previous month; The mainstream purchase price for corn deep processing enterprises in the Huang Huai region of North China is reported at 2000-2220 yuan/ton, a decrease of 50-70 yuan/ton from the previous month; The purchase price of second-class corn in northern ports is 2085 yuan/ton, a decrease of about 55 yuan/ton from last month. However, due to a large amount of goods arriving at southern ports, as of the end of the month, with some enterprises gradually completing their phased stocking, the price ｄｒｏｐ has been relatively large. The corn price quoted at ports in Guangdong is 2245 yuan/ton, a decrease of 115 yuan/ton from the previous month.

2、 Downstream performance is expected to gradually improve

In terms of corn deep processing, due to the low price of corn, deep processing products have good cost-effectiveness. The overall operating rate has reached a high level of 70-75%, which is 5 percentage points higher than last year. The processing profit is still in the profit range, and it will be the peak season for corn deep processing product consumption until the end of the year. It is expected that the purchasing enthusiasm of enterprises will still be high.

In terms of pig farming, data released by the Ministry of Agriculture and Rural Affairs shows that by the end of October 2024, there will be 40.73 million sows in stock, an increase of 0.3% compared to the previous month, equivalent to 104.4% of the normal stock. The production capacity is in the green zone (i.e. 92% -105% of the normal stock), and the farming scale has shown a significant recovery from the lowest point at the beginning of the year, which has lasted for four to five months. The pig stock is expected to further expand in the future and is expected to continue until the second and third quarters of next year. Comprehensively improve the basic demand for corn next year.

3、 Imports have almost disappeared, and domestic production is seeing a glimmer of hope

In the past three years, the annual export volume of imported corn and its various substitutes to China has exceeded the usual amount by about 30 million tons, equivalent to about 10% of the annual domestic corn consumption, directly causing the domestic corn to shift from a tight balance pattern to oversupply, which is also one of the important reasons for the avalanche of domestic corn prices. This year, the production of new season corn is still good, and the price has fallen below the cost line. In view of this, China has begun to strictly control the import of corn and its substitutes. The latest data from the General Administration of Customs shows that the import volume of corn has plummeted in the past two months. In October, the import volume of corn was only 250000 tons, a decrease of nearly 90% year-on-year, fully reflecting China's resolute attitude towards controlling the impact of imported corn.

In summary, after strict import control, domestic corn is expected to gradually return to its tight balance pattern, gradually reversing the almost loss making situation of corn cultivation, and there is a possibility of tight supply by the second to third quarters of next year. However, at present, the progress of new grain consumption is not enough to create a shortage of grain sources. Most grain consuming enterprises have not yet started building large inventories, and trading entities are still observing due to concerns that the subsequent rebound of corn may not necessarily cover capital costs, storage fees, and losses. Therefore, it is expected that corn will not perform well in the short term. In the long term, it is necessary to pay attention to whether market expectations have improved with the consumption of grain sources, as well as the possible policy measures for the release of wheat and corn reserves.