IndustryWhat are the favorable opportunities for corn compared to the old and new years?
Corn is about to enter a new year, and market pessimism will also spread into the new year. However, there is still a significant difference in supply and demand between the new and old crop years. Let's compare and see what changes the market has in the new year, and what opportunities for improvement exist in the fourth quarter.
The import pressure in the new fiscal year has significantly decreased year-on-year
The two major sources of pressure for the previous year were high corn yields and a large influx of imported corn, both of which were concentrated in the fourth quarter.
The fourth quarter of this year is quite different. The pressure of high yield this year is slightly lower than last year. Although there are differences in the market on this year's production reduction and the year-on-year expectation is slightly lower, the expected production pressure is slightly lower than last year. The supply pressure of imported corn has decreased significantly year-on-year. The pressure of imported corn last year mainly came from the large arrival of Brazilian corn. In the fourth quarter of last year, we imported a total of 10.585 million tons of corn, an increase of 391% year-on-year. Among them, imported Brazilian corn was 9.033 million tons, accounting for a high proportion of 85.3%. This year, the year-on-year production reduction of Brazilian corn is about 12%, and the expected export reduction is also 34%. In addition, there were relevant news of tightening of imported corn in China near April this year. The latest data from customs shows that China imported corn was only 430000 in August this year. tons, a year-on-year decrease of 64%, And currently, there are no orders from the United States for corn in the new fiscal year in China, so the expected import volume of corn in the new fiscal year will significantly decrease year-on-year, especially in the fourth quarter of this year. And in August of this year, there were reports of tightening policies on imported sorghum and barley in the nearby market, further reducing the expected import pressure for the new fiscal year.
Increased uncertainty in policy grain allocation
Since the beginning of the previous year, the market has been concerned about the release of imported reserve corn and overdue rice, as the release of imported reserve corn began in September last year and was only suspended in December of that year. During this period, there was no restraint due to the launch of new season corn, which made market participants feel the urgent pressure of imported reserve corn release. However, it was not until around August this year that the release of imported reserve corn gradually increased, and the release intensity was also relatively small, which was not as expected by the market. Overdue rice was also delayed in release.
This part of the policy grain supply pressure that was not fulfilled in the old work year has been moved to the new work year, becoming a big mountain on the supply side of the new work year. The author believes that tightening the policy on imported grains may be making way for later policy grain supply. However, unlike the arrival of imported corn, policy grain supply is expected to mainly regulate prices and will not exacerbate price declines. It will only limit price rebounds. The expected amount of supply in the early part of the year is relatively low, and there is even a possibility of increasing storage. However, in the later part of the year, the expected amount of supply will increase, thereby limiting the upward height of corn prices during the year.
Grassroots grain sales rhythm may bring trading opportunities
The negative sources for the fourth quarter are twofold: firstly, a large amount of new season corn is on the market, and secondly, there is a strong pessimistic sentiment in the market; The reasons for the bullish trend are twofold: firstly, a significant decrease in import pressure compared to the previous year; secondly, a favorable policy towards lower prices; and thirdly, the peak season on the demand side.
The pessimistic sentiment in the old market has spread to the new market, leading to expectations of a low opening and decline in the price of corn in the new season. It is precisely because of the heavy market pessimism that grassroots units have a relatively high willingness to sell grain in the early stages of listing, which has intensified the short-term decline rhythm of the market and brought trading opportunities for oversold rebound to the market. In addition, the bearish trend during the year mainly comes from the pressure of policy grain investment in the later part of the year, but in the early part of the year, policy expectations are biased towards the positive, which also provides short-term rebound trading opportunities for the market. From the perspective of consecutive corn contracts, the price difference between contracts is gradually widening, showing a situation of rising prices in the distant months and rising prices in the near months. This also indicates that the market's pessimistic expectations for corn are most evident in the current period, while expectations for the later period are relatively better than at present.
In the fourth quarter, the focus of market attention is on the pace of grain sales. Currently, the market understands that there is a high willingness of grassroots grain sales, and farmers in listed areas actively subscribe to sell. However, it cannot be ruled out that there may be a rise in reluctance to sell at the grassroots level after the spot price falls below the cost line during the listing stage. If grassroots grain sales remain active during the price decline stage, there are good opportunities for reversal and rebound trading in the market. However, if the pace of grassroots grain sales slows down, it is expected to prolong the decline cycle.
