The demand for animal feed is recovering, and industrial grain consumption is expected to increase steadily in the new season

The situation of increasing corn production in the new season is basically clear, and changes in downstream consumption directly determine the direction of corn purchase prices. Corn feed accounts for about 70% of total consumption in China, while industrial grain accounts for about 20%. With the current recovery of feed consumption and growth in industrial consumption, it is expected that the total consumption of corn will steadily increase, which will effectively drive the price of corn in the new season.

Corn feed consumption has rebounded. On the one hand, the demand for corn in the feed farming sector continues to rise. Driven by the improvement in the efficiency of pig farming, there has been a significant increase in feed production in recent times. According to data from the China Feed Industry Association, the national industrial feed production in August 2024 was 27.83 million tons, a month on month increase of 5.0%. The proportion of corn used in compound feed was 31.2%, a year-on-year increase of 5.6 percentage points. According to the perennial pattern, the fourth quarter is the peak season for livestock product consumption, and the demand for corn feed will further increase. On the other hand, the substitution of wheat for corn as feed has significantly decreased. In 2023, the main production areas such as Henan will be affected by the "rotten field rain", resulting in a high proportion of sprouted wheat, most of which will enter the field of animal feed, leading to an annual consumption of over 30 million tons of wheat for animal feed. The overall quality of wheat harvested this summer is good, with prices significantly higher than corn. Wheat as a substitute for feed no longer has an advantage, and it is expected that the amount of wheat used for feed will decrease by about 20 million tons. This market share will shift to substitutes such as corn, sorghum, and barley. According to the Market Early Warning Expert Committee of the Ministry of Agriculture and Rural Affairs, the consumption of corn for animal feed in China will reach 193.5 million tons in 2024/25, an increase of about 2.5 million tons compared to the previous year.

The consumption of corn industry is steadily increasing. Corn is widely used in the fields of starch and downstream deep processing, with a long industrial chain. Since the beginning of this year, the sustained macroeconomic recovery has driven the consumption of corn industry, and the overall operating rate of corn deep processing industry is at a historical high. According to estimates from relevant institutions, the cumulative corn consumption of deep processing enterprises in the first half of 2024 increased by 17% year-on-year, with starch processing enterprises and alcohol processing enterprises experiencing growth rates of 11% and 34%, respectively. At the beginning of the listing of new season corn, the purchase price decreased year-on-year, which enabled deep processing enterprises in the main production areas to maintain relatively good profitability and increased their enthusiasm for purchasing and processing corn. Overall, it is expected that the consumption of corn industry in China will reach 84.5 million tons in 2024/25, an increase of more than 2 million tons compared to the previous year.

The production and demand of corn in the new season are tightly balanced, and the price will be mainly stable. Due to the recovery of feed consumption and the increase of industrial consumption, it is expected that the total consumption of corn in China will reach nearly 300 million tons in 2024/25, an increase of more than 4.5 million tons from the previous year, reaching a historical high. Although corn has achieved another bumper harvest this year, with an increase in production of over 8 million tons to 270 million tons, China's corn still shows a pattern of insufficient production and demand (a gap of over 2 million tons, which continues to narrow compared to the previous year). This balance of slightly tight fundamentals, coupled with timely regulation of central and local grain reserves, determines that the main tone of the annual corn market price will be stable, and the possibility of sustained sharp fluctuations is unlikely. For trading and processing entities, the short-term sharp drop in local corn prices due to concentrated listing is often not a risk but an opportunity. Not blindly following the trend and maintaining a normal purchasing pace may be the safest strategy in this year's corn market.