Corn and Starch Monthly Report: Spot Supply Pressure Relieves, Corn Will Still Shake Bottom

Review of Corn Market in October:

In the October USDA report, global supply pressure slightly eased, and US corn continued to increase yield. Net long positions in US corn increased, with strong support at 400 cents per bushel. The bottom of domestic North China corn has appeared, and currently spot prices are rebounding. Affected by the news of storage and procurement, the spot prices in Northeast China are basically close to the bottom, and imported grains have begun to tighten, resulting in a decrease in corn production and a reduction in corn supply pressure. The price difference between North China corn and Northeast China corn is at a high level, and the market is still fluctuating narrowly around 2200 yuan.

Internationally, the bottom of US corn has appeared, with strong support at 400 cents per bushel. With increasing demand in the later stage, there is still a possibility for US corn to rise. Brazil's corn exports have increased, and the planting progress has accelerated. There may still be speculation about weather conditions in the later stage.

Domestically, the selling pressure in Northeast China will weaken in November, and farmers will be reluctant to sell. Northeast corn will hit the bottom and rebound. The cost of planting new crops has decreased, and the demand for breeding has still slightly increased. Feed companies are stocking up. Considering the expected reduction in production and the impact of storage policies, the bottom support for North China corn in 2050 is strong, and there is support for Heilongjiang corn near 1900. It is expected that the closing price of Beigang in November will be between 2150-2250, and the 01 market's premium spot is also expected to fluctuate strongly between 2150-2250. Due to the low level of by-products and the long period of losses in deep processing, it is expected that the price difference between 01 corn and starch will remain high.

1. Unilateral: The US corn 12 contract enters at around 400 cents per bushel, with a target of 430 cents per bushel. Domestic 01 corn maintains a fluctuation of 2150-2250.

2. Arbitrage: The price difference between 01 corn and starch fluctuates between 380-450. Buy corn spot and sell 01 corn.

3. Options: Watch and see. (The above views are for reference only and shall not be used as a basis for market entry).

Part II International Corn Fundamental Situation

1、 Global corn supply decreases, with new corn stocks appearing at the bottom

In October 2024, the USDA reported a slight decrease in global corn production, but production and inventory to sales ratios remain high. The expected global corn production for the year 24/25 is 1.217 billion tons, lower than last year's 1.226 billion tons and also lower than last month's 1.219 billion tons. Among them, the consumption of feed corn was 774 million tons, which was 770 million tons higher than last year. The total domestic consumption was 1.217 billion tons, which was 1.214 billion tons higher than last year. It is expected that the ending inventory will be 306.5 million tons, which is lower than last year's 312.7 million tons. The inventory to sales ratio is 25.19%. Among them, the United States produces 386 million tons, feeds 147 million tons, consumes 174 million tons for food and industry, and exports 59.06 million tons. Brazil's production is 127 million tons, with 63 million tons for feed and 49 million tons for export. Argentina produces 51 million tons and exports 36 million tons. Ukraine produces 26.2 million tons and exports 23 million tons. The global supply pressure is still high, but consumption is still increasing, the inventory to sales ratio is decreasing, and the pressure is beginning to ease.

2、 US corn yield continues to rise, exports increase, inventory slightly decreases

The October report shows that the corn harvest area in the United States remains unchanged, and the yield continues to increase. The cost line for 24/25 US corn is around 480 cents per bushel, and the US corn area is around 90.7 million acres, lower than last year's 94.6 million acres. The yield per acre has been increased from 183.6 catties per acre in September to 183.8 catties per acre in October. This year, the yield of high-quality American corn is relatively high, and the harvesting progress has accelerated. As of October 29th, the yield of American corn is 81%, higher than 68% last year.

The ethanol production in the United States is at a high level, higher than last year, and has recently remained around 1.1 million barrels per day. The holdings of the US corn fund have begun to shift towards net long positions. As of October 22nd, the net long position of US corn non-commercial holdings was 18000 lots, which began to turn into a net long position.

3、 Brazil's corn exports are lower than last year, and the progress of planting a crop is accelerating

The progress of planting a crop of corn in Brazil has accelerated, but Brazil's export volume is still lower than last year. Brazil exported 6.43 million tons in September, with a cumulative export of 23.49 million tons from January to September, lower than last year's 34.01 million tons. Currently, Brazil is in the peak export season. But the total export volume is still lower than the same period last year. As of October 29th, Brazil has harvested 36.8% of its corn crop, which is basically the same as last year's 37.2%.

Part III Fundamental Analysis of Domestic Corn

1、 The planting cost has decreased, the production of new corn has decreased, and there is still pressure on the harvest in Northeast China

In October, the pressure on corn in North China eased, and the bottom of corn prices appeared, currently fluctuating upwards. But the Northeast region is facing harvest pressure, and the carried over inventory is still high, resulting in delayed harvest and continuous decline in spot prices. The price difference between corn in Northeast and North China is widening.

The initial production of corn for the new season has been set, and the market expects a reduction of about 10 million tons. Steelｕｎｉｏｎdata shows that the national area has decreased by 1.42% and production has decreased by 8.73 million tons. Among them, the Northeast region (four provinces in Northeast China) reduced production by 3.28 million tons, and the three provinces in North China (Shandong, Henan, Shandong) reduced production by 5.48 million tons. We believe that the production reduction in Northeast China may be over 5 million tons, with Liaoning reducing production more than Steel Union. SteelｕｎｉｏｎLiaoning reduces production by 260000 tons, and we believe that Liaoning will reduce production by at least 2 million tons. Under the new expectation of production reduction, the bottom of corn is gradually becoming clear. The bottom of corn in North China has already appeared, and the bottom in Northeast Shandong is at 2050 yuan/ton. Heilongjiang started to stabilize and rebound at the end of October, and the bottom in Suihua area of Heilongjiang is around 1900 yuan/ton.

Due to the decrease in land rent this year, planting costs in Heilongjiang are also decreasing. The land rent in Heilongjiang is basically around 800 yuan/ton. Calculated at 1600 jin/mu, the cost is basically around 2000 yuan/ton, and the converted port closing price is basically around 2250 yuan/ton. 01 corn will still fluctuate around the cost line in the short term.

Imported corn continued to decline in September, but the amount of substitute grains remained higher than last year. In September, 310000 tons of corn were imported, with a cumulative import of 12.83 million tons, lower than the same period last year's 16.56 million tons. The total import of corn, sorghum, barley, and DDGS was 31.63 million tons, higher than the 27.5 million tons in the same period last year, and the domestic grain supply is still relatively high. It is expected that grain imports will continue to decrease in the fourth quarter.

2、 Feed demand continues to improve in September, but consumption remains lower than last year

November is the traditional breeding season, and with low prices of corn and soybean meal, it is expected that the demand for feed will increase. According to data from the China Feed Industry Association, the feed production for September 2024 was 28.15 million tons, an increase of 1.2% month on month and a decrease of 4.1% year-on-year. The cumulative feed production from January to September was 227.87 million tons, a decrease of 4.3% year-on-year. The production of pig feed in the first three quarters was 102.29 million tons, a year-on-year decrease of 6.8%. The production of egg and poultry feed was 22.88 million tons, a year-on-year decrease of 5.9%. The production of meat and poultry reached 70.53 million tons, a year-on-year increase of 0.5%. The feed for broiler chickens decreased by 0.4% year-on-year, while the feed for meat ducks increased by 1.0% year-on-year. The data from the Industry Association is similar to our predictions in terms of pigs and poultry, but there is a significant difference between the egg and poultry data and ours. Egg and poultry stocks are relatively high this year, and it is expected that feed production will increase year-on-year. The main reason for the significant difference in egg and poultry feed is the relatively low coverage of statistical data on egg and poultry feed by industrial associations, as well as the good profits of egg and poultry, and the large proportion of self distribution by individual investors. November is the traditional breeding season, and demand is expected to increase. It is expected that the month on month increase will continue. In terms of live pigs, the existence of live pigs is still on the rise, and the profit of live pigs is good. It is expected that the demand for live pig feed will continue to grow. According to data from Steel Union, 123 sample companies had a stock of 34.9971 million pigs in September, an increase of 0.7% month on month and 0.24% year-on-year. As of October 29th, the profit from self breeding and self raising was 474 yuan/head, and the profit from purchasing piglets was 149 yuan/head. The profit of live pigs continues to decline, with an increase in inventory. It is expected that inventory will remain relatively stable in November, and feed demand will also remain relatively stable. The profit of broiler farming increased in October, and as of October 27th, the profit of broiler farming was 0.32 yuan per chicken. As of October 27th, the cost of egg farming is 3.39 yuan/jin, and the profit from farming is 1.35 yuan/jin.

3、 The profit of deep processed corn is at a high level, and the operating rate is increasing

In October 2024, corn prices continued to decline, with good demand for starch, and inventory of deep processed corn began to increase. As of October 23rd, the inventory of 96 deep processed corn companies was 3.028 million tons, which was 2.92% higher than the same period last year. Heilongjiang's corn inventory was 755000 tons, up 10.76% from last year, Shandong's corn inventory was 481000 tons, down 2.04% from last year, and Jilin's corn inventory was 349000 tons, up 31.4% from last year. The start-up rate of starch enterprises remained high in October, with a start-up rate of 60.14% as of October 23. The starch inventory of starch enterprises is also higher than last year, and the profits of starch enterprises are at a high level. As of October 28th, the profit of starch in Heilongjiang was 147 yuan/ton, and the profit in Shandong was 103 yuan/ton. Starch inventory continues to decline, but still higher than last year. As of October 23, starch inventory was 795000 tons, a monthly decrease of 10.1% and a year-on-year increase of 35.9%. In November, starch companies will still have good profits, the operating rate will continue to increase, and starch inventory will remain high. But in October, it was reported that starch could be exported. According to the average annual export volume of about 400000 tons in the past, it will be beneficial for starch in the medium and long term.

4、 Northern corn inventory begins to accumulate, while southern grain inventory continues to decline

In October, the corn inventory in Beigang was seasonally accumulated, but the grain inventory in the south decreased due to reduced imports. According to data from Mysteel's corn team, on October 18th, the total corn inventory in the four northern ports was 1.472 million tons, and the inventory began to increase. Guangdong Port has a domestic corn inventory of 122000 tons, a foreign trade inventory of 16000 tons, imported sorghum of 606000 tons, imported barley of 681000 tons, and a cumulative grain inventory of 1.425 million tons.

5、 Corn and starch trading logic

In October 2024, corn spot prices continued to decline, with high operating rates and low prices of by-products. The decline in starch prices was relatively small, resulting in higher profits for starch enterprises. At present, the corn prices in Northeast China have fallen significantly, and the price difference between corn in North China and Northeast China continues to widen. The prices of by-products are still relatively low, and the contribution of by-products from starch enterprises has reached a new low in 19 years. Among them, the contribution of by-products from deep processing in Shandong is 530 yuan/ton. In October, corn in North China stabilized and rebounded. The market expects the base price of corn in Shandong to be around 2050 yuan/ton, and the base price of starch in Shandong to be around 2700 yuan/ton. At present, the price difference between Shandong corn and Heilongjiang corn is relatively high, and Heilongjiang starch has begun to have pricing power. It is expected that there will be more warehouse receipts for the 01 contract in Heilongjiang. 01 Starch is expected to be delivered at a discount during the Spring Festival period. For North China starch, the current profit is relatively high, and it is expected that the company will incur losses in mid to late December. But there is still a peak season expectation in November, and it is expected that the fluctuation of 01 starch will be relatively small.

Part Four Market Outlook

Corn:

In 24 years, global supply is still sufficient, and the USDA report in October raised the yield. However, the demand for US corn has increased, and the net surplus has begun to increase. The bottom of US corn has basically been established, and there is still room for rebound in the later stage. In the new season, domestic corn production has decreased, imported grains have started to decrease, and the substitution of wheat and brown rice has significantly decreased. Demand is slowly increasing, and corn supply will be tight in the 24/25 fiscal year. At the end of September, a large amount of corn was launched in North China domestically. In October, North China corn rebounded, and the bottom of North China corn has already appeared. The price of 2050 yuan/ton in Northeast Shandong is basically at the bottom, and it will continue to rebound in the later period. In October, a large amount of corn was launched in Northeast China, and due to the impact of storage news, Northeast corn began to stabilize and rebound. Expected space in Heilongjiang is limited below 1900 yuan/ton. There is still room for a rebound in Northeast corn in November, but considering the delayed harvest and high carryover this year, there is still selling pressure from Northeast farmers before New Year's Day, and the market is expected to continue to fluctuate narrowly.

Starch:

The supply of corn is sufficient, the operating rate is at a high level, and the starch inventory will still be at a high level. In October, with the large-scale launch of new corn in North China, the profit from deep processing is relatively high. The fourth quarter is the traditional peak season for starch demand, usually with considerable profits. According to past patterns, the profit from deep processing in November will reach a high point for the year. The spot price of starch in Shandong is around 2700 yuan/ton, with a basic bottom near 2550 yuan/ton in Heilongjiang. Moreover, the price of by-products is at a low level, and it is expected that the price difference between starch and corn will remain high. The price difference between 01 corn and starch will continue to fluctuate at a high level, and the price difference between 01 corn and starch is likely to be between 380-450.

[Trading Strategy]:

The bottom of US corn has basically been established, with strong support at 400 cents per bushel. The net long position of US corn has increased, and it is expected that there is room for a rebound in US corn. At present, affected by the news of storage and harvest, the downward space for corn in Northeast China is limited. Corn in Heilongjiang is basically at the bottom, and the bottom of corn in North China has also been established. Corn in November will still be relatively strong. But there is still selling pressure before January, and it is expected that corn will continue to fluctuate narrowly in November, and the market will still rise to spot prices.

1. Unilateral: Enter the US corn 12 contract at around 400 cents per bushel, with a target of 430 cents per bushel. Domestic 01 Corn Pre production

Shake between 2150-2250, try shorter options below 2180, and lower options for 01 starch between 2580-2650.

2. Arbitrage: The price difference between 01 corn and starch fluctuates between 380-430. Buy corn spot with short market 01 corn.

3. Options: Watch and see. (The above views are for reference only and shall not be used as a basis for market entry).