The space above and below corn is limited

In September, the previously expected blue and yellow futures market failed, and against the backdrop of the smooth transition between the new and old markets, pessimistic sentiment spread in the market. Corn futures and spot prices simultaneously gave up resistance and fell sharply. The corn futures 2411 contract fell as low as 2105 yuan/ton, and the 2501 contract fell as low as 2131 yuan/ton; The opening price of corn spot in Northeast China for deep processing of new grain has significantly decreased compared to the same period last year, and some deep processing in North China has fallen below 2000 yuan/ton; At the end of September, stimulated by macroeconomic policies, commodities rebounded significantly, and corn followed suit with an increase; But as we enter October, macro sentiment gradually fades, corn pricing returns to fundamentals, and prices weaken again.

Looking at the current situation, the main contradiction in the corn market is the pressure of new grain listings and the spread of macro support for commodities to indirect support for corn. Loose supply and demand remain the main tone of the corn market. On the one hand, the amount of new grain continues to increase, and on the other hand, some aged grains still need to be cleared, resulting in significant supply pressure in the market; Pig prices have fallen, breeding profits have narrowed, and the secondary fattening population is cautious and cautious. The stimulus for collection and storage is limited, and demand is unlikely to increase significantly in the short term. The focus of this round of macro policies is on debt securitization and then spreading to the stock market and real estate, with more emotional impact on agricultural products. However, when the corn market is extremely pessimistic, the lifeline of macro sentiment also needs to be grasped. Overall, the impact on the corn market is greater than the macro impact, especially as macro sentiment is gradually fading. Without macro disturbances, corn market prices should be even worse than they are now.

We have previously stated that further decline in corn market prices requires sustained panic selling or continued weakening of demand. For the former, the current opening price of new grain in Northeast China is close to the planting cost, with low grain prices and weak willingness of grassroots farmers to sell grain. There is a low price reluctance to sell, and it is difficult to have the panic selling in September in the short term. For the latter, the overall high level of deep processing production this year provides rigid support for the demand for corn; The year-on-year decline in feed demand has narrowed. According to data from the Feed Industry Association, the national feed production in September was 28.15 million tons, a year-on-year decrease of 4.1%. From January to September, the national feed production was 227.87 million tons, a cumulative year-on-year decrease of 4.3%; According to data from the National Bureau of Statistics, the inventory of sows capable of breeding in September was 40.62 million, an increase of 250000 or 0.60% compared to the previous month. After a slight decline last month, it has risen again, and basic production capacity continues to increase slightly. So, it may be difficult to see sustained panic selling or continued weakening of demand.

In terms of domestic substitutes, with the rapid decline in corn prices, wheat prices have remained relatively stable, and the price difference between wheat and corn has rapidly expanded. As of October 21, the price difference between wheat and corn in North China has reached 280 yuan/ton. There is no obvious substitution advantage for wheat prices, which will be conducive to increasing corn consumption. In the weak corn market price and lack of anchoring, the critical price difference for reasonable substitution between wheat and corn will determine the top of corn prices.

The import of corn has shown a tightening trend. According to data from the General Administration of Customs, the import volume of corn in September was only 310000 tons, a year-on-year decrease of 80.9%. The total import volume of corn from January to September was 12.83 million tons, a year-on-year decrease of 22.5%, a significant reduction in imports. As a result, the inventory of corn in domestic and foreign trade in Nangang has rapidly declined. As of October 11th, the total inventory of corn in Nangang's domestic and foreign trade was 185000 tons, significantly lower than the same period last year's 769000 tons, making the price of corn in Nangang relatively firm. However, the import of alternative energy raw materials such as sorghum and barley has also suppressed the price of corn. In addition, imported corn has been continuously auctioned recently, but the transaction rate is not high due to factors such as quality, which has little impact on the market in terms of scale. However, continuous auction investment will still become one of the suppressing forces in the market.

In summary, the current corn market is still in a bottom oscillation trend, and the space below is limited. It is not advisable to continue to be pessimistic. It is recommended to focus on the circulation of spot goods and be cautious in hoarding grain. Futures should pay attention to the support of the low point in the early stage, and wait for the later stabilization to try to buy on dips.