Corn futures hit a four-year low! Has there been any change in the spot market situation?

On Tuesday, corn futures hit a new low since July 2020, closing at 2127 yuan/ton in midday trading. In terms of spot goods, corn could still be sold for around 1.3 yuan/jin last year, but in some areas from September to October this year, corn can only be sold for around 0.95 yuan/jin.

Although the temperature in Northeast China has dropped and there is no problem with the safe storage of corn, especially corn grown on the ground, another issue has arisen: many corn crops have already become moldy during the previous high temperature weather, and their preservation value is not significant. "Zhang Hongwei, a corn trader in Changchun, Jilin Province, told Futures Daily reporters that in the early stages of the temperature ｄｒｏｐ in Northeast China, the market generally expects farmers' enthusiasm for selling newly produced corn, especially high moisture corn, to decrease, and the market supply pressure will be much smaller. Corn purchase and sales prices will rebound. Surprisingly, due to the significant decline in corn quality, the enthusiasm of farmers and small vendors to sell corn has increased, resulting in an increase in corn inventory in northern ports and major distribution markets in mainland China, ultimately leading to downward pressure on spot prices.

At present, there are more rainy and snowy weather in the Northeast region, and the export volume of corn from production areas is showing a downward trend. However, the accumulated inventory in northern ports in the early stage has not been greatly affected by market supply, and the performance of corn prices is weak. At the same time, there is no bright spot in downstream demand, and coupled with the recent continuous decline in pig prices, market participants are not optimistic about corn prices in the later stage. It is expected that seasonal supply pressure will become the dominant factor in corn prices in the later stage. In addition, although there have been strong winds in Henan, Shandong, Hebei and other places recently, the weather has been sunny, which is conducive to threshing, drying and selling newly produced corn, and has increased market supply to a certain extent.

But in Zhang Hongwei's view, the short-term decline in corn prices does not mean that there is no hope for future rebound. There are also many favorable factors in the current domestic corn market: firstly, the phenomenon of winter wheat growth in mainland China is prominent, coupled with drought and lack of rainfall in many areas, the market expects that there will be significant variables in next year's winter wheat production; Secondly, the supply of imported corn and its substitutes has decreased. If this trend continues until the first half of next year, the pattern of oversupply in the domestic corn market will change; Thirdly, the quality of newly produced corn has generally declined, leading to price differentiation. In the future, there is a higher probability of higher quality corn being replenished.

Entering November, with state-owned enterprises such as China National Grain Reserves Corporation listing and opening up for purchase in the main corn producing areas of Northeast China, the sentiment in the domestic corn market is gradually increasing. Farmers, small grain traders, drying towers, and traders all expect a rebound in prices, but the actual transaction prices in the market are still low, and the boosting effect of increased storage on corn prices is limited. Chai Yinfeng, the general manager of Heilongjiang Yingfeng Grain Trading Co., Ltd., stated that the quality of newly produced corn is poor, and the number of corn that can meet the purchase standards of state-owned grain enterprises is limited, which to some extent has also discounted the "increase in storage benefits".

Recently, our local state-owned large-scale grain storage enterprises have been purchasing a large amount of corn, and market prices have not responded much to this. It is expected that with the increase in purchasing volume, the demand for storage will drive the rebound of corn prices. Pan Yutian, a corn trader in Qiqihar, Heilongjiang Province, said that the low price of new corn may lead to "cheap grain hurting farmers", and relevant institutions are actively taking necessary measures to stabilize market prices. It is expected that with the opening of more purchasing warehouses in the later stage, domestic corn prices will stabilize and rebound.