Corn stage strengthening

Since late September, corn futures prices have experienced a rebound after hitting a new low since July 2020. In the agricultural product market, the overall trend of corn is relatively independent and its performance is significantly stronger.

Recently, some areas in Heilongjiang have launched a plan to increase regulatory reserves, which has affected market sentiment. The directly affiliated warehouse of China Grain Reserves Corporation announced the purchase of new corn, with a price range of 2020-2100 yuan/ton for the third class 14% moisture content in Heilongjiang. As corn in Northeast China enters its peak harvest season, deep processing enterprises are gradually listing to purchase new grains. As of last weekend, the listed price of corn for deep processing enterprises in Heilongjiang was 1870-2010 yuan/ton, a decrease of 20-110 yuan/ton compared to the previous week; Jilin deep processing enterprises are listed for purchase at a price of 1910-2090 yuan/ton, a decrease of 10-20 yuan/ton compared to the previous week. The purchase price of feed corn is 2150-2250 yuan/ton, a decrease of 50-140 yuan/ton compared to the previous week. Compared to the continuous decline in corn prices in Northeast China, corn prices in North China have remained strong and experienced a weak rebound, mainly driven by the regular rotation of grain storage in China. As of last weekend, the mainstream purchase price for deep processing enterprises in Shandong, Hebei, and Henan was 2020-2240 yuan/ton, with a weekly increase of 30-150 yuan/ton.

As of the 40th week of 2024, the corn inventory in northern ports was 1.215 million tons, continuing the previous downward trend. It is expected that corn inventories in northern ports will rebound again starting from the 43rd week. As of the 40th week of 2024, the arrival volume of corn in the four northern ports has increased to 472000 tons, an increase of 253000 tons compared to the previous week. As the purchase volume of corn in the production area increases, the arrival volume of corn is expected to remain high until the 45th week. A massive amount of 417000 tons of corn were harvested in the four northern ports, although there was a decline in the weekly cycle, it is still at a high level in the same period of the past three years. From the inventory of southern ports, the domestic corn inventory in Guangdong Port is 181000 tons, still hovering at the low level of the year, while the foreign corn inventory has further decreased to the land level of 31000 tons. According to the current average price of 2150 yuan/ton for second-class corn in Beigang, including freight and port miscellaneous expenses, the theoretical cost of bulk shipping to the port is 2250 yuan/ton. Compared with the current price of 2340-2360 yuan/ton for second-class corn on bulk shipping in the south, it is about 100 yuan/ton lower. The amount of corn arriving in Nangang will significantly increase in the later stage. In addition, considering the dual impact of policies and profits on imported grains, it is difficult to achieve significant growth in the short term. In the later stage, Nangang's inventory will mainly be supplemented by domestically produced corn.

From the perspective of the deep processing market, as of October 11th, the corn inventory of deep processing enterprises was 2.714 million tons, slightly lower than the 2.81 million tons in the same period last year. There is still a continuous demand for replenishment in the fourth quarter, but the inventory of finished products is still at a high level, which will continue to suppress prices.

From the perspective of feed industry, with the changing cost of pig farming in China, the southern region mainly relies on imports, while the southern region is closer to the pig sales areas of the Pearl River Delta and Yangtze River Delta, gradually shifting the pattern of pig farming from north to south. At present, corn accounts for 31.2% of the compound feed produced by feed enterprises, an increase of 5.6 percentage points year-on-year. With the improvement of breeding profits and the recovery of the pig breeding cycle, the demand for feed in the later stage will see an increase. As of the week of October 11th, the available days of corn inventory for feed companies were 26.07 days, which is not only the lowest level of the year, but also the lowest level in the same period of the past three years, reflecting the cautious stocking mentality of feed companies. The stocking pace of feed companies in the later stage still needs to be monitored.

In summary, at present, the Northeast corn market is experiencing a peak period of concentrated listing, and the negative sentiment in the market has not yet reversed. The price of corn in the Northeast production area has fallen below the planting cost, and it is necessary to closely monitor the support of the production area's collection and storage policies for prices. The enthusiasm of traders to build warehouses will be an important indicator reflecting market sentiment. The consumer side focuses on the replenishment needs of the deep processing industry and feed enterprises. Under the expected impact of sustained policy based storage and stable consumption in production areas, the selling pressure brought by the peak of concentrated listing may achieve a smooth transition. After the release of market sentiment, corn prices are expected to experience a temporary rebound.