The atmosphere of price drop in the corn market is shrouded by deep processing production restrictions and crop shutdowns

Since August, as the time for new grain to be launched approaches, the sales window for 2023 corn season has gradually compressed. Under the pressure of spot supply in the market, deep processing enterprises of COFCO in Heilongjiang, Jilin, Hebei and Anhui have announced the suspension of corn purchases, and some deep processing enterprises have restricted production and processing. The strong supply and weak demand situation has led to a downward trend in the corn spot market.

At present, the supply of corn spot market is still under pressure, and the bearish sentiment of trading entities towards the future market is gradually increasing. Affected by high temperatures and rainy weather, the quality of corn has been damaged, leading to a stronger selling sentiment among traders. Some traders also face financial pressure from three parties and have a certain willingness to sell at a discounted price, resulting in a slightly loose supply in the corn spot market. However, downstream enterprises have weak capacity to absorb corn consumption, and the demand for deep processing enterprises is increasingly weakening. Under the supply-demand game, corn prices continue to decline.

COFCO's deep processing enterprises have successively announced the suspension of purchasing corn, which has intensified the panic of traders who were reluctant to sell at high prices in the early stage. Some traders have relaxed their mentality and started actively drying corn and naturally drying low-quality corn. A large number of low-quality grain sources have "surrounded" deep processing enterprises, leading to a strong willingness of enterprises to lower prices. And the deep processing enterprises that have been eroding the confidence of traders have also quickly responded, further lowering the purchase price of corn.

The suspension of production by COFCO's deep processing enterprises can fully reflect the current situation of most deep processing enterprises. Currently, most deep processing enterprises in Northeast China have sufficient inventory, and even some enterprises can maintain their inventory until the new season of corn is launched. In addition, some enterprises have had to proactively reduce their inventory in the face of losses in processing profits due to high prices of corn purchased through online bidding in the early stage. At the same time, the processing costs of deep processing enterprises in Northeast China are slightly higher than those in North China, and the prices of processed products are generally average, resulting in a lack of profit advantage for enterprises, and even exacerbating losses for some individual enterprises, indirectly leading to an increase in the current situation of deep processing shutdowns, suspensions, and production restrictions.

Currently in the off-season for deep processing enterprises, some of them have not fully started production. Due to the impact of rainfall and flood discharge in the early stage, some areas' grain sources have been soaked in water and their quality has been damaged. Therefore, traders can only send them to deep processing enterprises. It is understood that the current Mengzhou Alcohol Factory in Henan is in a semi production state; The processing products of Kaiyuan Yihai in Liaoning are generally shipped, and currently the enterprise is limited in production and operation; Changqing Biotechnology in Changzhi, Shanxi Province has a maintenance plan in the near future, and some enterprises have opened processing production lines according to their own situation, indicating an intention to actively reduce inventory. Overall, the demand follow-up of deep processing enterprises is clearly insufficient, and it is difficult to achieve significant volume increase in the short term.

Although there is still support at the bottom of corn, due to the approaching launch time of new season corn and the suppression of negative factors, the demand of deep processing enterprises is unlikely to have a significant improvement in the short term, and there is little upward space for corn prices.