The production and demand pattern is tight, and corn will first rise and then fall

Since the end of September, corn prices have fluctuated upwards. Taking the corn 2501 futures contract as an example, corn prices have risen from 2160 yuan/ton to 2230 yuan/ton, an increase of 70 yuan/ton. The current corn futures prices are in a sideways consolidation state, and the volatility of corn may increase in the near future. Based on factors such as the new year's corn production and demand, current energy grain price differences, and corn basis, we believe that the current strategy of buying corn basis is relatively appropriate.

The production and demand of corn in the new year are relatively tight

According to institutional data, it is estimated that the domestic corn planting area in 2024 will be about 608.19 million mu, a decrease of 8.73 million mu compared to 2023, a year-on-year decrease of 1.42%. From a regional perspective, the corn planting area in Northeast China will be approximately 246.56 million mu in 2024, a year-on-year decrease of 2.38%; The corn planting area in the North China region is about 218.02 million mu, a decrease of 1% year-on-year; The corn planting area in the northwest region is about 53.04 million mu, an increase of 0.11% year-on-year. In addition to planting area, corn yield is also an important influencing variable. According to statistics, in 2024, the yield of corn in the Northeast region decreased by 2.51% year-on-year, the yield of corn in the North China region decreased by 6.98% year-on-year, and the yield of corn in the Northwest region increased by 2.581% year-on-year. Taking into account the planting area and yield of corn, the domestic corn production in 2024 is expected to be approximately 271 million tons, a decrease of 9.01 million tons or 3.2% compared to the same period last year. Considering the year-on-year decline in new corn production and assuming that corn demand does not significantly decrease, we evaluate that the year-on-year pattern of corn production and demand in the new year is relatively tight.

Due to the growth cycle of corn, the price trend of corn exhibits strong seasonality. Therefore, considering seasonal factors, we believe that the fourth quarter will be the annual low point for corn prices. Corn prices will remain relatively high in the first and second quarters of next year, and the supply of corn substitutes will increase in the third quarter. Corn prices may show a downward trend from a high level. Simply put, the price trend of corn in the new year may show a trend of first rising and then falling.

Short term restrictions on imported grains

According to data from the Chicago Mercantile Exchange, as of October 29th, the closing price of the March futures contract for US corn next year is approximately 427 cents per bushel. Based on the current basis and exchange rate, the tax payment cost for US corn within the quota to Guangdong region is approximately 2034 yuan per ton. For domestic corn, taking the 2503 contract on the Dalian Commodity Exchange as an example, the cost of arrival in South China is approximately 2380 yuan/ton. Overall, it can be seen that the cost of importing corn within the current quota to the port is 346 yuan/ton lower than that of domestic corn. From the perspective of the price difference between domestic and foreign corn, the arrival cost of imported corn within the current quota is significantly lower than the cost of domestic corn to South China. However, due to policy factors, China is still unable to import a large amount of foreign grains in the near future, which will increase domestic corn demand to some extent and support the domestic corn market price.

According to Chinese customs data, in September 2024, China imported 310000 tons, 970000 tons, 940000 tons, and 230000 tons of corn, sorghum, barley, and wheat, respectively. The total import volume of imported grains was about 2.45 million tons, while in the same period last year, the total import volume of the four types of grains was about 3.74 million tons. In addition, from a monthly perspective, the total arrival volume of imported grains in September 2024 also showed a downward trend compared to the previous month. Based on the reference shipping schedule and Reuters data, we estimate that the total arrival volume of imported corn, sorghum, and barley from October to December 2024 will be 1.7 million tons, 1 million tons, and 1 million tons, respectively. It should be noted that due to the significant uncertainty in shipping schedule data, it is necessary to track and adjust on a weekly basis. Overall, the supply of imported grains was at a temporary low point in the fourth quarter, which will increase the demand for domestic corn and support the fluctuation and strengthening of domestic corn prices.

Increased outflow of corn from Northeast China

From the perspective of regional price differences, the price difference between corn from Northeast China and North China has improved since the National Day holiday, which is conducive to the outflow of corn from Northeast China. According to institutional data, as of October 29th, the price difference between North China corn and Northeast corn was about 80 yuan/ton, while on September 27th, the price difference between North China corn and Northeast corn was about -140 yuan/ton. Based on historical data and factors such as location, we believe that the reasonable price difference between North China corn and Northeast China corn should be maintained within the range of 150-250 yuan/ton. As the price difference between corn from North China and Northeast China rebounds from its low point to the current level, we believe that corn from some parts of Northeast China can be transported by truck to North China, which will increase the demand for corn in Northeast China to some extent and support the price of corn in Northeast China.

In addition, the massive data of Beigang Corn can also verify the above viewpoint. According to institutional data, since October 2024, the weekly volume of corn in the four northern ports has reached approximately 500000 tons, a significant increase compared to the previous volume. In addition, according to segmented data, the amount of corn sent from northern ports to the Yangtze River region is about 150000 tons/week, which is equivalent to about 600000 tons/week of arrival at the Yangtze River estuary, a significant increase compared to May September 2024. It should be noted that the increase in the arrival of corn from Northeast China in the Yangtze River region indirectly reflects that Northeast corn has a price advantage compared to North China corn. From the perspective of regional price differences, this will increase the outflow of corn from Northeast China, thereby supporting the price of corn in the Northeast region.

In summary, the production and demand pattern of corn in the new year is in a relatively tight state. According to the seasonal trend of corn prices, corn prices may show a trend of first rising and then falling. Considering factors such as the current corn base spread and the far month material price difference, we believe that it is difficult to trade corn unilaterally. At this stage, it is recommended that corn traders prioritize buying corn based on a relatively controllable risk. In addition, we still need to pay attention to the impact of policy factors on corn prices and adjust corn positions in a timely manner.