Corn port inventory is at a historical high

Since the end of November, corn futures prices have experienced a significant decline. The contract price for corn 2501 has dropped from 2190 yuan/ton to 2120 yuan/ton. There are two main reasons for the decline in corn futures prices this week: firstly, the inventory of corn in the northern and southern ports has reached a historical high for the same period, and in the short term, it is no longer possible to accommodate the volume of corn gathered at ports; The second reason is that corn futures prices have a significant premium compared to spot prices and are at a historical high during the same period. Considering factors such as corn supply and demand, basis, and warehouse receipts in the future, corn is currently in a neutral low valuation and weak upward driving pattern. It is recommended that investors take a wait-and-see approach.

Port storage capacity is relatively tight

Data shows that as of November 22, the corn inventory in the four northern ports was about 4.06 million tons, an increase of 3.26 million tons year-on-year, which is at a high level since the same period in 2018. From the weekly data, the corn inventory in the four northern ports has rapidly increased from 1.16 million tons at the end of September to the current 4.06 million tons. When the corn inventory in the four northern ports is at a low level, the northern ports can accommodate a weekly corn collection volume of 1.2 million to 1.6 million tons. But when corn inventory is relatively high, port storage capacity is relatively tight and cannot accommodate a large amount of corn arriving at the port. In addition to the rapid increase in corn in the four northern ports, the inventory of feed grains in the southern ports has also accumulated rapidly. According to data from Guangdong Corn Data Network, as of November 29th, the total inventory of corn and other grains in Guangdong was about 2.33 million tons, which is at a high level since the same period in 2019. In terms of sub items, the domestic corn inventory is about 907000 tons, the imported corn inventory is about 33000 tons, the imported sorghum inventory is about 582000 tons, and the imported barley inventory is about 815000 tons. From a material perspective, the rapid increase in grain inventory in Guangdong is mainly due to a significant increase in domestic corn inventory. Based on the current high inventory of corn in the north and south, the short-term driving force for corn price increases is weak, and it will take time to digest some of the corn inventory.

Short term attention to the rhythm of farmers' grain sales

From the trend of corn futures prices, in recent times, the decline in corn futures prices has been greater than the decline in spot prices. Taking the basis of the contract between Northern Port and 2501 as an example, the corn basis has increased from -115 yuan/ton to the current -67 yuan/ton. As the corn basis gradually returns, the decline in corn futures is relatively limited. Of course, the significant increase in corn futures prices has resulted in a rapid increase in warehouse receipts, which are relatively high. According to data released by the Dalian Commodity Exchange, as of December 3rd, the number of corn warehouse receipts was 78200, a significant increase compared to the number in October. Furthermore, based on year-on-year data, the current number of corn warehouse receipts is at a high level since the same period in 2017, second only to the same period in 2022. Based on the current corn basis and warehouse receipt data, we believe that corn futures prices in recent months are still facing warehouse receipt suppression.

The current price of corn is showing a weak trend, and the most fundamental reason is that farmers have a good enthusiasm for selling grain, and the supply of corn has increased in stages. Data shows that as of November 28th, the progress of grain sales by farmers in the Northeast region is about 22%, with a five-year average of about 18%; The progress of grain sales by farmers in the North China region is about 27%, with a five-year average of about 21%. Based on the above data, it can be seen that farmers in the Northeast and North China regions have relatively high enthusiasm for selling grain this year. It should be noted that this year, the temperature in the above-mentioned regions has been relatively high compared to the same period last year, and some farmers in certain areas have difficulty storing corn, resulting in a temporary increase in grain sales compared to the same period last year.

Conclusion: In summary, the current corn market is facing high corn inventory in the North and South ports, high corn warehouse receipts, and a neutral low corn valuation. Based on this, we believe that the short-term corn price is in a volatile and weak trend, with weak upward driving force. We recommend investors to take a wait-and-see approach. In addition, we need to focus on the rhythm of increasing corn storage. According to incomplete statistics, China Grain Reserves Corporation has successively released corn storage points since November 22nd. As of the end of November, China Grain Reserves Corporation has released about 42 corn storage points, which is to some extent conducive to stabilizing the corn market. Of course, if the corn market price further weakens in the later stage, the driving force and willingness of China Grain Reserves Corporation to continue to increase storage may increase. Based on this, we assess that the decline in corn prices at the current level is relatively limited.