Corn: Can the market still soar after continuous gains recently?

In recent days, the main corn contract has risen from the lowest point of 2209 yuan/ton to the highest point of 2279 yuan/ton, with an increase of 3.16%, breaking the downward trend of the past six months. To investigate the reasons, we analyze the following points:

Firstly, the two official announcements of increased storage in the past two months have boosted market confidence to a certain extent, changing the previous mentality of traders who were afraid to collect grain. Some traders have gradually opened up warehouses to collect grain; Secondly, as the progress of grain sales progresses, the overall loose supply environment will be improved to a certain extent when the progress approaches or reaches 50%; In addition, as the Spring Festival approaches, the activity of purchasing and selling corn at the grassroots level is gradually decreasing. During the Spring Festival, objectively speaking, purchasing and selling are stagnant, and the supply is temporarily reduced; Finally, the import of corn has significantly reduced, and the impact of foreign corn has further weakened. The profit margin of foreign corn imports has significantly decreased compared to domestic corn imports, and the import volume has shown a further shrinking trend.

Although the recent increase in corn prices is not small, we believe that the probability of another rapid rise before the new year is not high. We expect that there will still be a wave of selling pressure after the new year. After the selling pressure subsides, we can choose to buy on dips. We expect the corn market to show a volatile upward trend in the future.

1. Frequent official announcements to increase reserves boost market confidence

On December 5, 2024, China Grain Reserves Corporation officially announced an increase in storage: China Grain Reserves Corporation and its related enterprises will continue to increase the scale of domestic corn collection and storage in major corn producing areas such as Northeast China in 2024, actively enter the market to carry out acquisitions, and the specific acquisition locations and related information will be promptly announced to the public through local media. After more than a month, China Grain Reserves Corporation once again announced an increase in storage: On January 11th, according to the work arrangements of relevant departments, China Grain Reserves Corporation and its affiliated enterprises will further increase the scale of domestic corn storage in 2024, and information on newly added purchasing warehouses will be promptly announced to the public through local media.

Subsequently, Heilongjiang, Inner Mongolia and other regions quickly announced additional storage locations: on January 11th, the Inner Mongolia branch of China Grain Reserves Corporation announced the latest 7 corn storage locations; On January 11th, China Grain Reserves Corporation Heilongjiang Branch announced the latest 26 corn storage sites. The recent frequent and rapid increase in reserves from top to bottom has to some extent boosted market confidence and given the market a more positive signal. According to traders in the production area, some traders have started to open warehouses to sell grain, which plays a very important role in regulating the mismatch between supply and demand of corn in this stage.

2. Nearly half of grain sales progress, supply expected to tighten

The progress of corn sales this year is slightly faster compared to the same period last year. According to data from Steel ｕｎｉｏｎ, as of January 9th, the sales progress of farmers in 13 provinces across the country was 48%, which is 4% faster than the same period last year. The progress of grain sales by farmers in the seven major provinces in China is 45%, which is 5% faster than the same period last year. In addition, after farmers sold their grain in December, their grain sales are relatively average. In addition, the amount of dry grain has increased, and traders' willingness to stock up has increased. In addition, with the upcoming Spring Festival approaching, grassroots purchasing and sales activities have basically come to a halt, and the expectation of temporary supply has tightened, which is conducive to the rebound of corn prices.

3. The significant contraction of imports has significantly weakened the impact

According to the latest data released by the General Administration of Customs, China's corn imports in November were 300000 tons, a year-on-year decrease of 92%. The total import volume of corn from January to November was 13.42 million tons, a year-on-year decrease of about 39.5%. Among them, 6.345 million tons of corn were imported from Brazil, accounting for 47.3%; Ukraine imported 4.613 million tons, accounting for 34.4%; The United States imported 2.065 million tons, accounting for 15.4%.

Due to the abundant harvest of corn in China this year and the decline in prices, imports have slowed down in recent months. After the restart of corn imports in September, Brazil has become the largest corn supplier in China for three consecutive months. In November, it imported about 190000 tons of corn from Brazil, accounting for 63% of the total import volume for the month, but the quantity decreased by 94% year-on-year. Ukraine is the second largest supplier of corn for the month, importing 50000 tons of corn from Ukraine in November. Recently, China has hardly ordered US corn, far below the average level in recent years. In addition, the profit margin of imported corn has been significantly reduced, and there has even been an inverted trend in the import profit of the US Gulf. The far month imports of the US West and Brazil have also shown an inverted trend, further reducing the impact of imported corn on the domestic market.

In addition, on January 10, the Ministry of Agriculture and Rural Affairs released an analysis of the supply and demand situation of agricultural products in China in January 2025: it is expected that domestic corn imports will significantly decrease in 2024/25, with a direct drop of 4 million tons in import volume, from an estimated 13 million tons in December to 9 million tons. The demand for feed and deep processing remains high, coupled with the purchase of additional storage by China Grain Reserves Corporation, the bottom support for corn prices is strong.