There is still room for corn to rise in the future market

Although corn is high-yielding, the reduction in imports has led to a decrease in total supply compared to the same period last year, while the demand side has remained stable and increased, and the supply and demand of corn still maintain a tight balance. With more than half of the corn on the market and a decrease in effective supply in the later stage, there may still be room for the corn spot price to rise.

Since late December last year, after digesting the bearish effects of high yields, corn futures have fluctuated higher, rebounding by over 130 points at one point. Looking ahead to the future, the progress of corn procurement in Northeast China is accelerating, downstream demand is improving, and coupled with a decrease in corn imports, the overall supply and demand structure is tightening. With multiple positive factors, corn futures may continue to rise.

Accelerated listing progress

Due to the increase in sowing area and better growth conditions, China's corn production continues to be high this year. According to the "Analysis of China's Agricultural Product Supply and Demand Situation in January 2025" released by the Market Warning Expert Committee of the Ministry of Agriculture and Rural Affairs, the planting area of corn in China in 2024/2025 will be 44740.7 thousand hectares, an increase of 1.2% over the previous year; The yield per unit area is 6591.7 kilograms per hectare, an increase of 0.9% compared to the previous year; The total output was 294.917 million tons, an increase of 2.1% over the previous year, reaching a new historical high. The huge pressure of high yield has caused corn futures to fluctuate downwards. In early December last year, the main contract was close to 2100 yuan/ton, reaching the lowest level in nearly four years.

As the spot price of corn fell to a relatively low level, traders began to purchase and stockpile, and the progress of corn procurement was fast. As of now, the corn procurement in Northeast China and the Huang Huai region has exceeded 50%, which is the second highest level in the past 7 years and only lower than the same period in 2020/2021. According to institutional statistics, as of January 16th, the progress of grain sales by farmers in 13 provinces across the country was 53%, 6% faster than the same period last year. The progress of grain sales by farmers in the seven major provinces in China is 50%, which is 7% faster than the same period last year. This has reduced the pressure on corn to enter the market in the later stage, laying the groundwork for further rebound in corn prices.

In addition, the news of the national reserve department's secondary storage support the corn spot market. On January 11, 2025, China Grain Reserves Corporation announced that 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. At the same time, Inner Mongolia and Heilongjiang branches will be the first to announce storage points, including 7 in Inner Mongolia and 26 in Heilongjiang. Currently, a total of 169 storage points have been announced. This is an important means for government agencies to stabilize corn prices, objectively reducing the overall supply of corn in the market and easing market supply pressure. Traders have entered the market one after another, joining the army of grain grabbing. The progress of corn procurement has rapidly increased, and corn prices have stopped falling and stabilized.

Demand has improved somewhat

The downstream demand for corn mainly includes two categories: feed demand and deep processing demand, among which corn feed demand accounts for a relatively large proportion, nearly 70%. In the past two years, due to the low prices of aquaculture products and low profits, the demand for corn feed has not been strong. However, with the prices of feed materials such as corn and soybean meal falling to the lowest level in recent years, the breeding costs of pigs, broiler chickens, and laying hens have decreased. Despite the low prices of breeding products, the inventory of pigs, poultry, and other feed materials remains at a high level, resulting in a high demand for corn and other feed materials.

Due to bearish outlook on the future market, after the launch of new corn in 2024, feed mills had a weak desire to purchase and stockpile corn. As a result, feed mills' corn inventory remained relatively low for a long time, dropping to the lowest level in nearly four years in December last year. But with the increase in the purchase volume of national reserves and the rebound of corn prices, influenced by the mentality of "buying up, not buying down", the willingness of feed mills to enter the market for procurement has increased, and the inventory of feed mills has begun to quickly recover. It has now recovered to more than 33 days and may continue to increase in the later stage.

In terms of corn deep processing, due to good downstream demand, the operating rate of corn deep processing was relatively high last year. With the rise in corn prices, corn deep processing enterprises have also increased their corn procurement volume. According to monitoring, as of January 15, 2025, the total corn inventory of 96 major corn processing enterprises in 12 regions of China was 6.251 million tons, an increase of 5.11%, significantly higher than the same period last year and the 5-year average level.

Decrease in import volume

Due to the high yield and continuous low corn prices in China, the import profit of corn has decreased, and the import volume of corn in China will sharply decrease in 2024. According to customs data, the total import volume of corn from January to November 2024 was 13.42 million tons, a year-on-year decrease of about 39.5%. Looking at each month, except for July and November 2024, the monthly import volume continued to decrease compared to the previous month, especially from August to November, where the import volume was less than 500000 tons for four consecutive months. Among them, the monthly import volume of corn in August and September was 381000 tons and 313000 tons respectively, hitting a new low since April 2020; The import volume of corn in October was only 251000 tons, a year-on-year decrease of 87.7%, reaching a new low since December 2019. Based on the current arrival schedule of imported corn at the port, it is expected that the import volume will continue to remain low in December 2024, with an annual import volume of less than 14 million tons, a decrease of more than 13 million tons from the previous year. For several consecutive years, imports exceeding quotas have had a certain degree of suppression on the rise in domestic corn prices, but with a significant reduction in import quantities, the pressure will be significantly alleviated.

    In summary, although corn is high-yielding, the reduction in imports has led to a decrease in total supply compared to the same period last year, while the demand side has remained stable and increased, and the supply and demand of corn still maintain a tight balance. In addition, the state-owned sector has once again carried out the purchase of national reserves, leading deep processing companies, traders, and feed mills to actively enter the market. In the later stage, with more than half of the corn market volume, the effective supply will decrease, and there may still be room for the corn spot price to rise.