IndustryThe temporary supply and demand of corn tend to be loose, and a short-term pullback may not be ruled out
Recently, the spot prices of corn have generally been strong, supported by the policy of China Grain Reserves Corporation to expand the production and storage scale of corn in the three northeastern provinces in 2024, as well as market concerns about the China US trade war. At the same time, the fast pace of grain sales has led to reduced supply pressure after the holiday, which also provides support for the market. However, firstly, there is a seasonal high in port inventory; secondly, there may still be a seasonal grain sales period under the background of rising temperatures; thirdly, with the rise in corn prices, profits in the deep processing and feed industries are shrinking, which will limit the demand space for raw materials. The fourth is to maintain the premium of futures, attracting industry sellers to hold value or arbitrage traders to enter the market. If the market rises, it is necessary to release warehouse pressure in advance.
2、 Fundamental analysis
（1） The progress of grain sales is relatively fast compared to the same period last year, and the supply pressure has decreased compared to the same period last year
According to Mysteel data, as of February 14th, the progress of corn sales nationwide has reached 61%, compared to 56% in the same period last year. Among them, 58% in North China, 53% in the same period last year, and 59% in Northeast China, 53% in the same period last year. The progress of grain sales this year continues to be relatively fast, and the supply pressure after the holiday will be significantly reduced. However, the resumption of production and work after the holiday is gradually advancing. If the temperature rises, it will accelerate the pace of grain supply at the grassroots level. Seasonal pressure still exists, and there is no basis for a sharp increase in short-term prices.
（2） Port grain inventory is relatively high year-on-year
According to Mysteel data, as of February 7th, the corn inventory in the four northern ports was 4.226 million tons, compared to 1.3528 million tons in the same period last year. Due to the resumption of production and work after the holiday, the weekly inventory decreased by 174000 tons and the monthly inventory decreased by 392000 tons. Due to the Spring Festival holiday, the number of goods arriving at the port has dropped to a low level. Due to policy support for storage during the Spring Festival holiday, prices remained relatively strong, with the closing price of second-class grain at Jinzhou Port rising from 2150 after the holiday to 2190. Overall, port inventory has significantly increased year-on-year, and the potential for price increases in the future may be limited.
The inventory of corn for domestic trade in Guangdong Port was 1.502 million tons, which remained at the level of 150000 to 300000 tons in the same period last year. It increased by 95000 tons on a weekly basis and decreased by 293000 tons on a monthly basis. The market price of second-class grain in the northeast region of Guangdong Port is 2290, up 20% from 2270 after the holiday. At present, the price difference between Guangdong Port and Northeast China remains at around 140, and there is a slight profit from shipping from North Port to South Port, resulting in high inventory levels in Guangdong Port. At the same time, the grain inventory in Guangdong Port was 2.905 million tons, up from about 2.53 million tons in the same period last year, which is at a high level in recent years. It increased by 120000 tons on a weekly basis and decreased by 327000 tons on a monthly basis. Subsequent feed companies may not be in a hurry to purchase.
（3） Continuous profitability, seasonal rebound in deep processing start-up rate
According to Mysteel data, as of February 14th, the company's starch inventory was 1.347 million tons, which is at an absolute high in the same period of recent years. Last year, it was 1.0017 million tons, an increase of 23000 tons on a weekly basis and 441500 tons on a monthly basis. Due to ongoing inventory pressure, starch prices are maintaining a weak adjustment trend. However, due to the low prices of raw materials, the enterprise still maintains a profitable state. The profit of Jilin deep processing enterprises is about 98 yuan/ton, and the profit of Shandong region is about 48 yuan/ton. Under the influence of profit attraction and seasonal cycles, there is a trend of recovery in the start-up rate of enterprises. Currently, the industry start-up rate is 57.36%, compared to about 54.45% in the same period last year. The enterprise's corn inventory is 4.456 million tons, compared to 4.77 million tons in the same period last year. With the resumption of work and production after the holiday and the increase in operating rates, it may drive the demand for raw material replenishment, which is conducive to supporting corn prices in the short term.
（4） Feed demand or stable increase
The current inventory of live pigs corresponds to the inventory of sows that were able to breed in April last year. The inventory of sows capable of breeding in April 2024 was 39.86 million, the lowest value since September 2021. Until November 2024, the number of sows capable of breeding maintained a month on month increase, and there is an expectation of a month on month increase in feed demand before September 2025. The latest data shows that as of the end of December 2024, the inventory of breeding sows in China was 40.78 million, close to 105% of the green and reasonable production capacity regulation areas being put online. This data is the first time since April 2024 that breeding sow data has declined, and it has boosted market sentiment towards the distant future. In addition, the profit of pig farming continues to shrink. As of February 14th, the profit from self breeding and self raising has dropped to 83.24 yuan/head, and the profit from purchasing piglets has dropped to 73.9 yuan/head. The decrease in profit may lead to cost control in pig farming, making it difficult to significantly increase feed demand.
In addition, as of February 14th, the inventory days of feed enterprises were 30.11 days, basically unchanged from the same period last year and at a relatively low level in recent years. Due to the year-on-year increase in corn inventory in Guangdong Port and the impact of low corn prices, although there is a need for companies to replenish their inventory, they may still focus on using it as needed, and significant stockpiling may be difficult to occur.
（5） The quantity of imported substitutes has decreased, and wheat prices are leading to the top of corn prices
Customs data shows that China imported 340000 tons of corn in December 2024, a year-on-year decrease of 93.1%. From January to December, the cumulative imports were 13.64 million tons, a year-on-year decrease of 49.7%. In December, China imported a total of 3.43 million tons of corn, sorghum, barley, and wheat, a year-on-year decrease of 4.11 million tons, a decrease of 55%. At the same time, the domestic trade inventory in Guangdong Port continued to remain low, indicating that the impact of imported grains has further weakened. With the reduction of US corn production and ending inventory, the price of US corn has risen sharply recently, leading to an increase in import costs of over 2200. Overall, the significant reduction in corn imports and grain substitution imports has led to a decrease in Nangang's foreign trade inventory. Driven by market sentiment and policies, southern enterprises have made more purchases of domestically produced corn, resulting in a significant increase in demand. Meanwhile, the increase in import costs is also pushing up the bottom of domestic corn prices.
In terms of wheat, due to loose fundamental supply and demand, coupled with the policy of supplementing supply, the driving force for the sustained rise in wheat prices is insufficient. However, the market price is already near the lowest purchase price, and at the same time, China Grain Reserves Corporation's procurement is accelerating. The bottom price of wheat is relatively stable, and the downward space is expected to be limited. It is expected that wheat will mainly fluctuate. At present, the price difference between wheat and corn in Shandong and other places remains around 150 yuan/ton, which is close to the critical point of wheat replacing corn for feed. If corn continues to rise, it will attract wheat to flow into feed enterprises. However, due to the current stage of loose supply and demand for corn, the upward space for corn is currently limited.
（6） Spot prices tend to be strong, leading to a slight increase in basis
As of February 14th, there were 113158 registered warehouse receipts for corn futures on the exchange, with no change compared to the previous month. From a seasonal perspective, the registered warehouse receipts for corn are at a historically high level. After the Spring Festival, under the support of policies and concerns about the US China trade war, spot prices have shown a strong performance, while the main futures contracts have remained volatile, and the upward trend of futures has been somewhat restored. As of February 13th, the corn closing price basis at Jinzhou Port has been forced to increase by -115 yuan/ton. But futures still maintain a rising trend, leading to continued selling pressure. In terms of price difference, as of February 14th, the price difference of corn in the East China Northeast region is about -30 yuan/ton, still maintaining an inverted state, and the outflow of corn from Northeast China still does not have profit conditions.
3、 Summary and Prospect
On the supply side, the fast sales progress of corn has led to a decrease in post holiday corn supply pressure. But with the resumption of production and work and the rise in temperature, the volume at the grassroots level may increase seasonally. At the same time, the significant increase in corn inventory in the ports of the north and south compared to the same period last year also indicates that there is still a certain accumulation of inventory in the channels. In terms of midstream and downstream, China Grain Reserves Corporation will continue to increase its collection and storage points based on policy support. The seasonal rebound in the operating rate of deep processing enterprises combined with sustained profitability will attract companies to continue replenishing inventory. However, due to high product inventory and narrowing product raw material price differences, the extent of replenishment still needs to be monitored. Feed companies have a need to replenish inventory, but the driving effect on raw materials is limited due to the high year-on-year inventory in Guangdong Port. Overall, the temporary easing of supply and demand may put pressure on prices. From the perspective of price difference, the wheat corn price difference is on the edge of wheat feed substitution, and the continued rise of corn may attract more wheat into the feed industry, thereby squeezing the demand space for corn. As a result, there has been insufficient action on corn in the near future. Against the backdrop of temporary loose supply and demand and high futures prices, the pressure of futures selling protection still exists, and the possibility of a temporary correction in corn cannot be ruled out. In the short term, pay more attention to taking profits, and spot companies with inventory can test short positions during high prices.
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