In the new year, cereals are still tightly supplied, and corn prices will remain strong in the long term. In the short term, considering the current downstream replenishment situation, farmers are under greater pressure to sell grain after the Spring Festival, and it is recommended that investors focus on corn every pullback to buy opportunities.
Since entering December, due to the lack of driving force for corn prices in northeast production areas, the quotations of corn in some deep processing enterprises have shown a downward trend. At the same time, considering the supply and demand of raw grains at home and abroad, we believe that corn will retrace after the Spring Festival or buy opportunities.
According to data released by customs, China imported about 3.6 million tons of cereals in November, including 530,000 tons of sorghum, 1.53 million tons of barley, 790,000 tons of corn and 750,000 tons of wheat. The cumulative volume of cereal imports in 2021/2022 was about 7.52 million tonnes, up 7.4% year-on-year. Among them, it is necessary to focus on the progress of U.S. corn shipments, if the current loading schedule is followed, the arrival of U.S. corn in the new year is about 15 million tons, a year-on-year decrease of 50%.
According to data from the USDA's December Supply and Demand Report, the total cereal production of the world's main crude grain producing countries (excluding China) in 2021/2022 is about 903 million tonnes, consumption is about 700 million tonnes, and ending stocks are about 79.42 million tonnes. According to simple calculations, the estimated cereal ending stock consumption ratio in 2021/2022 is about 11.3%, which is at a historical low. Considering the low global cereal stocks and the support of China's import demand, it is expected that the price of grain in the outer plate is easy to rise and fall, which supports domestic cereal prices to a large extent.
Since 2020, after the digestion of corn stocks in storage, wheat feed demand has increased significantly due to the lower price of wheat than corn. According to incomplete statistics, the total amount of domestic feed wheat in 2020/2021 is about 44 million tons, an increase of 38 million tons year-on-year. At the same time, taking into account the price spread between maize and wheat in the new year, we believe that the amount of feed wheat will fall to 25 million tons.
Due to the rapid increase in wheat feed demand in 2020/2021, wheat stocks in Tuoshi have declined rapidly. According to incomplete statistics, the current wheat stock in Tohwa is about 45 million tons. We believe that under the premise of a rapid decline in wheat stocks in the city and no significant increase in wheat production, the center of gravity of wheat prices in 2021/2022 will shift significantly, thereby supporting domestic corn prices.
Referring to market news, since October 2020, the domestic directional rice turnover is about 22 million tons, assuming that the calculation is based on 80% of the inventory rate, the domestic feed rice in 2020/2021 is about 17.6 million tons. Looking ahead to next year, the reserve price of the targeted rice auction is expected to remain stable. If the price of targeted rice continues to widen from the price of wheat and corn, the substitution of feed rice will increase further, and the substitution of feed rice is estimated to be about 22 million tons in 2021/2022, and the price of targeted rice will have an important impact on the pricing benchmark of next year's corn price.
Based on estimates of area and yield, domestic maize production in 2021/2022 is estimated to increase by 15 million tonnes year-on-year, of which 20 million tonnes will increase in the northeast and 5 million tonnes in north China. The market unanimously expects that in recent years, there will be a gap of 55 million to 60 million tons of domestic corn per year, and considering the increase in demand next year, it is estimated that the corn gap next year will be about 35 million to 40 million tons. As a result, maize for 2021/2022 remains in tight balance, and from the annual cycle, there is still an upward driver for maize.
At the current time node, the market mainly trades in the progress of corn sales in the northeast production area. According to our sample survey statistics at the beginning of the month, as of December 5, the overall grain sales progress in Heilongjiang was about 25%, 25 percentage points slower than that of the same period last year; the overall grain sales progress in Jilin was about 18%, 22 percentage points slower than the same period last year.
Corn demand is mainly divided into feed demand and deep processing demand. According to the China Feed Industry Association, feed demand is estimated to fall by 4.5% year-on-year in 2021/2022, and demand for energy cereals will be reduced by 3.9 million tons. In terms of deep processing demand, as fuel ethanol enterprises no longer enjoy targeted rice in the new year and new production capacity is put into production, it is estimated that the demand for deep processed corn in 2021/2022 will increase by 10% year-on-year, about 8 million tons.
Considering the international and domestic grain production and demand, we believe that the grain in the new year is still showing a tight pattern, and from the perspective of the annual cycle, corn prices will remain strong. In the short term, considering the current progress of corn grain sales and the downstream replenishment situation, farmers have greater pressure to sell grain after the Spring Festival, and it is recommended that investors focus on the opportunity of corn correction.
Source: Futures Daily