Corn prices are falling endlessly, bottomless, futures are at new lows one after another, can the market get better?

(1) Corn spot situation    

In the past week, corn prices continued their downward trend and continued their downward trend. Recently, the northern region has generally suffered heavy snow, but this round of weather has not allowed corn to rise, and the price has fallen under the bearish sentiment of market consistency. In the weather of continuous rain and snow, the mentality of the main body of grain holding is relatively pessimistic, and this round of snowfall still has not been able to stop the "enthusiasm" of farmers to sell grain, and the peasants' enthusiasm for selling grain is high, and the market volume has increased. In addition, traders and drying towers do not hoard, dare not receive, deep processing enterprises have not established effective inventory, procurement enthusiasm is weak, so the price falls, especially in the northeast production area prices continue to fall, falling endlessly, Sunday is a "avalanche". In Shandong that week, the number of vehicles in Shandong changed greatly, and the price fell slightly. Under the foregone conclusion of this year's bumper harvest, the market consistency is bearish, the downstream demand is not strong, the peasants are selling grain quickly, and the traders do not accept it, which is an important cause of the decline. Pay attention to the future sales of farmers and the construction of enterprises!

In the past week, there was heavy snow in many places in the north, and it was a blizzard in North China that had not been encountered for many years, but it still exceeded 1,800 vehicles at the peak of the year, the highest in the year. Shandong still maintains the tradition of "more cars and lower prices", but the market consistency is bearish, and less cars do not necessarily increase prices. On the 17th, the snow stopped and the sky was clear, and the amount in North China increased again, where else could the price go? And the lower the price, the more traders did not dare to collect, and there was no profit; For example, some feed mills have 1.25 yuan / catty. Take Shandong traders as an example, in September, they wanted to build up inventory at 1.4--1.5, which became 1.35 in October and 1.3-1.25 in November; Now it has fallen sharply, but they dare not act; I don't know where the market will fall in the future! The degree of farmers' subscription is also greater than everyone imagined, and this is also the main reason for the recent stampede and decline.

Compared with the falling prices, the operating rate of deep processing is higher than last year's level; The inventory of feed mills is lower than last year, and the corn inventory at the port continues to decline; There is no channel inventory at all; However, the auction of imported corn continues, and the pressure on the arrival of corn in the later stage of import is great! How do you judge the future price of corn? The market has fallen to this position, and for the spot, how much room is there for this price to fall, whether to establish inventory, or whether to fight for the market outlook? We need to think carefully! It is recommended to pay attention to the future situation of grain sales and traders' warehouse construction in Northeast China, and the stage impact of reserve purchase and downstream consumption and stocking. Correctly understand the market, adapt to market changes, predict future changes, and reasonably use various tools for trading activities!

(2) Review of futures market:

Last week, the U.S. corn continuous contract opened at 486.5 cents/bushel, with an intraday high of 488 cents/bushel and a low of 477.5 cents/bushel, and closed at 4862.5 cents/bushel, down 0.87%.

Last week, the opening price of corn 2401 contract was 2491 yuan/ton, the highest intraday price was 2498 yuan/ton, the lowest was 2441 yuan/ton, and closed at 2444 yuan/ton, down 54 yuan, or 2.16%; The biggest weekly drop since the end of May.

The corn 2405 contract opened at 2507 yuan/ton last week, the highest intraday price was 2507 yuan/ton, the lowest was 2442 yuan/ton, and closed at 2446 yuan/ton, down 59 yuan, or 2.36%; The biggest drop in nearly 29 weeks.

Friday night futures fell even more crashing, with the corn 2403 contract falling below 2400; Although corn 2405 has just become the main force in recent days, it still fell sharply, falling 1.1% in just two hours, hitting a new low in the past three years.

(3) Relevant information on the source countries of China's corn imports

We know that the amount of corn imported is also one of the important factors affecting domestic prices, and China's corn imports have exceeded the import quota of 7.2 million tons for four consecutive years. The United States, Ukraine and Brazil are the main sources of corn imports, especially the cheaper Brazilian corn imports have increased significantly this year, with Brazil overtaking the United States for the first time in September to become the largest supplier of corn imports to the mainland.

According to customs data, China's grain imports in November were 14.525 million tons; From January to November, the total import volume increased by 9.1% year-on-year to 143.737 million tons.

Let's take a look at Ukraine, which was once one of the largest sources of imports

Grain exports for the 2023/24 season, which began in July, amounted to 15.3 million mt as of Dec. 15, data released by Ukraine's agriculture ministry on Friday showed; Of this amount, 7.7 million tonnes of corn were exported.

Ukraine's exports through the temporary Black Sea corridor could increase to 5 million tonnes this month from 3.8 million tonnes in November, a senior Ukrainian official said. Ukraine exported 2 million tonnes of cargo through the temporary Black Sea corridor in October and 280,000 tonnes in September. For comparison, Ukraine exported 4.2 million tonnes of cargo in September 2022 through the UN-brokered Black Sea corridor.

Since the temporary Black Sea corridor opened in August, 241 ships have exported 8.6 million tonnes of cargo, including 6 million tonnes of agricultural products. The number of vessels increased from 52 in October to 110 in November.       

And after a previous moratorium, Slovak truckers resumed lockdown on Monday afternoon the only road crossing between the Czech Republic and Ukraine for freight. Slovak and Polish truck drivers have been demanding restrictions on the entry of Ukrainian trucking companies into the EU. After the outbreak of the Russia-Ukraine conflict, the European Union lifted this restriction on Ukrainian trucking companies.

Let's take a look at Brazil, one of the countries that import corn this year.

Brazil's corn exports in December were estimated at 7.14 million mt, up from 6.865 million mt estimated a week earlier but down from 7.291 million mt in December, the Brazilian Grain Exporters Association (ANEC) said.

However, statistics from the Brazilian Secretariat of Foreign Trade (Secex) show that Brazil exported 2 million tonnes of corn from December 1 to 8, compared with 6.244 million tonnes in the whole month of December. Brazil exported 7.41 million tonnes of corn in November, up from 5.89 million tonnes in November.

Bulk grain shippers shipping crops from U.S. Gulf Coast export hubs to Asia are sailing longer routes and paying higher freight rates to avoid vessel congestion in the drought-affected Panama Canal and pay record canal transit fees.

As of Dec. 1, sales of the first corn harvested in the 2022/23 season were equivalent to 88.5 percent of Brazil's production in south-central Brazil, according to a survey by Datagro Grains. Brazil's 2023 second season corn sales progress is 70.3 percent, equivalent to 98.4 million tonnes, up from 65.8 percent a month ago, compared to 74.5 percent a year ago and a five-year average of 84.8 percent.

According to CONAB data, due to the drought in Brazil, as of December 9, the corn planting progress of the whole season was 65.9%, nearly 20% lower than the same period last year, which obviously adversely affects the future corn harvest in Brazil.

And although Brazilian corn is currently flowing to the mainland, at least 220,000 tons of Brazilian corn that was originally planned to be shipped to the mainland has been diverted to Japan, which is commonly known in the industry as ship washing.

(4) U.S. corn-related situation

The recovery of U.S. corn exports was boosted by the acceleration of purchases by buyers from Mexico and unknown destinations. The export sales report released by the US Department of Agriculture showed that in the week ended December 7, 2023, the net sales of corn in the United States totaled a net increase of 1.4186 million tons, in line with expectations, and a slight increase from the previous value, which was 1.3118 million tons.  

U.S. corn export sales in 2023/24 increased by 1.4186 million tons, up 10% from the previous week, and the previous value was 1.2879 million tons, down 12% from the average of the previous four weeks; The market had previously estimated a net increase of 800,000 tonnes to a net increase of 1.6 million tonnes.　　

Among them, 143,300 tons were exported to China that week, a significant decrease from the previous period, and 274,500 tons last week. This is much higher than the level of the same period last year, which was only 10,000 tons.

Export shipment data fell again. In the same week, the U.S. corn export shipment was 851,000 tons, a decrease of 22% from the previous week, and the previous value was 1.0861 million tons; This is an increase of 18% from the average of the previous four weeks.

Among them, 141,300 tons of exports were shipped to Chinese mainland that week, a significant decrease from the previous period; Export shipments to the country last week were 276,600 tons.

(5) Market review and future analysis

Since the launch of the new season corn, both spot and futures have been in a downward trend. Especially this year's new season corn opened high and low, at the price of 2800 to open the scale, and now the port has fallen to around 2430 yuan, which shows the miserable degree of the market. Although in November, due to weather reasons, spot prices fluctuated upwards and rose slightly, but at the end of the month, it ended with a decline, and all parts of the country entered December in the form of volume drops. Recently, it has been falling endlessly, miserable, falling immeasurably, and constantly refreshing the low level. What will the price be in the future?

From the perspective of the main corn contract, it has shown a downward trend since September, although there was a brief rebound from late October to mid-November, and it was short-lived after all; Can't resist the pace of decline. Starting from the 11th, the market that has been consolidating for several days has once again "soared down 3,000 feet", falling continuously, and continuously refreshing new lows for the year. For Dalian corn, it is a crash and a big fall.

In the past week, the corn 2405 contract opened at 2507, retreating for five consecutive sessions. On the 14th, C2405 became the new main contract, completing the main conversion, closing at 2446 on Friday, down 2.08% for the week; originally thought that the support below was strong, but on Friday night, in just two hours, it not only fell by more than 1%; Moreover, it fell below the main contract, with a low of 2429 in the past three years; Drop to 2415. It can be seen that pessimism is enveloping the corn market, which is extremely fragile!

Recently, I made a serious mistake in judgment, and I didn't expect this year to be a "qualitative" change, but I didn't expect it to be so tragic. This year's bumper output of more than 10 million tons, peasants' enthusiasm for selling grain is high, and middlemen (traders and drying towers) do not hoard and dare not establish inventories, which makes the short-term contradiction between supply and demand prominent, and the market consistency is bearish, which is the fundamental reason for the decline of corn. In previous years, during the peak sales period of farmers, traders and drying towers hoarded and purchased a large number of them to alleviate the supply problem, and even increase the income; However, this year's market consistency is bearish, hoarding for a few days to lose money, so that everyone dare not establish inventory, farmers have nowhere to go, the grain source will be reduced as soon as the price comes, each family compared to the price reduction, the Chinese word head enterprises did not take the lead in the acquisition, resulting in this year's phenomenon.

In the declining market in the past few months, who has profited and who has been hurt the most? Farmers, traders, and demand enterprises; Is the development of the industry normal? The market has fallen to this position, how will it operate in the later stage? If it is not broken, it will not be established, or will it be established first and then broken? What is the so-called planting cost? Although the price has fallen, the peasants will still be reluctant to sell, and will the middlemen dare to build up inventory?

From a technical point of view, corn has entered a bear market; However, from the heart, I still think that the probability of a rebound and rise exists, but the current decline is a bit beyond cognition, and it is difficult to return, and the market sentiment is sluggish. For futures, at this time, should we go against the trend and buy the bottom, or wait and see, or even short?

(6) This week's view

To sum up, from the perspective of technical analysis, corn has become a bear; However, I am still optimistic about the market outlook and believe that it will still rebound; However, the market is extremely sluggish. Therefore, it is recommended that everyone wait and see, and it is better for activist investors to take a light position against the trend. Personal opinion, FYI!

      Important: The information contained herein is derived from publicly available information and is not guaranteed to be accurate or implied in terms of accuracy, reliability, timeliness and completeness. The views and information published in this article are for investors' reference only and do not constitute investment advice to anyone. The risks and returns of futures are relatively large, please participate cautiously, sincerely apologize for the inconvenience caused to you, thank you for your understanding and cooperation!

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