Corn continues to fall, grain reserves are harvested, futures bottom out, reversal is imminent, will it get better?
(1) Corn spot situation
In the past week, corn prices have continued to fall, continuing to show a downward trend, and the decline has widened. Recently, farmers are highly motivated to sell grain, and the market is at the peak of supply, but the downstream demand is not strong, the enthusiasm for procurement is weak, traders and other middlemen dare not hoard, and the import to Hong Kong exceeds expectations, and the inventory of substitutes is more, so since the end of last week, the market has fallen wildly, and the waterfall has fallen sharply, like "black clouds crushing the city and wanting to destroy". The continuous decline makes people shudder and shudder. However, with the rebound of futures and the beginning of the acquisition of the direct warehouse of the Central Reserve, the price decline slowed down, and the port returned to 2430-2450 yuan/ton over the weekend.
Pay attention to the future sales of farmers and the construction of enterprises!
This week, the spot price also fluctuated greatly, and at the beginning of the week, it fell sharply. The lowest port fell to 2370 yuan/ton, COFCO in North China purchased 2400, and deep processing enterprises also fell sharply; It is even the same as the import arrival price. As prices continued to fall and fell to a low level, farmers began to be reluctant to sell, and the amount decreased; A number of directly affiliated warehouses have opened and harvested new season corn, such as Harbin direct warehouse of China Grain Reserve, Zhumadian direct warehouse, Lindian direct warehouse, and Nong'an direct warehouse; Coupled with the big rebound in the futures market, the rebound from 2364 is around 2450; As well as the arrival of pre-holiday deep processing and feed and other enterprises' stocking needs, the price decline has slowed down significantly in recent days, and there has been a slight rise. Since Friday, the port has changed from a decline to a slight rise, and has continued to rise, and today it has returned to 2430-2450 yuan/ton.
The market is gradually changing, what will be the price in the future?
The overall price of the week is still falling, but is changing, for the future corn price, how do you judge? Obviously, the operating rate of deep processing is higher than last year's level; Feed mill inventories are lower than last year, and port corn inventories are historically low; There is no channel inventory at all; Prices also fell to low levels. With the arrival of the traditional stocking season, North China has also fallen to 1.2, and the unimaginable price a few months ago, the direct warehouse has begun to collect grain, and at this price, whether or not to establish inventory, do you dare to establish inventory, and how to carry out normal grain trade? We need to think carefully! Don't you still think that now is the bottom of the stage? Is it normal to continue to fall? In recent years, the war for grain is now at a low level, how should we act? Or is it recommended to pay attention to the future situation of grain sales and traders' warehouse construction in Northeast China? The stage impact of reserve acquisition and downstream consumption 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 482.5 cents/bushel, with an intraday high of 482.75 cents/bushel, a low of 468.25 cents/bushel, and closed at 472.75 cents/bushel, down 2.02%, the second consecutive weekly decline.
The corn 2405 contract opened at 2445 yuan/ton last week, the highest intraday price was 2446 yuan/ton, the lowest was 2364 yuan/ton, and closed at 2416 yuan/ton, down 30 yuan, or 1.23%; The decline has slowed from last week. However, it hit a new low since September 2020 during the session.
In stark contrast to the crazy plunge in the previous Friday night, this time the night market rose wildly, and in just two hours, the main contract rebounded nearly 40 points, up 1.58%.
(3) Relevant information on the source countries of China's corn imports
We know that the amount of corn imports is also one of the important factors affecting domestic prices, and in recent years, in order to meet domestic demand, 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 this year, the cheaper Brazilian corn imports have increased significantly, while imports from the United States have decreased significantly, making Brazil surpass the United States as the mainland's largest supplier of imported corn.
Despite a record domestic output, China imported 3.59 million tonnes of corn in November, the largest import volume in a single month, according to customs data. an increase of 75.69% month-on-month, to 2.04 million tons in the previous month; This is a 384% jump from the same period last year, to just 740,000 tonnes in November 2022.
Among them, Brazil is still the largest corn supplier, importing 3,221,034.42 tons of corn from Brazil in the month, an increase of 78.86% month-on-month, and China did not import Brazilian corn in the same period last year.
benefited from an increase in corn imports from Brazil and a decline in international corn prices; From January to November 2023, the total amount of corn imported by the mainland was 22.18 million tons, a cumulative increase of 12.3% over the same period last year. Among them, a total of 8.795 million tons of corn were imported from Brazil, accounting for 39.6%; The United States imported 6.497 million tons, accounting for 29.3%.
Let's take a look at Ukraine, which was once one of the largest sources of imports
Some Ukrainian officials said they hoped to reach a consensus with Poland this week to allow border checkpoints to open in order to facilitate the reopening of border checkpoints.
In the four months that the Black Sea Temporary Corridor has been operating, 302 ships have exported 10 million tons of Ukrainian products, including grain and steel, to 24 countries through the temporary corridor.
In November, the mainland imported 50,765 tons of corn from Ukraine, an increase of 644.7% month-on-month and 5,141% year-on-year. So far, a total of 5.39 million tons have been imported from Ukraine year-to-date, accounting for 24.3% of the total imports.
Some exporters expect Ukraine's corn exports to continue to increase in 2024, but given the ongoing logistical difficulties, a significant increase in supply is unlikely. At the same time, some sellers said that due to logistics bottlenecks and congestion at port terminals, the transportation of corn in Ukraine may continue to be delayed in 2024. Ukraine is expected to export 23 million mt of corn.
Consulting firm APK-Inform raised its forecast for Ukraine's 2023 cereal production by 1.6 million mt to 56.3 million mt from the previous forecast of 54.7 million mt, in a report released on Wednesday.
Let's take a look at Brazil, one of the countries that import corn this year.
In November, a large number of corn imports from Brazil arrived in China, accounting for 89.69% of the total corn imports in that month. A large amount of corn will arrive in the country in the near future.
Mato Grosso State Institute of Agricultural Economics said that as Brazil's main corn-growing state, it is at an all-time high in terms of acreage and yields; Mato Grosso corn production in 2022/23 hit a record high with a total output of 52.5 million tonnes, up 19.77 percent from the previous year. However, due to the fall in maize prices that have led to the inability to recover planting costs and unfavourable weather conditions, the planted area is expected to decrease by 6.27 percent in the next season.
Brazil's corn exports in December were estimated at 7.17 million mt, up from 7.14 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 from December 1 to 15, Brazil's corn exports were 3.68 million tons, an increase of 1.68 million tons from a week ago; The monthly export volume in December last year was 6.244 million tons.
(4) U.S. corn-related situation
The export sales report released by the U.S. Department of Agriculture showed that in the week ended December 14, 2023, the total net sales of corn in the United States increased by 1.0141 million tons, in line with expectations, and a slight decrease from the previous value, which was 1.4186 million tons.
That week, 1.15 million tons of corn were sold in the current market year and 1,000 tons of corn were sold in the next market year.
Among them, 136,300 tons were exported to China that week, a slight decrease from the previous period, and 143,300 tons last week. Much higher than the level of the same period last year, less than 10,000 tons in the same period last year.
Export shipment data increased. In the same week, the U.S. corn export shipment was 870,900 tons, an increase of 2% from the previous week, and the previous value was 851,000 tons; This is an increase of 14% from the average of the previous four weeks.
Among them, 202,500 tons were exported to Chinese mainland that week, a slight increase from the previous period, and 141,300 tons were exported to China last week. However, it is a significant decrease from the same period last year, when the shipment figure was 415,300 tons.
(5) Market review and future analysis
Since the launch of the new season corn this year, both corn spot and futures prices have shown a downward trend. The price of corn in the new season is high and low, in late September, the port opened the scale at 2,800 yuan/ton, and the mainstream price of the port fell to 2,370 yuan on the 20th, a decline of more than 400 yuan, which shows the cruelty of the market. At the beginning of December, all over the country in the form of falling prices, falling endlessly, miserable, especially in the northeast production areas continued to fall, Shandong to the highest number of vehicles reached 1882 units. And in the middle of the year, the north was hit by a blizzard, and the price did not rise as before, but continued to fall. In the past two weeks, it has plummeted wildly, and the market panic and pessimism have intensified, with the port falling by 150 yuan and Shandong reaching 1.2 yuan.
However, the weekend slowed down and rebounded, what will happen to the price in the future?
From the perspective of the main futures contract, there has been a sharp downward trend since September, but there has been a short-term rebound, and after all, it is short-lived, and it still can't resist the pace of decline. Especially in the middle of the waterfall, the market has fallen for seven consecutive years, constantly refreshing the low, and even hitting a new low since the end of September 2020.
However, in recent days, the bottom has rebounded, and the disk has formed a "V-shaped" small reversal, which will be the turning point of the market?
In the past week, the corn 2405 contract continued to fall on Monday and Tuesday, and began to bottom out on Wednesday and gradually recovered lost ground. It opened the week at a price of 2,445 yuan, and then plunged rapidly, falling more than 1% in two hours; The daily session fell below the contract's new low for the year, causing it to plunge 1.92% on Monday, the sixth consecutive day of decline. Bearish spread on Tuesday, panic intensified, down 1.25%. After bottoming out to 2364 on Wednesday, the bulls rekindled the battle and started a counteroffensive, rebounding 0.34% on the day to end the history of decline. The rally continued on Thursday and Friday, closing on Friday with a result of 2416, up 0.96% on the day. Friday night market changed, the situation of the crazy decline in the early stage, crazy rise, just two hours, rebounded nearly 40 points, an increase of 1.58%, more than the closing price on the 15th, forming a "V-shape".
As a recent bullish editor, I would like to briefly talk about my own viewpoint, just for you to think about! We know that this year's corn harvest is bumper, the market consistency is bearish, there are many imports to Hong Kong, imported corn continues to be auctioned, the market demand is not strong, farmers subscribe to sell, and traders do not hoard. However, the market fell to such a low level, which is also a bit "more than expected", and the market is also quietly changing!
This year's bumper output has increased from the original forecast of 20 million to 40 million tons to more than 13 million, and the actual output has increased by 11.64 million tons, which is lower than expected. Although the import arrival at the port exceeded expectations, the pressure shifted back with transportation problems and price advantages sharply, and the expectation weakened. Two import auctions failed that week, and it was rumored that the auctions were suspended.
According to the statistics of relevant agencies, the progress of grain sales this year is slightly higher than that of the same period last year, and as the temperature gets lower, storage becomes easier; And with the low price, the grassroots began to be reluctant to sell. All of them show that the negative factors are gradually weakening.
Recently, a number of directly affiliated warehouses have opened and closed, giving the market some support; The demand market has entered the peak season of stocking, and in the case of low channel inventory, feed and deep processing inventory, will traders establish inventory? In particular, the bottoming out of futures rebounded and rose sharply, allowing the market to see the strength of the phased bottom and the bullish sentiment increased.
In terms of futures, although the general trend is in a decline, the recent bottoming rebound shows that the bottom support is extremely strong, coupled with fundamental factors such as planting costs, the market is difficult to fall in the short term, and there is a strong rebound to continue. Since the beginning of this year, futures have basically been running at a discount to the spot, and the spot has begun to be premium recently, which may drive the rebound of the spot in the future, and the market is changing; Coupled with the recent continuous decline, a rebound can be expected! Do you still doubt this?
(6) This week's view
To sum up, from the perspective of technical analysis, although the corn market has entered a bear market, it is in a short-term over-falling rebound trend. Therefore, it is recommended that you pay attention to the support below, continue to hold long orders, and buy dips. 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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