Since March, the price of corn in North China has continued to weaken, the corn price in Northeast China has stabilized and rebounded, and the price trend of corn in Shandong and Heilongjiang has continued to diverge, and the average price difference has narrowed rapidly, falling to 76 yuan/ton on April 17, the lowest since the cancellation of the temporary storage purchase policy for corn. One has to ask: what is happening to the corn market, and what is the underlying reason for this situation?
Due to the rapid decline in the price of corn in Northeast China in the early stage of listing, a large amount of corn in Heilongjiang was supplied to Shandong, and the surplus grain in Northeast China declined. The local corn production in Shandong has increased, the market supply is sufficient, and a large number of wheat in North China will be listed in June, feed breeding enterprises are unwilling to increase the purchase of inventory, and the future market price is expected to be pessimistic, resulting in a price decline, and then formed a situation in which the price gap between Shandong and Heilongjiang corn continues to narrow.
Since March 2024, the price of corn in North China has continued to weaken, the price of corn in Northeast China has stabilized and rebounded, and the price trend of corn in Shandong and Heilongjiang has continued to diverge, and the price gap has narrowed rapidly, falling to 76 yuan/ton on April 17, the lowest since the cancellation of the purchase policy of temporary storage of corn. Shandong is the largest corn deep processing and feed processing province in China, with an annual corn processing volume of more than 40 million tons, and is the largest corn consumption market in China. Heilongjiang is the largest corn producing area, with an annual output of about 40 million tons of corn, about half of which needs to be transported, so under normal circumstances, the price of corn in Shandong and Heilongjiang will maintain a reasonable freight price difference, generally maintained at 200~300 yuan/ton, so as to ensure the effective circulation of the corn market. From the perspective of stages, the price difference between corn production and marketing areas at different stages shows different characteristics. During the implementation of the temporary storage policy in the 2008/2009~2015/2016 corn market in Northeast China, due to the strong support of the purchase price of temporary storage in Northeast China, and the price in North China fluctuated with market supply and demand, Heilongjiang corn entered the reserve instead of flowing to Shandong; Barley and DDGS have broken the normal price difference between Heilongjiang and Shandong corn prices, and the price of corn in Heilongjiang has been higher than that of Shandong many times, especially in 2014/2015 and 2015/2016 when import substitution was heavily imported. In 2016, the state canceled the corn storage policy, after the corn was listed in October 2016, the price of corn in Northeast China fell rapidly, and the price difference between corn in Heilongjiang and Shandong was quickly repaired, and it expanded to 335 yuan/ton at the end of 2016, creating favorable conditions for the smooth outflow and sales of corn in Heilongjiang. 2016/2017~2019/2020 is the period of domestic corn destocking, the corn inventory in Northeast China replenishes the national corn production and demand gap, the price of corn is mainly adjusted through the market mechanism, the price difference between production and marketing areas can be straightened out, most of the time the price of corn in Shandong is more than 200 yuan/ton higher than that in Heilongjiang, and the corn in Heilongjiang has been smoothly outflowed, which has also effectively supplemented the corn supply in Shandong. In 2020/2021~2022/2023, the end of domestic corn destocking, mainly relying on imports to supplement the supply of the domestic market, at this stage, domestic and foreign corn prices rose simultaneously, superimposed on the impact of the Russia-Ukraine conflict, international grain prices are at a high level, the domestic sales area depends on the production area to supplement the supply of grain sources, the production area has the leading power of corn pricing, and the production and marketing area still maintains a reasonable logistics price difference. Starting from the 2023/2024 season, due to the high price gap between domestic and foreign countries after the sharp drop in international grain prices, imported grain sources are more cost-effective than Northeast corn, and the import quantity is larger. From October 2023 to February 2024, a total of 26.76 million tonnes of cereals such as corn, sorghum and barley were imported, about 83% of the total imports of the previous season. Low-priced imported grain sources supply the market in the sales area, and the northeast producing areas gradually lose the dominance of corn pricing, so it is necessary to passively reduce prices and compete with imported grain sources for cost performance, and straighten out the price difference between production and marketing areas. Since January this year, in order to protect the interests of grain farmers and prevent domestic corn prices from falling excessively, the state has launched the purchase of regulatory reserves in the northeast region, which has driven the market purchase and sales sentiment. However, enterprises in the sales area have a low-cost supply of imported grain, and the market expectation is weak, and the procurement enthusiasm is low, so it is difficult to follow the price increase in the production area. The resonance of many factors such as the international market, domestic policies and demand changes has caused the price inversion of the domestic corn market production and marketing area. On April 17, the corn purchase price of Heilongjiang deep processing enterprises was 2180~2240 yuan/ton (discount standard moisture, the same below), the purchase price of Jilin corn was 2250~2300 yuan/ton, and the purchase price of corn in Liaoning was 2270~2300 yuan/ton, which was flat week-on-week. Shandong Weifang deep processing enterprises corn (national standard second-class, the same below) listed purchase price of 2300~2330 yuan/ton, Binzhou 2320~2350 yuan/ton, Hebei Shijiazhuang purchase price 2260~2300 yuan/ton, Xingtai 2280~2320 yuan/ton, Henan Hebi 2200~2240 yuan/ton, down 10~60 yuan/ton week-on-week. Since April, the domestic corn market has been intertwined with long and short factors, and futures prices have shown range-bound fluctuations. This week, bearish factors were slightly dominant, and futures prices fell. On April 18, the main DCE corn contract closed at 2381 yuan/ton, down 12 yuan/ton. Corn prices in North China continued to decline, with Shandong falling below the January low, hitting a new low this year. First, due to the rapid decline in the price of corn in Northeast China in the early stage of listing, the price difference between Shandong and Heilongjiang corn expanded to 400 yuan/ton, and Heilongjiang corn was supplied to Shandong in large quantities, resulting in more local surplus grain in Shandong after the Spring Festival. Second, at the end of 2023, due to the excessive rain in North China, the "African swine fever" epidemic is frequent, and local enterprises reflect that there is more destocking, which also leads to the deviation of feed breeding demand, resulting in a decline in the price of corn in North China. Third, a large number of wheat in North China will be listed in June, and feed companies generally expect that the supply of feed raw materials is sufficient, and they are reluctant to increase procurement and establish inventory. Fourth, before and after the Spring Festival, the trading enterprises that collected grain and built warehouses suffered losses in grain storage, and were pessimistic about the future market price expectations, and some grain storage entities appeared panic selling, which also led to an increase in short-term supply and a decline in prices. In the later period, as the farmers' surplus grain gradually bottomed out, the short-term sell-off means that the future supply will decrease, coupled with the bonded corn import has also decreased significantly, the supply and demand pattern has changed to a tight direction, and the spot price of corn is expected to show a fluctuating upward trend as a whole, and the corn price difference between Shandong and Heilongjiang will be gradually corrected. On April 18, the corn spot trade in the southern port was upside down, and the flat price of corn (bulk weight 700g/L, moisture 14.5%) in the northern port was 2370~2390 yuan/ton, down 10~20 yuan/ton week-on-week, 20~30 yuan/ton month-on-month, and 400~450 yuan/ton year-on-year; second-class corn in Guangdong port was 2420~2450 yuan/ton, down 20~40 yuan/ton week-on-week, down 50~80 yuan/ton month-on-month, and down 400~450 yuan/ton year-on-year. According to the calculation of the flat price of the northern port, the shipping freight is 45~55 yuan/ton, plus the port miscellaneous charges, the arrival cost of corn to Guangdong port is estimated to be 2460~2470 yuan/ton, and the north-south spot shipment is upside down 40~50 yuan/ton. Since March, the inventory of northern ports has increased significantly. As of April 12, the corn inventory in the four northern ports was 3.275 million tons, an increase of 215,000 tons week-on-week and a year-on-year decrease of 310,000 tons. After the Spring Festival this year, the surplus grain of farmers in the northeast producing areas declined rapidly, the effect of the superimposed regulatory reserve purchase policy appeared, the enthusiasm of trading enterprises to enter the market to purchase increased, and the price remained strong. However, some enterprises in the southern sales area reflected, because the downstream demand has not improved significantly, and the capital chain of enterprises is relatively tight, and the price of long-term imported barley and sorghum is also relatively cheap, many market players are not optimistic about the domestic corn price in the later period, increase the domestic corn procurement, the establishment of long-term inventory willingness is still not strong, the market price follows the rhythm of purchase and sales adjustment, the north-south corn spot shipment continues to be upside down, and the recent market is expected to dominate, the inversion range has increased. The short-term foreign trade corn and imported sorghum and barley supply and demand expectations remain loose, which also suppresses the price of corn in southern ports. On April 17, the corn inventory in Guangdong port was 883,000 tons, a decrease of 21,000 tons week-on-week, including 531,000 tons of domestic corn inventory and 352,000 tons of foreign trade corn inventory. On April 12, the stocks of imported sorghum and barley in Guangdong ports totaled 1.374 million tons, including 575,000 tons of imported sorghum, an increase of 109,000 tons from last week, and 799,000 tons of imported barley, a decrease of 44,000 tons from last week. (This article was originally published in the A03 edition of the Grain and Oil Market News on April 20, 2024)
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