"The more it falls, the more it sells, the more it sells, the more it falls" Where is the "hope" for corn price increases?

Special analysts are well-known

【Main viewpoint】In late May, wheat in the main domestic producing areas will be listed in large quantities, some trading enterprises will vacate their warehouses to collect wheat, and corn shipments will increase, which will cause downward pressure on corn prices, but the surplus grain in the corn market will gradually decrease, and the supply and demand pattern will change in the direction of tightness.

Entering May, the domestic corn market is intertwined with long and short factors, and the price trend in different regions is differentiated. Shandong corn prices fell below the previous low at the end of April, hitting a new low this year, and entered the May over-fall rebound, with a week-on-week increase, but the month-on-month decline is still large. The surplus grain in Northeast China has gradually decreased, coupled with the boost of policy purchases, and prices have maintained a stable trend since the Spring Festival.

The price spread of corn in the production and marketing areas remained low in recent years

In April, domestic corn prices showed a trend of "strong production areas and weak sales areas", and the corn price difference in production and marketing areas remained at a low level in recent years. On May 8, the price difference between Shandong corn and Heilongjiang dropped to 48 yuan/ton, and the price difference between corn in the north and south ports was 20~40 yuan/ton, which was low in recent years, and the spot shipment in the production and marketing area continued to be upside down.

From the perspective of the distribution of domestic corn production and marketing areas, 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, which is the largest corn consumption market in China. The corn output and corn consumption in the three provinces and one region in Northeast China account for about 45% of the country's corn production and 20% of the country's corn consumption, which is the largest net outflow of corn in China. The southern region accounts for about 16% of the country's corn production and 42% of the country's consumption, making it the largest net inflow of corn. Therefore, under normal circumstances, the corn price in the northeast producing area and the Shandong and southern sales areas maintain a reasonable freight price difference, so as to ensure the effective circulation and operation of the corn market.

In 2023/2024, the resonance of various 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. First, the decline in international food prices has affected the expectations of the domestic market. In the first quarter of 2024, the international corn price hit a new low in the past three years, and the domestic and foreign corn prices were transmitted to each other through trade, and the low international grain prices drove the domestic market prices downward. Second, after the sharp drop in international grain prices, the import volume of corn and substitute cereals increased at a low price, and it was mainly supplied to the domestic market. As of the end of March, a total of 30.75 million tons of corn and alternative feed grains were imported in the first half of 2023/2024, an increase of 16.31 million tons or 113% year-on-year, and exceeded 30 million tons for the first time in the first half of the year, a record high. Total imports in the first half of the year already accounted for 96% of all imports in 2022/2023. 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.

Starting from January 2024, 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 Northeast China, which has driven market purchase and sales sentiment. After the Spring Festival, farmers' surplus grain declined rapidly, and processing enterprises in Northeast China needed to lock in grain sources to ensure adequate supply in the later period, and corn prices remained stable. However, the enterprises in the sales area still have a low-price supply of imported grain, and the market expectation is weak, the enthusiasm for procurement is low, and the price follows the international market to decline, resulting in regional trend differentiation in the short term, the price difference between corn in the production and marketing area remains low, and the price continues to invert sharply.

The price of corn in the domestic market fluctuated slightly

On May 8, the purchase price of corn in Northeast deep processing enterprises (discount standard moisture): Heilongjiang 2130~2230 yuan/ton, Jilin 2230~2280 yuan/ton, Liaoning 2270~2300 yuan/ton, week-on-week were flat. The listed purchase price of national standard second-class corn in North China deep processing enterprises: Shandong Weifang 2280~2300 yuan/ton, Binzhou 2300~2330 yuan/ton, Hebei Shijiazhuang 2240~2280 yuan/ton, Xingtai 2260~2300 yuan/ton, up 10~30 yuan/ton week-on-week; Henan Hebi 2200~2240 yuan/ton, Zhoukou 2250~2280 yuan/ton, down 10~20 yuan/ton.

Entering May, the domestic corn market is intertwined with long and short factors, the price fluctuates slightly, and the price trend in different regions is differentiated. Since April, Shandong grain collection and construction of the trading enterprises in the grain storage losses, pessimistic about the future market price expectations, part of the grain storage of the main body of panic selling, the formation of "the more falling, the more selling, the more falling" of the downward cycle, at the end of April, Shandong corn prices fell below the previous low, a new low this year, in May over-fall rebound, week-on-week rise, but month-on-month decline is still larger. In the Northeast region, due to the gradual decrease in the surplus and the boost of policy acquisitions, prices have remained stable since the Spring Festival. At present, the market in the sales area is not willing to receive goods, which brings negative impact, and the price rise and fall is limited, showing a range-bound trend.

Due to the late May domestic main producing areas of wheat is about to be listed in large quantities, Henan is the country's largest wheat producing area, some trading enterprises vacated the purchase of wheat, corn shipments increased, and many feed companies are actively preparing to purchase wheat, reducing the purchase demand for corn, all of which have caused a certain downward pressure on corn prices. However, the surplus grain in the corn market is gradually decreasing, and the short-term sell-off means that the future supply is reduced, and the import of corn in the bonded area has also decreased significantly, and the supply and demand pattern has changed to a tight direction.

It should be noted that the price of corn in the United States has fallen significantly, and it has fallen below the cost of planting, which is in the lower range. According to the USDA planting intentions report, the decline in the planting area in the United States in the new year will also push domestic corn prices higher if the international corn price rises in the later period due to the decline in planting area and the speculation of dry weather.

The corn spot trade in the north and south ports continued to be inverted

On May 8, the flat cabin price of corn (bulk weight 700g/L, moisture 14.5%) in northern ports was 2360~2380 yuan/ton, flat week-on-week, down 10~20 yuan/ton month-on-month, and down 350~400 yuan/ton year-on-year. The price of second-class corn in Guangdong port was 2400~2420 yuan/ton, up 20~30 yuan/ton week-on-week, down 10~20 yuan/ton month-on-month, and down 300~350 yuan/ton year-on-year.

According to the price of corn in the northern port, the shipping freight is 45~55 yuan/ton, plus the port miscellaneous charges, the arrival cost of corn in Guangdong port is estimated to be 2420~2440 yuan/ton, and the north-south spot shipment is upside down 20~30 yuan/ton. According to incomplete statistics, as of May 3, the corn inventory in the four northern ports was 3.755 million tons, an increase of 84,000 tons week-on-week and a year-on-year increase of 456,000 tons, a collection of 326,000 tons this week, a decrease of 94,000 tons week-on-week, and a massive volume of 242,000 tons this week, an increase of 20,000 tons week-on-week.

Due to the downstream demand in the southern sales area has not improved significantly, the price of long-term imported barley and sorghum is also relatively cheap, the short-term foreign trade corn and imported sorghum and barley supply and demand are expected to remain loose, the domestic new season wheat is growing well and is about to be listed, many market players are still not optimistic about the domestic corn price in the later period, and the willingness to establish long-term inventory for domestic corn procurement is not strong, and the market price follows the rhythm of purchase and sales, which suppresses the corn price in the southern port. However, the surplus grain of farmers in the northeast producing areas has declined rapidly, the market price has remained strong, and the spot shipment of corn in the north and south has continued to maintain an upside-down situation.

On May 8, the corn inventory in Guangdong port was 1.097 million tons, an increase of 134,000 tons week-on-week, including 678,000 tons of domestic corn and 419,000 tons of foreign trade corn. On May 6, the inventory of imported sorghum and barley in Guangdong ports totaled 1.452 million tons, an increase of 727,000 tons year-on-year. Among them, 511,000 tons of sorghum were imported, a decrease of 29,000 tons from the previous week, and 941,000 tons of barley were imported, an increase of 46,000 tons. (This article was originally published in the A03 edition of the Grain and Oil Market News on May 11, 2024)