Sluggish Corn Spot Trading, Insufficient Driving Force for Price Increase. 09-27-2024

Summary

Since August, the auctions of rotation grain by branches of Sinograin in various places have been very intensive. Since late August, the transaction rate has been at a relatively high level. Entering September, the market supply is still loose. The market transaction price has fallen slightly compared with August. At the same time, downstream enterprises mainly replenish stocks based on rigid demand. Spot transactions are relatively sluggish, making corn prices lack upward momentum.


Factors of Price Decline


Influence of weather factors:

Recently, water-soaked corn in Northeast China has been harvested and put on the market in succession. It has low test weight, high mildew content and moisture, but it has a relatively obvious price advantage. It continues to flow into the market for circulation. Under the pressure of repaying tripartite funds, some trading entities continue to ship. Deep-processing and feed enterprises have an obvious wait-and-see attitude and mainly consume their own inventories. The market sentiment is weak and the price is adjusted downward weakly. In terms of new crops, there is less precipitation and higher temperature in Northeast production areas, which is conducive to draining moisture and reducing waterlogging in fields with waterlogging in the early stage and is beneficial to the formation of corn crop yield.


Influence of inventory factors:

The corn inventory of downstream feed enterprises has increased and the spot trading volume is low.

In September, the market enters the season of alternating old and new. The remaining high-quality inventory corn has decreased. At present, the quantity of fresh corn on the market is still relatively small. The corn inventory of feed and breeding enterprises in sales areas has gradually increased. In late August, the corn inventory of large and medium-sized feed enterprises in southern sales areas was 20-30 days. In early September, the corn inventory of most enterprises increased to 30-40 days. In the inland market of Central China, Hubei spring corn was mostly purchased in the early stage. In the South China market, due to geographical advantages, Northeast corn is mainly purchased. Generally speaking, the southern sales area market has weak demand for Northeast spot corn.

Source: China Grain Net.


Future Outlook and Challenges

Supply aspect: Currently, the main holders of grain in corn-producing areas still have a certain amount of surplus grain. At the same time, new corn in some planting areas in Northeast and North China has begun to be harvested successively and is continuously flowing into the market, with supply pressure continuously rising. For example, new-season corn in Liaoning has been put on the market, and new-season corn in Heilongjiang region will also be supplied successively from late September to early October. In addition, Sinograin continuously releases corn grain sources. Coupled with measures such as rotational grain and auctions of imported corn, market supply is further increased, making it difficult to reverse the pattern of supply exceeding demand in the short term.


Impact of expected production reduction: This year, most areas in North China experienced drought in the early summer, floods in the later period, and rainy weather during the pollination period. There is a strong expectation of production reduction for corn. Corn in some low-lying areas in Northeast China also has an expected production reduction. If the reduction is large, it may alleviate the supply pressure in the market to a certain extent and provide support for corn prices.


Seasonal changes in demand: With the arrival of the fourth quarter, industries such as pig farming enter the traditional peak season, and feed demand is expected to increase, which will have a certain pulling effect on corn prices. However, it is still necessary to pay attention to the recovery status of the pig farming industry and the procurement strategies of feed enterprises.


Policy factors: Changes in government agricultural policies, subsidies, tariffs, and import and export restrictions will also affect corn prices. For example, government support policies for corn cultivation or regulatory policies for imported corn may all change the supply and demand pattern of the corn market.


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