Corn market fluctuates due to new temporary storage policy

1 yuan/jin may become the price ceiling

ASoybeans and corn growth slightly worse than last year

“This year's corn production has declined slightly compared with last year, mainly because last year's corn production was very high.” Zhang Xin, a purchaser in Xigangzi Town, Heihe City, said.

According to Li Wei, a farmer in the Suihua area, because the region had more rain than usual this year, low accumulated temperature, and late sowing, corn yield per unit area is expected to be lower than last year.“Last year's corn harvest was good, mainly because of the continuous good weather with rain at night and clear skies during the day, which was extremely favorable for corn growth.”

According to a farmer in Buluo Village, Keyinhe Township, Suiling County, this year's soybean yield per unit area is good, because the region had good weather, neither drought nor waterlogging, and the yield per unit area is estimated at about 300 jin/mu, with relatively good protein quality as well. However, farmers growing corn can be described as “nine out of ten lose money.”“Corn in our village has lodged over a large area, and this year's yield per unit area is estimated at only about 10,000 jin/ha, while last year's yield per unit area was 23,000 jin/ha.”

It is understood that last year the planting area of corn and soybeans in the region each accounted for about half, while this year the corn planting area rose to 90%, and soybean planting fell to 10%.

During the survey, the reporter learned that the early growth of soybeans in some areas was worse than in previous years. Chen Yingjian, general manager of Hailun Chengrui Industry and Trade Co., Ltd., introduced that due to the low accumulated temperature during this year's growing period, soybeans had no pods at 15—20cm from the bottom, while the top grains were not full enough, with green beans appearing. This year's soybean yield per unit area is expected to be 4,500 jin/ha, about 10% lower than last year.

Zhou Wei, a soybean grower in the Nehe area, also told the Futures Daily reporter that, based on the soybean output already harvested in the Nehe area, one ha of land produces 3,800—4,000 jin.“The output is somewhat lower than last year, but compared with the output of previous years, this year is still fairly good.”

“This year is somewhat drier, and soybean output is expected to be slightly lower than last year. Last year's soybean output was about 4,000 jin/ha, and this year's soybean output is estimated at 3,500—3,600 jin/ha.” said the person in charge of a cooperative in Sunwu County, Heihe City.

According to the person in charge of the agriculture department of Qiqihar City, the local weather in April and May this year was not very good, mainly low temperature and excessive rain, making field cultivation impossible; in June, drought appeared in some places, such as southern Longjiang, and later there was also the situation of “no rain across the road.”

“This year's total precipitation is similar to previous years, but the precipitation distribution is uneven. Corn growth is good in places with abundant rain, while in the opposite case corn growth may not be very good. In addition, this year's corn cobs are relatively small and are not yet fully mature; the maturity period is 3—5 days later than usual.” the person in charge introduced.

Wu Guangjing, an analyst at Guotai Junan Futures, said that due to different geographical locations, the growth conditions of soybeans and corn in various places also differ. Overall corn output is expected to decline slightly from last year, while soybean output is basically flat with last year.

During the survey, the corn along the route had not yet been harvested, while the early-maturing soybeans had basically been harvested. A few days ago, the reporter again contacted farmers and traders visited along the route and learned that this year's harvest progress is later than last year. At present, due to rainy weather, less than 20% of corn has been harvested. If the weather is clear later, corn and soybeans will enter the concentrated harvest period.

“The corn on our side has basically not started to be harvested, and soybean harvesting is already more than half completed. Judging from the soybeans harvested so far, this year's total output may be lower than last year.” Li Xing, a farmer in the Suihua area, told the Futures Daily reporter.

“A few days ago we had scattered light snow here, and these two days it has been cloudy again. The farmers around us first harvested miscellaneous small beans, and soybeans have not yet started to be harvested.” Zhou Wei, a soybean grower in the Nehe area, told the reporter.

Most farmers and traders believe that although this year is not as good as last year, this year's soybeans and corn still count as a bumper harvest. However, for farmers, a bumper harvest does not mean a bumper income.

B Temporary storage price for corn falls for the first time, farmers' income will shrink

This year's national temporary storage corn purchase policy for the Northeast region was issued on September 18. According to the policy, this year's national temporary storage corn listed purchase price (national standard third-grade quality standard, the same below) is 1 yuan/jin, and the price difference between adjacent grades is controlled at 0.02 yuan per jin. Last year's purchase prices were 1.13 yuan/jin for Inner Mongolia and Liaoning, 1.12 yuan/jin for Jilin, and 1.11 yuan/jin for Heilongjiang. It is worth noting that this year's corn storage price is the first decline since 2008.

After this year's corn storage price decline, many traders said they would lower their opening prices accordingly.“This year's wet corn price is generally about 0.1 yuan/jin lower than last year. In most areas, the wet corn price is 0.6—0.65 yuan/jin, equivalent to 0.75—0.814 yuan/jin for standard-moisture corn, that is, 1,500—1,630 yuan/ton. Compared with last year, income has decreased somewhat.” Wang Qiang, a farmer in the Qiqihar area, said.

The reporter found that not only has the opening price of corn been lowered from last year, but traders are also relatively cautious about the opening price of soybeans.

The person in charge of a small pressing enterprise in Suihua told the reporter that they are relatively cautious in estimating this year's opening price for new soybeans, and the opening price needs to refer to the situation of protein plants in the south.“Last year's soybean purchase price was about 2.2 yuan/jin. If this year's soybean price exceeds 2.06 yuan/jin, we will not purchase.” Li Xia, a trader in Buluo Village, Keyinhe Township, Suiling County, told the reporter that the opening price of soybeans in the region last year was 2.3 yuan/jin, and this year it maintained this price only for the first few days after listing, then fell all the way. On September 21, the local soybean selling price was 2.04 yuan/jin, and after screening the price was as low as 1.8 yuan/jin.

During the survey, the reporter found that the unpromising opening price did not affect farmers' enthusiasm for selling. At present, farmers are relatively active in selling grain, but traders are not very active in purchasing. It is understood that because new soybeans have high moisture and traders have relatively low price expectations, generally believing that the spot price of soybeans will be below 2 yuan/jin, they are only willing to purchase when the new soybean price reaches 1.95 yuan/jin.

The person in charge of a cooperative in Sunwu County, Heihe City, said he is relatively worried about the sales situation of this year's new soybeans. If the soybean selling price does not reach more than 2.2 yuan, losses will occur. The reporter found that during the survey, the soybean selling price in the region was about 1.97 yuan/jin.

⟧ In fact, industry insiders are very pessimistic about this year's opening prices for corn and soybeans. A staff member of a grain reserve depot in Nenjiang County believes that this year's soybean opening price is expected to be around 2 yuan/jin, and the lowest may not rule out 1.85—1.9 yuan/jin; this year's corn storage price of 1 yuan/jin is expected to be the price ceiling.“Whether from farmers' psychological expectations, traders' purchasing expectations, or the expectations of relevant industry insiders, this year's selling prices for soybeans and corn are relatively pessimistic, and the price center is moving downward. At the same time, many people hold the view that the temporary storage price is the top range for this year's corn price.” said Wu Guangjing of the Industrial Services Research Institute of Guotai Junan Futures.

Although the state lowered the temporary storage price for corn, most farmers are still willing to grow corn, because the income from corn planting is still higher than that from soybeans. A small number of farmers said that they will observe for a while longer before deciding whether to plant soybeans or corn next year.

Tang Qingxia, an agricultural product analyst at Jiangxi Ruiqi Futures, calculated an account for the reporter. Taking corn and soybeans in Suihua and Qiqihar as examples, the total cost of corn planting in Suihua City is about 12,320 yuan/ha, with a yield per unit area of 25,000 jin of wet corn per ha and a unit price of 0.6 yuan/jin. After deducting costs, the net profit is 2,680 yuan/ha, while the planting profit for soybeans is only 737 yuan/ha. The corn planting cost in Qiqihar is 12,495 yuan/ha, the yield per unit area is 14,175 jin, and with a standard grain price of 1 yuan/jin as the temporary storage corn price, the production income is 14,175 yuan/ha. The net profit for corn is 1,680 yuan/ha, while the soybean planting profit is negative, losing 2,475 yuan per ha.

“If the planting returns of soybeans and corn do not fundamentally change, the planting structure of soybeans and corn will not change significantly next year. The possibility of another sharp decline in soybean planting area is very low, and the possibility of area recovery cannot be ruled out.” Wu Guangjing said.

C Weak downstream demand sharply increases operating pressure on processing enterprises

At present, domestic soybean oil pressing plants are in vastly different situations. Most oil plants have gone bankrupt one after another and withdrawn from the market, but some oil plants have earned generously. Their current capacity can no longer meet market demand, and they have begun to actively and substantially increase capacity. A certain pressing oil enterprise in Heilongjiang is one of the latter. It is understood that the enterprise uses locally produced non-GMO soybeans as raw material and adopts a physical pressing method. Local residents are already accustomed to eating physically pressed soybean oil, and most purchase the enterprise's products. Driven by market demand and generous pressing profits, the enterprise began to expand capacity this year, from 200,000—300,000 tons last year to 1 million tons.

The enterprise mainly sells small-package 5L products. The soybean oil extraction rate is less than 11%, the oil content of soybean cake is 6%—8%, and the meal yield is 80%. Small-package 5L soybean oil sells for 118 yuan (108 during promotions), and soybean cake is generally used for export and local breeding, selling for 3,800—4,000 yuan/ton. Roughly estimated, based on a soybean cost of 4,000 yuan/ton, the enterprise's pressing profit per ton of soybeans is around 1,000 yuan/ton.

Of course, enterprises like this are still a minority. Most small pressing oil plants are in an unfavorable situation, and some have serious losses and are on the verge of bankruptcy. In the future, as the state gradually relaxes controls on genetically modified foods, foreign GM soybeans will further impact the domestic market, and the situation for domestic soybean oil plants will not be optimistic.

Judging from the situation of related enterprises in the soybean processing industry chain, small pressing oil plants that press non-GMO soybeans have relatively good sales, while large oil plants have average sales of soybean oil and soybean meal, especially with weak soybean oil consumption. The price difference between non-GMO soybean oil and GM soybean oil is also not large.