2015 Corn Temporary Storage Policy May Be Announced Early

In this year's corn market, wave after wave of bearish rumors about the temporary storage policy have battered the fragile psychological defenses of industry personnel. For a time, a thick bearish atmosphere pervaded the market, industry confidence was suppressed, and those working in the sector were gripped by anxiety.

A sharp cut in the temporary storage purchase price would affect growers the most. With planting costs currently high, combined with expectations of reduced output caused by drought, growers' returns will decline markedly, or they may even suffer losses; grain-using enterprises, because of expectations of a sharp cut in the temporary storage price, have become less enthusiastic about purchasing and are focusing more on the new grain marketing period, which, at a time of weak consumption, adds further strain to the corn market; and reflected on the futures board, far-month contracts have fallen sharply and have long been consolidating in a low range.

Securing confidence

Recently, numerous bearish rumors about the temporary storage policy have flooded the corn market, far-month futures contracts have been severely suppressed, and grassroots growers and downstream grain-using enterprises have also been affected, producing differing psychological expectations.

Overall, the corn industry, like the stock market, has entered a thick bearish atmosphere, and the normal development of the industry has been severely distorted by market rumors. Exactly how the temporary storage policy will be implemented weighs on the minds of all those working in the corn market.

The author believes that at this moment, with confidence lacking across the entire industry, grain-related policy appears especially critical. Introducing favorable policy early will help stabilize the grain market, stabilize the confidence of those working in the grain industry, and firmly keep the “rice bowl” in our own hands.

Securing returns

From the current situation, during implementation of the temporary storage policy, farmers have obtained relatively good returns from increased grain output and rising grain prices, but this has also pushed up planting costs in grain production, the most important being land rent costs and labor costs, while other costs have also shown a gradually increasing trend.

The rise in planting costs has narrowed the room for grain price declines that farmers can withstand, and if other factors emerge, that room will become even smaller, as this year illustrates. This year, most of the northeastern production areas experienced a drought unseen for many years, and the main features of this year's drought were its early onset, long duration and strong impact.

At present, the bearish rumor of a “sharp cut in the temporary storage price” is already known to many farmers, and introducing favorable temporary storage policy early will help give farmers a “reassurance pill” before the new grain comes to market, so that some farming households do not suffer losses because of the impact of bearish news and the late introduction of policy.

Securing grain quality

For a long time, the timing of corn temporary storage purchases has been relatively late. Although policy has been introduced earlier in individual years, by the time it reaches the final purchasing stage, the timing has basically been dragged out to December. Corn in the Northeast region begins to come to market successively in October, and because the Northeast has a large grain planting area, high output and grain that is not easy to store, before temporary storage purchases begin there is a relatively high risk of grain spoilage, and the mold rate also gradually increases as time passes.

After temporary storage purchases begin, overall grain quality has already declined markedly. This is also the reason for the large amount of spoiled grain entering temporary storage warehouses in recent years.

Starting temporary storage purchases early would not only allow farmers to sell good grain at a good price, but also allow the state to put more high-quality grain sources into storage. Therefore, this year's temporary storage policy may not only be announced early, but the implementation of purchases may also start early.