The breeding industry is beginning to recover, and feed demand will relatively improve
In the earlier period, after domestic corn market prices rose sharply for a consecutive period, the overall market recently showed a pattern of stability in the north and weakness in the south. However, judging from the current supply and demand situation in the domestic corn market, this north-stable, south-weak situation will be difficult to sustain for long. On the one hand, current domestic corn prices are still relatively high compared with the same period last year, so the possibility of continued deep declines is not great; on the other hand, grain depots, traders and farmers are currently worried about future price risks for corn, and their selling enthusiasm has clearly increased. However, because bulk listing of new corn still awaits time, while the feed and breeding markets have now begun to show signs of recovery, feed corn consumption in the future tends to rebound. Therefore, in the short term, the domestic corn market will continue to maintain a high-level range consolidation trend. To grasp the medium- and long-term trend, the following issues deserve our close attention:
Focus one: Corn outbound shipments in producing areas are active, and short-term supply is relatively ample
Recently, due to the impact of feed wheat substitution, feed enterprises in southern sales areas of China have mostly slowed corn procurement. At the same time, it is currently the peak period for winter wheat procurement within the Pass, and this year China's wheat output increased year on year, with quality better than last year. The government also established a minimum purchase price system, with purchase funds supplied without limit. As a result, farmers have been highly enthusiastic about selling wheat this year, and grain depots have also been very active in purchasing. This has caused certain warehouse capacity problems in some areas of the main grain-producing regions within the Pass, so these grain depots have accelerated the outbound shipment of some corn and freed up and merged warehouses in order to purchase more wheat. In addition, rainy weather has continued to occur recently in Northeast China, with relatively high temperatures, making it inconvenient for some distributors and farmers to store corn. Coupled with some weakening in the southern corn market, grain depots, traders and farmers are currently worried about future price risks for corn, and their selling enthusiasm has clearly increased. For this reason, the current domestic corn purchase and sales market has relatively ample short-term supply.
Focus two: Breeding has begun to recover, feed demand will relatively improve, and this will boost the market outlook to some extent
Recently, China's live hog market has shown an oscillating rebound. At present, live hog prices have risen by about 0.2 yuan per jin compared with last week. In most areas, hog breeding can break even, and a small number of hog farmers earn 20-50 yuan per head. In poultry breeding, broiler prices in most areas are currently relatively stable, and most breeders can profit 1-3 yuan per bird, while a small number can profit 4-6 yuan. Egg prices have risen by 0.2-0.3 yuan per jin compared with last week. Most laying hen breeders break even, and a small number profit about 0.1-0.2 yuan per bird. Domestic feed sales volume for poultry feed is basically equivalent in most areas on a month-on-month basis. Aquaculture has already begun to enter the peak season, and feed sales in most areas are showing a trend of gradual improvement; the overall domestic feed market has begun to show signs of recovery.
Focus three: Most grain-using enterprises and feed enterprises have a corn supply-demand gap, while bulk listing of new corn still awaits time
At present, corn outbound shipments in Northeast China, North China and other places are relatively active, while bulk listing of new corn still awaits time. In the season of transition between old and new corn, most grain-using enterprises and feed enterprises still have a certain supply-demand gap in corn. It is understood that at present, feed enterprises in southern sales areas mostly have corn inventories sufficient for about 1 month of use. A small number of large enterprises in Sichuan, where transportation is relatively remote, have about 2 months of inventory, and some feed enterprises in Ningbo, Zhejiang have corn inventory for only about half a month. However, bulk listing of summer corn in North China and the Huang-Huai Plain is about in mid-to-early September, still nearly 2 months away from now, so ordinary feed mills still have a corn supply-demand gap of about 1 month. Although some spring corn in the hilly and mountainous areas of the southwest will soon begin to be listed, the quantity is relatively limited and can only ease or partially fill part of the local corn supply gap. Moreover, newly listed corn has relatively high moisture and is difficult to use in large quantities.
Focus four: Old grain will still be auctioned later, and new corn is growing well
It is understood that Northeast China originally planned to auction corn in August, but has now decided to postpone it to September. However, corn auctioned in Changchun in February this year has now quietly entered the market. This year, China's corn-producing areas have had abundant rainfall, and the overall growth condition of new corn is relatively good. Although the current corn growth situation is generally good, after entering August, corn growth will enter a critical period. Changes in weather conditions will have an important impact on future yield expectations, and weather factors will, to a certain extent, dominate market trends.
Focus five: International corn prices tend to rise, forming a positive factor for the domestic market
According to the report released by the U.S. Department of Agriculture in July, the 2005/06 marketing year U.S. corn ending stocks were lowered to 2.062 billion bushels, below the industry average expectation. At the same time, the U.S. Department of Agriculture raised the feed use of new-crop corn by 100 million bushels. Considering the tight supply and demand situation for new-crop corn, this has once again made the market focus its attention on the current weather in the corn belt, because it is currently the corn pollination period, and weather is very critical to the impact on yield per unit area. If yield per unit area is lower than the currently forecast level, U.S. corn ending stocks at the end of August 2007 may fall to a level between 900 million and 1 billion bushels, which provides bullish support for current market prices. Since U.S. corn demand exceeded supply for the first time in 2006, and a turning point may appear, coupled with the harmful impact of hot and dry weather in July on corn growth, it is expected that international corn prices will still tend to rise later, thereby forming a positive factor for the domestic market.
In summary, although corn prices in some southern areas are showing a short-term weak market trend, it is still difficult for them to fall significantly. Later, as the peak period of feed wheat substitution passes, corn outbound shipments from some grain depots in North China and the Huang-Huai region end, and corn inventories at most grain-using enterprises and feed corn enterprises further decrease, a new round of restocking activities will soon begin; at the same time, as the domestic livestock and poultry breeding market gradually recovers, feed corn consumption will also improve somewhat. In addition, international corn prices tend to rise, which also provides some support to the domestic market, but old grain will still be auctioned later, and new corn is growing well, so the impact on market sentiment should not be underestimated. Overall, the current domestic corn market does not have a foundation for a comprehensive sharp decline, and with the full release of positive market factors, it is expected that the domestic corn market later will still have certain upside opportunities, and corn prices in some areas may rise somewhat.