Why Are Corn Prices Weak? Ample Supply in Sales Areas, Social Inventories Still Being Released
I. Spot Market
Northeast Production Areas: Outbound shipments from production areas temporarily stable; spring planting underway in Heilongjiang
Currently, traders in Northeast production areas are still releasing inventory, and outbound prices remain stable compared with last week. At present, grain sources in the hands of farmers in Liaoning and Inner Mongolia are basically sold out, while some villages in Jilin and Heilongjiang still have corn for sale, but farmers' asking prices are relatively high, traders' current purchasing willingness is not strong, and buying and selling are sluggish. Regarding spring planting, all Northeast regions except Heilongjiang have completed spring planting, and seedling emergence in Jilin and Inner Mongolia is good. Rainfall this week effectively alleviated the earlier drought in Liaoning. In eastern and northern Heilongjiang, planting was delayed due to low temperatures earlier, and spring planting work is still underway.
North China Production Areas: Warehouse-clearing work continues; grain supply temporarily appears ample
The work of clearing warehouses in North China for wheat while holding corn is still underway. Small and medium-sized traders have a strong awareness of risk avoidance and are actively shipping out, while large traders are relatively bullish and waiting for better prices. Currently, deep-processing enterprises in North China have ample inventories and a steady purchasing mindset. In addition to supplying local consumption, grain sources in North China also supply surrounding sales-area markets.
Sales-Area Market: Local declines in sales areas; no supply gap for now
This week, corn transaction prices in sales areas declined in some regions because of poor results in Northeast auctioned grain transactions and because downstream demand has not yet fully recovered. At present, inland sales areas such as Sichuan, Hunan and Hubei still mostly use corn from North China and Northwest China. Recent volumes have been ample, and enterprise purchase prices are stable to weak. In addition, since the start of corn auctions in the Northeast, there has not yet been frantic bidding, completely opposite to last year's scene, creating a bearish effect on the mindset of grain-using enterprises. It is also understood that feed mills' inventories are better than in the same period last year.
Port Market: Northern port purchases quiet; Guangdong transactions temporarily stable
Today, corn purchase prices at northern ports are between 2330-2375 yuan/tonne, with the mainstream range at 2350-2370 yuan/tonne. At present, there are not many purchasing entities at the ports, and most mainly collect grain at the port themselves. Grain sources come from Heilongjiang, and quality varies. Current corn inventories at northern ports remain above 3.8 million tonnes, including about 1.5 million tonnes of temporary storage. Guangdong port transactions are temporarily stable between 2490-2520 yuan/tonne, and the north-south price inversion has eased somewhat. Although traders have raised quotes, transaction conditions remain unsatisfactory, restraining room for increases. At present, substitution by sorghum and barley remains brisk.
Feed and Breeding: Egg prices fall; pig prices rise in the south and fall in the north
Affected by high laying hen inventories, egg supply is ample and prices continue to fall. Recent temperatures have been unstable, so precautions are needed against disease outbreaks. Live pig prices show increases in the south and declines in the north. In the north, overweight pigs and pigs held back from sale have recently been marketed, increasing supply and suppressing prices with a slight decline. But the south continues its upward trend. After the national average live pig price broke 7, it gave farmers more imagination, but how much upside remains still depends on downstream consumption.
Deep Processing Industry: Policy affects starch enterprises' mindset; alcohol remains sluggish
After the deep-processing subsidy policy was introduced, the mindset of enterprises in the two major production areas of Northeast and North China changed considerably, mainly in North China. Because of concern that the Northeast's price advantage will become more obvious later, North China enterprises are currently highly motivated to produce, and prices are relatively low, with the aim of locking in recent profits and reducing losses caused by the future increase in the Northeast's competitive advantage. Although Heilongjiang's subsidy policy for deep processing has already been introduced, Northeast starch sales prices remain firm compared with North China. On the sales side, although rising white sugar prices reflect the substitution advantage of starch sugar, because downstream demand is weak, signings are unsatisfactory for both high-priced white sugar and starch sugar. Alcohol demand is weak, enterprises are operating below capacity, and the situation of large losses remains unchanged.
II. Market Forecast
Social inventories are still being supplied to the market. The transaction heat of Northeast temporary-storage corn is completely opposite to last year. With no shortage yet, enterprises' purchasing mindset is steady, and coupled with substitution by imported crops, this further suppresses domestic corn prices. From the supply perspective, a rebound in grain prices needs to wait until social inventory consumption is over, especially the trade inventories in Northwest China and North China need to hit bottom. From the demand perspective, attention needs to be paid to the recovery status of downstream breeding. Overall, in May, trade grain in North China and Northeast China still needs to be released, and corn prices are under pressure.