Substitute products concentrated at ports; corn prices may struggle to rise further

In the 2014/2015 year, the additional imports of sorghum, barley and DDGS were basically used to replace corn. If the substitution ratios are calculated at 0.91, 0.78 and 0.6 respectively, the additional substitution consumption of corn was 4.3 million tons.

According to shipping schedule forecasts, in the second quarter imported sorghum, barley and DDGS will still arrive at ports in a concentrated manner. It is expected that in the 2014/2015 year imports will reach 8.5 million tons, 7 million tons and 4.5 million tons respectively, up 4.34 million tons and up 2.11 million tons year-on-year, and down 2.15 million tons year-on-year.

⟦NL> Spot corn prices temporarily stop rising and turn weaker

In the past week, corn prices in the Northeast production areas were stable with some declines. On Wednesday of this week, the purchase price of 14% moisture second-grade corn by deep-processing enterprises in Suihua, Heilongjiang was 2,180-2,280 yuan/ton, and the ex-warehouse price by traders in Changchun, Jilin was 2,300-2,310 yuan/ton, both down 10-20 yuan/ton from a week earlier; the purchase price by feed enterprises in Shenyang, Liaoning was 2,350-2,380 yuan/ton, and the purchase price by deep-processing enterprises in Tongliao, Inner Mongolia was 2,340-2,380 yuan/ton, both unchanged from a week earlier. Since the Spring Festival, corn prices in the Northeast production areas have generally risen significantly, with cumulative increases generally reaching 100-200 yuan/ton.

In the past week, corn prices in the North China production areas were generally stable, with slight declines in some areas. On Wednesday of this week, the purchase price of 14% moisture second-grade corn by deep-processing enterprises in Weifang, Shandong was 2,350-2,370 yuan/ton, down 20 yuan/ton from a week earlier; the purchase price by deep-processing enterprises in Shijiazhuang, Hebei was around 2,300 yuan/ton, unchanged from a week earlier. Since the Spring Festival, corn prices in the North China production areas have

rebounded to varying degrees, among which prices in Shandong and Hebei production areas rose 100-170 yuan/ton, and Henan rose about 100 yuan/ton.

In the past week, corn prices at northern and southern ports generally fell slightly, by 10-20 yuan/ton. On Wednesday of this week, the purchase price of 14.5% moisture Liaoning and Jilin corn at Jinzhou Port in Liaoning was 2,360-2,380 yuan/ton, and the theoretical flat-cabin price was 2,410-2,430 yuan/ton; the transaction price of 14.5% moisture high-quality Liaoning and Jilin corn at Shenzhen Port in Guangdong was 2,480-2,500 yuan/ton. Since the Spring Festival, corn prices at northern and southern ports have generally risen by a cumulative 80-100 yuan/ton.

Later trends still affected by policy

Since April, domestic corn market prices have shown a trend of slowing gains, overall stabilisation and local pullbacks.

First, this month the sales areas began to release temporarily stored corn (including inter-provincial transferred grain sources and imported grain sources). Although the volume released was not large and sales were poor (cumulative transaction rate less than 10%), the earlier-than-expected release time also created a wait-and-see mentality in the market.

Second, recent market rumours say there will be subsidy measures for later temporary storage corn auctions, which further affected market psychology.

Third, recently the arrival at ports of substitute varieties such as imported sorghum has accelerated, especially at southern ports such as Guangdong. After April, arrivals will continue to grow, and the additional substitution volume for the whole year is expected to exceed 4 million tons. This will significantly suppress corn prices at ports in the sales areas and in turn affect the northern ports and Northeast production area markets.

Finally, the feed and breeding market has remained weak recently. According to data from the Ministry of Agriculture, in March the pig inventory at 4,000 monitoring points nationwide fell month-on-month for the 6th consecutive month, among which the inventory of breeding sows fell month-on-month for the 19th consecutive month.

By comparison, with the total temporary storage purchase volume in the Northeast approaching the high level of 80 million tons, temporary storage purchases and auctions remain the main factors, except that expectations for related policies had not changed previously, and prices were supported by temporary storage purchases; while recently market expectations for related policies have changed, and the bearish effects of other factors such as increased substitute supply and sluggish demand

have emerged or even been amplified at this stage. But overall, policy remains an important factor affecting corn price trends, especially as May approaches and Northeast temporary storage corn is about to be put on the market, when related policies will gradually become clear.