Corn prices unlikely to see deep correction, temporary storage auction runs low-key
The much-watched "trial" auction of temporary-storage corn in the south has ended. Given that the starting prices at this auction did not show the worrying "low prices," the state's intention to auction at a price that covers costs is obvious, and the bearish impact of the auction on the market is limited.
Temporary storage auction proceeds "low-key"
On April 9, the highly anticipated first regular auction of 2015 temporary-storage corn finally came to a close. As expected, drawn by its comparative price advantage, imported corn sold out entirely, while domestic temporary-storage corn transactions were dominated by second-grade corn. The starting prices were not as low as some market participants had expected, and the bearish impact of the auction has been partly absorbed. At the same time, the "trial" and "trend-setting" nature of this round of auctions by the relevant authorities is beginning to emerge.
Judging from the pricing level of the trial auction of temporary-storage corn, the relevant authorities clearly intend to sell off surplus stock at an opportune time after completing large-scale purchases for temporary storage. This is also the fundamental reason why the starting prices at this auction were not significantly lowered, and it provides guidance for the future direction of the corn market.
It is understood that farmers in Northeast China now have very limited grain left in hand. Following Heilongjiang and Liaoning, corn sales progress among farmers in Jilin has also reached nearly 90%, and the market generally expects that grain purchasing will become very difficult one month from now.
Farmers' grain-selling progress close to last year
According to follow-up surveys, the corn-selling progress of farmers in China's northern producing areas has now approached the level of the same period last year, and the final purchase volume of temporary-storage corn is expected to soon exceed 80 million tons. Against this background, history is quite likely to repeat last year, but whether it can again reach last year's high still depends on demand. It is understood that around this year's Spring Festival, the inventory levels of grain-using enterprises across China were noticeably higher than a year earlier, and in recent months the arrival volume of imported grains at ports has averaged more than 1 million tons.
Given that the current temporary-storage corn auction is relatively low-key, its adverse impact on the market is gradually dissipating. It is expected that the domestic corn market will warm up modestly in the later period under the checks and balances of multiple factors, and the medium- to long-term upward trend remains unchanged. Continued attention should be paid to the pace of subsequent temporary-storage corn auctions.
It is worth mentioning that the first shipment of Argentine sorghum is about to arrive in China in April, and China's imported corn quota is also being heavily consumed amid active ship purchases. In the medium to long term, the pressure from imported grain arrivals at domestic ports still cannot be taken lightly.