Northeast corn prices keep rising, farmers' enthusiasm for selling grain runs high

According to observations, the temporary state reserve corn purchase is about to end, but the heat remains undiminished, corn prices in the Northeast continue to rise steadily, while corn in North China and southern sales regions, lacking the support of the temporary reserve policy, has seen its price momentum slow markedly, with some places even seeing a slight decline.

According to a report by China National Radio's "San Nong China", since mid-March, affected by the huge volume of state temporary reserve purchases, the circulation of grain supplies in production areas has appeared somewhat tight, and corn prices have overall continued to maintain their upward trend. Entering April, farmers no longer have much surplus grain on hand, and state temporary reserve corn auctions will also begin. Under such circumstances, how will China's corn market develop in the future? What changes will the market see?

The Huize Farmers' Cooperative in Gongzhuling City, Jilin Province, is a large cooperative with more than 4,000 farming households and over 60,000 mu of land. The cooperative mainly grows corn. At the end of 2014, the corn here enjoyed a bumper harvest, and the price situation was also very optimistic. Speaking of that year's corn prices, member Wu Guangyu was quite satisfied:

Wu Guangyu: Right now it's around 1 yuan 16 fen, the price is quite high and quite steady.

Wu Guangyu told reporters that with better prices, farmers' enthusiasm for selling has also risen.

Wu Guangyu: We've sold all but a tenth, not much left.

It is understood that since the acceleration of temporary reserve corn purchases in early December last year, corn purchase prices for deep-processing enterprises in the Northeast have cumulatively risen by close to 300 yuan/ton, and increases in North China and southern regions have generally exceeded around 100 yuan/ton. Zhuochuang Information analyst Liu Dong introduced that, taking Spring Festival as the dividing line, corn price increases nationwide were relatively similar, but as of now, corn prices in North China and the South have somewhat declined, while only Northeast corn prices remain strong.

Liu Dong: The temporary reserve purchase volume in the Northeast this year is very large, and this is also the main reason why Northeast corn remains firm at present. The latest data show that as of April 5, the temporary reserve purchase volume was 77.58 million tons, a volume already far exceeding last year. From the policy side, first, the temporary reserve purchase volume is relatively large, and second, grassroots grain supplies are very scarce. The overall grain purchasing progress in the Northeast has now reached more than 90%, so farmers currently have less than 10% of their grain left, making a tight supply situation in the later period unavoidable.

The state's "Notice on Relevant Issues Concerning the State Temporary Storage Corn Purchase in Northeast China in 2014" stipulates that the deadline for temporary storage corn purchases is April 30, 2015, but according to Liu Dong's observations, the heat of temporary reserve purchases remains undiminished, Northeast corn continues to rise steadily, while corn in North China and southern sales regions, lacking the support of the temporary reserve policy, has seen its price momentum slow markedly, with some places even seeing a slight decline.

Liu Dong: In North China, such as Shandong, Henan and Hebei, some areas have seen slight declines, but the decline is not large, around 20 yuan per ton, and prices in southern sales regions have basically not changed much. The main reasons are that the earlier increase was relatively large and needs time to be absorbed, and second, overall purchasing and sales are relatively stable.

With the approval of relevant state departments, from April 7 to 9, the Anhui Grain Wholesale Market and related networked markets held a state policy grain competitive sales transaction fair. Today (the 9th), 317,500 tons of state temporary storage corn and imported corn will be auctioned. Liu Dong analysed that this may affect later pricing.

Liu Dong: Everyone is watching the auction price, including the transaction volume, and then deciding on later operations, so the market is now filled with a relatively strong wait-and-see atmosphere. Although the overall auction volume is not large, and the auction is mainly held in sales regions such as Anhui, Hunan, Hubei and Jiangxi, overall, this is the first auction of the year and everyone is paying close attention, including to the price and transaction volume, which may have some influence on later pricing and strategy.

Jiang Hongxia, an analyst at the Nanhuanqiao Agricultural and Sideline Products Wholesale Market in Suzhou, Jiangsu, believes that before this year's new corn comes onto the market, although domestic corn prices will not see the big market movement of last year, when prices rose 300—400 yuan/ton within two weeks, on the whole domestic corn will show a pattern of being easy to rise and hard to fall, and the specific increase will have a relatively large relationship with the release of temporary reserve corn.

Jiang Hongxia: The main reason is the huge quantity of temporary reserve corn. At the same time, the Northeast corn produced in 2013 has already been transferred across provinces to all parts of the country in large quantities, and this corn can be released from warehouses to supply the market at any time. From an analysis of the market situation in southern corn sales regions, imports of sorghum and barley, which substitute for corn, are growing very quickly, and mainland corn and Northeast-produced corn have no price advantage at all. If one further considers that the domestic pig breeding industry and corn deep-processing industry are still on the edge of losses, the corn "purchase and storage market" will not last too long. From an analysis of later market development trends, although consumption can hardly form significant support for corn prices, because the structural contradiction in domestic corn market supply is prominent and the cost of policy corn purchases is relatively high, before this year's new corn comes onto the market, domestic corn prices will show a pattern of being easy to rise and hard to fall.

At present, corn prices are tending toward stability, but on the whole, agricultural products such as corn and soybeans have hit new lows in recent years. Some views hold that the "Belt and Road" is the fulcrum for the take-off of China's bulk agricultural products and the "east wind" for Chinese agriculture to "go global". But to turn the "east wind" into a good opportunity, it is still necessary to seize opportunities in many aspects.