Corn-producing areas see reduced surplus grain, supply-demand conflict to emerge after the New Year
As the year-end approaches, farmers in producing areas are actively selling grain, the pace of temporary storage purchases is steadily rising, feed enterprises are beginning to prepare pre-New Year stockpiles, and trading activity in the corn market is heating up, but corn prices have not been boosted. It is expected that after the Spring Festival, with large volumes entering temporary storage, rising trader inventories and a small share of good-quality grain, the supply-demand conflict will gradually emerge, creating opportunities for corn prices to rise.
Temporary storage gains momentum, grassroots grain sources in producing areas shrink. As of January 20, temporary storage had absorbed a cumulative 33.18 million tonnes of Northeast corn, 430,000 tonnes higher than the same period last year, exceeding the same period last year for the first time since the start of purchasing, and the total purchased volume now accounts for 35% of total Northeast corn output. By province, as of the 20th, Heilongjiang's temporary storage intake was 18.52 million tonnes, Jilin's 9.5 million tonnes, Liaoning's 1.66 million tonnes and Inner Mongolia's 3.5 million tonnes, accounting for 49%, 36%, 13% and 19% of each province's corn output respectively.
The figures show that Heilongjiang's corn intake pace is the fastest, while other provinces are notably slower than last year. Among them, Jilin is mainly affected by a high mold rate in corn, while Liaoning and Inner Mongolia are affected by relatively high prices and smooth outflow.
Corn inventories at traders are higher than the same period last year. Last year, because of large-scale temporary storage purchases, grain supply became tight after May, triggering a sharp rise in corn prices. This year temporary storage is likewise purchasing at an astonishing pace, grassroots grain sources are shrinking day by day, and the volume of corn that can circulate in the future will decline markedly, strongly resembling last year's market and attracting traders in producing areas to actively build inventories. At present, overall trade grain stocks in producing areas are clearly higher than the same period last year. In addition to traders in Jilin and Heilongjiang in the Northeast, who hold a positive attitude, the sharp drop in grain prices in North China has also attracted local traders to start building inventories. However, given the relatively high moisture content of corn, the quantity stored so far is still limited.
⟦NL> An increase in inventories at the trade stage will, to a certain extent, reduce the quantity of grassroots corn. At the same time, prices are more easily supported by costs, constituting a short-term bullish factor for grain prices; on the other hand, it can also play a regulating role in the market. After grain prices rise to a reasonable level, trade grain sources can be gradually released into the market, reducing the possibility of a surge like last year's.
Farmers are selling grain at a relatively fast pace, and post-New Year supply pressure weakens. Driven by temporary storage purchases and traders actively building inventories, the current grain-selling progress of farmers in producing areas is faster than the same period last year, with basically all of it more than halfway through. Among them, Liaoning and Inner Mongolia have already bottomed out, and Heilongjiang's progress is already around 70%. Before the Start of Spring and the Spring Festival, farmers in producing areas will continue to maintain high enthusiasm for selling grain, accelerating the pace of grassroots grain sales. Under a rhythm of ample supply, the weak trend in grain prices is hard to change. The early release before the New Year will help ease post-New Year supply pressure and lay the foundation for a later rebound in grain prices.
The supply-demand conflict may appear after the New Year, providing opportunities for price increases. In 2012/2013, the market had relatively high carryover stocks of old grain, while in 2013/2014 there was basically no carryover of traded old grain. Therefore, if temporary storage this year purchases at last year's level, it will more easily create a situation of tight supply later. Combined with the limited quantity of high-quality corn, good grain will become a "hot commodity," and prices will also be supported. Overall, the surplus corn in producing areas is currently shrinking gradually, and tight supply after the New Year leading to higher grain prices is a high-probability event. But the exact extent of the increase will still depend on the final progress of temporary storage purchases, the import situation and breeding demand.