Soybean and corn prices rise, with both planting returns and market prospects improving

Summary: Soybean and corn prices have risen, and this year's market prospects are worth watching.

This year's soybean market is much better than in previous years, mainly thanks to rising soybean prices this year and obstacles to imported soybeans. It is expected that this year's soybean imports will shrink by 10 million tonnes. Although the domestic soybean planting area has increased somewhat this year, according to a report from the Grain and Oils Information Center, this year's increase in domestically grown soybeans is only just over 1.3 million tonnes, which means that, on the premise that total soybean consumption remains unchanged, China will still have a shortfall of 8.7 million tonnes. As for corn, because demand has increased sharply this year, corn prices will also benefit somewhat this year, but corn planting returns are not necessarily going to increase.

Soybeans

In 2017, an institution calculated that China's soybean planting return was 350 yuan per mu (net return), but this year the return will increase somewhat. Taking last year as an example, the unit price of soybeans was 1.5 yuan per jin, while this year it is currently basically 1.8 yuan per jin, a clear increase. And this price is probably not the final price. According to the China Agricultural Product Supply and Demand Report released by the vice president of the Chinese Academy of Agricultural Sciences, due to the market shortage this year, China's soybean prices have risen by more than 5%, and there is still good room for further increases. Although input costs for agriculture will also increase somewhat this year, soybean prices have risen significantly this year, so the returns are worth anticipating. Moreover, because the soybean supply side is relatively tight this year, it is believed that there will still be good room for soybean prices to rise further later this year.

Corn

Kexue Xingnong is also fairly optimistic about this year's corn prices. Although the intention to destock temporary reserves is strong, with temporary reserve auctions of 8 million tonnes per week continuing without interruption, from the supply and demand side, market demand has increased substantially this year, while the corresponding production capacity has not increased. In other words, this year the overall demand side of the corn market is tending toward tightness.

With the rise of China's corn deep-processing industry, production capacity has gradually increased. However, according to data from the Grain and Oils Information Center, corn output this year increased by only 0.3%, and compared with this year's demand, that increase seems negligible. Kexue Xingnong estimates that this year's corn demand will be about 250 million tonnes, while production capacity is at most 220 million tonnes, leaving a market demand gap of 30 million tonnes. Therefore, this year's prices and market prospects are still worth watching optimistically.

However, although corn prices are expected to rise this year, for many corn farmers this year will not necessarily really bring increased returns. Affected by natural disaster weather factors this year, yields per unit area have declined somewhat, and combined with higher agricultural input costs, a situation may arise in which prices rise but money does not.

Overall, this year's grain prices are still worth watching optimistically, but agricultural input costs are also constantly rising now. Compared with the pace of grain price increases, agricultural input prices have risen even more, and it is becoming harder and harder for farmers to obtain higher economic benefits from planting.

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