Corn market has both good and bad news; can the bear market end here?
Recalling the corn market in late July and early August, at that time we were still saying "when will the decline stop?" Within just a few days, corn market prices in North China, represented by Shandong, continued to rebound, and some areas have now returned to the "1 yuan" era, bringing a touch of "brightness" to the corn market in the bear market. Affected by this, corn prices at northern and southern ports and in sales areas followed closely with "rising" voices. Market participants described this round of rebound as "regional" and "phased," or "reasonable" and "corrective," and recently some market participants have called it "unusual." Indeed, the current domestic corn market is under the background of large-scale releases of policy grain sources and the gradual listing of spring corn in the south, while also shrouded in an atmosphere of huge corn inventories urgently needing to be drained. At this time, what is the reason for the rebound in corn prices? Can the bear market trend end here? This has become a question worth deep thought. In addition, the "auction," "spring corn," and "weather" that we had been continuously watching have also seen new developments. Recently, with both "bright spots" and "worries" coexisting, the corn market is indeed somewhat "entangled." The specific analysis is as follows:
"Unusual" One: Some corn prices in North China have returned to the "1 yuan" era. Since early August, when purchase prices at deep-processing enterprises in some areas of Shandong rebounded, some prices for high-quality corn have returned to the "1 yuan" era. Analysis of the reasons driving the rebound: First, it is exactly the period of the "lean transition" between old and new corn in the market, corn supply has become temporarily tight, enterprise arrivals are generally low, and some enterprises with low inventories have been forced to raise prices to purchase; Second, the amount of southern spring corn entering the North China market is currently relatively limited, spring corn in North China has not yet been listed in bulk, and rigid demand from downstream enterprises supports North China prices firm and upward.
"Unusual" Two: Corn prices at northern and southern ports and in sales areas followed closely. Driven by the rebound in corn prices in North China production areas, since mid-August corn prices at northern and southern ports and in sales areas have followed with a rebound after the earlier decline. As of now, corn quotes at Jinzhou and Bayuquan ports in the north are 1770-1800 yuan/ton, priced according to quality, with theoretical flat price at 1820-1850 yuan/ton, up 10-20 yuan/ton from last week. Jilin and Liaoning rotation corn quotes at Guangdong port are 1950-1970 yuan/ton, and quotes for poorer-quality corn are 1860-1900 yuan/ton, both up 40 yuan/ton from last week. At the same time, corn prices in southern sales areas rebounded in sync. Taking Jiangxi as an example, the current delivered price of new corn from surrounding areas has generally risen to around 1880 yuan/ton, and some high-quality new corn arrivals are as high as 2000 yuan/ton.
"Unusual" Three: Prices in Northeast production areas were not driven upward. Although corn prices in North China, southern sales areas, and northern and southern ports all showed a rebound, the Northeast corn market, affected by its own supply and demand fundamentals, was still not driven upward, and its prices remained relatively stable. However, affected by the boost from some deep-processing prices in Shandong, the outflow of corn from Northeast production areas is currently accelerating. Regarding the growth of new-season corn, last week precipitation in northern Northeast China was scarce. At present, drought conditions continue overall in most of eastern Inner Mongolia, northern Jilin, central and western Heilongjiang, and some areas of northern Liaoning, with signs of worsening and spreading. According to relevant meteorological reports, precipitation in Northeast China will still not strengthen significantly in the next three days, which requires continued attention.
"Unusual" Four: Temporary storage corn auction transactions have improved markedly. Since early August, as the scope of the seasonal rebound in corn prices gradually expanded, temporary storage corn auctions also showed a positive "trend." The auction transaction rate for temporary storage corn rebounded from a low level, reflecting on the one hand the current domestic market's insufficient remaining grain, and on the other hand, in Northeast China, as rotation grain gradually leaves warehouses and is consumed, the number of enterprises relying on policy corn auctions has also increased. According to statistics from the China National Grain and Oils Information Center, as of August 18, policy corn auctions this year (excluding invited bids) had cumulatively transacted 13.98 million tons, of which Northeast China transacted 7.46 million tons, cross-provincial relocation corn transacted 6.44 million tons, and imported corn transacted 75,000 tons. However, relative to the huge inventory pressure of about 240 million tons, later temporary storage corn "draining" still has a long way to go. Therefore, although temporary storage corn auctions show a slight sign of recovery, it is difficult to escape the overall pattern of hovering at low levels, and China's "astronomical" corn inventory as well as the potential pressure from new grain listings ultimately remain fetters on the market's weak rebound.
"Unusual" Five: Southern spring corn listing volume increased, quality poor, prices fell. Spring corn in southern provinces began to be listed one after another, and about one month has passed so far. Although the listing volume has been continuously increasing, its quality is average, and price declines have become obvious. According to statistics from relevant departments, Hubei corn has now been listed in large quantities, Huai'an and Xuzhou in Jiangsu have listed small amounts, and Bengbu and Bozhou in Anhui, Xi'an and Hanzhong in Shaanxi, Puyang and Zhumadian in Henan, Tai'an in Shandong, and other places have listed sporadically, with price ranges of 1700-1920 yuan/ton, down 40-60 yuan/ton from the beginning of listing. On the one hand, because this year the southern spring corn sowing areas in China experienced flooding disasters not seen in several years, some severely affected areas basically had no harvest at all, and other areas also had corn quality seriously affected by days of rainfall. The subsequent continuous dry weather led to water shortage and drought, inhibiting corn cob growth, resulting in lower spring corn output this year, smaller kernels, and in some areas bulk density reaching only 600-630 g/L, unable to meet the purchase standards of grain-using enterprises. On the other hand, this year the outbound price of new-season spring corn meeting national standard Grade One in various places was generally 1800-1840 yuan/ton, and the opening scale price was not accepted by the market, with purchasing and selling willingness light. Therefore, since new-season spring corn began to be listed, it has mainly been consumed locally, and difficulty in outbound shipment has caused its price to continue declining.
"Unusual" Six: Local drought has reduced per-unit yield and aroused "worries." Since mid-to-early August, extreme drought in some areas of China has aroused widespread market attention, especially in Inner Mongolia and western Heilongjiang, which are major corn production areas in China, and there have also been reports of no rainfall for 20-30 consecutive days in parts of Jilin and Liaoning. According to incomplete statistics, as of August 18, the drought-affected crop area in Inner Mongolia, Jilin, Heilongjiang, Shaanxi, Gansu, Ningxia, and other places was 4566.5 thousand hectares, with 405.4 thousand hectares having no harvest at all. Some pastoral areas in eastern Inner Mongolia saw reduced pasture grass output due to drought. At the same time, in addition to Inner Mongolia and Heilongjiang, parts of Jilin and Liaoning having no rain for 20-30 consecutive days is also equally worrying. Although corn in most areas of Northeast China safely passed the key pollination period this year, up to now many places have seen no rainfall, causing water shortage during the corn filling period, which is unfavorable for later kernel volume formation. If drought continues, it will affect the corn per-unit yield level.
The above briefly described various "unusual" aspects of the current corn market. Next, I will discuss my personal views on how long everyone is concerned this round of rebound can last, or whether the "bear market" can reverse: First, carefully sorting out the reasons for the recent rebound in corn prices, it is not difficult to find that whether in North China production areas, or at northern and southern ports or in sales areas, tight inventories at grain-using enterprises and tight supply of high-quality corn are important reasons for this round of price rebound. From the perspective of the domestic corn market's supply and demand fundamentals, rational analysis shows that huge inventory pressure and relatively weak market demand do not support price increases. Second, new pressure is gradually approaching. It is understood that at present some areas in Shandong have sporadic spring corn listings, with prices between 1700-1750 yuan/ton, and bulk listing is expected in late August. In Hebei, Shaanxi, and other places, about 10-15 days later some high-quality corn will be listed. This batch of corn has higher bulk density and basically meets manufacturers' purchasing standards. In addition, the listing volume will be significantly larger than at present, which will again increase domestic corn supply pressure. Finally, it is expected that corn prices at southern ports may be the first to enter a downward channel. It is understood that in the next ten days about 350,000 tons of domestic corn will arrive at Guangdong port. In addition, imported sorghum and barley will also arrive at port in a concentrated manner. Energy feed supply at Guangdong port will gradually become looser. In addition, southern spring corn is also expected to increase supply to a certain extent. The rise in corn prices at Guangdong port will be difficult to sustain in the short term, and it is expected to enter a downward channel earlier than North China.
Based on the above analysis, although the phased rebound in the domestic corn market has its rationality, under the overall background of China's temporary storage corn draining, policy variables and the listing of new corn both suppress its upside space. Therefore, before the autumn grain listing, this round of corn price rebound in some areas can only be said to be the last radiance of the setting sun, and merely a regional, phased, and even short-lived market behavior. Next, with old and new pressures overlapping, there is not much time or space left for corn prices to rise. It is still difficult for the "bear market" to turn into a "bull market," and the key still lies in policy direction. However, for high-quality corn, the current domestic corn circulation sector continues to be dominated by overdue-storage and older-storage-year 2013 rotation corn. Therefore, the scarcity of high-quality corn may again be reflected before the bulk listing of autumn grain, and its price increase will be a high-probability event. At the same time, due to relatively severe local drought, the adverse impact on regional corn per-unit yield is worth attention. Of course, even more worrying than weather is still the first reform of the autumn Northeast temporary storage corn purchase policy. At present, the first batch of corn producer subsidies in Northeast China (nearly 30 billion yuan) has been issued, but whether there will be a second batch, or even a third batch, after the first batch, under the principle of "market-based pricing, separation of price and subsidy," how the state will "subsidize" will be the key affecting the price positioning level of new-season corn, and its impact on the corn market will be even more worth watching.