Grain prices in October are more likely to rise than fall

I. Review of the grain market in September

    In recent times, affected by extreme weather worldwide, major grain-producing countries such as Russia and Canada have seen large-scale reductions in grain output, further worsening the imbalance between global grain supply and demand. Domestically, prices of agricultural products, with corn as the representative, have risen across the board, which has also pushed the center of gravity of domestic grain prices upward.

    Data released by the National Bureau of Statistics show that in August China's CPI rose 3.5% year on year and 0.6% month on month. The increase in price levels expanded somewhat, mainly related to the carryover effect and newly added price-increasing factors. Among the newly added price-increasing factors, grain rose 12% year on year, and the rise in agricultural product prices contributed about 70% to the newly added price-increasing factors. It can be seen that the sharp rise in CPI is unfavorable to the state's management of inflation and the macroeconomy.

    To safeguard national food security and maintain the stability of the domestic grain market, the state has recently introduced a number of regulatory measures. While strengthening macro-control of the wheat, corn and early rice markets, it has also repeatedly issued relevant measures to ensure this year's autumn grain production. Recently, in order to ensure market supply and basic price stability, the National Development and Reform Commission, the State Administration of Grain, the Ministry of Finance and the Agricultural Development Bank of China jointly issued the Notice on Strictly Enforcing Discipline and Earnestly Ensuring the Release of Policy Grain from Warehouses, requiring relevant departments to strictly comply with all regulations on the sale and release of policy grain from warehouses, strictly implement the responsibility system for the release of policy grain from warehouses, and strictly enforce the quality standards for the release of policy grain from warehouses. In addition, to ensure the stability of agricultural product prices during the Mid-Autumn and National Day holidays, the state has also required relevant departments to strengthen price supervision.

    (1) In September, both domestic and international corn prices hit new highs

    In September, corn prices at home and abroad generally showed an upward trend. By comparison, the rise in U.S. corn was more intense, mainly because the sharp reduction in wheat production in the Black Sea region led to strong global demand for U.S. agricultural products. Driven by long positions taken by funds, the CBOT December corn contract broke through the 500-cent mark on the 19th. In contrast, the main 1105 contract of Dalian corn futures in China was suppressed in September by state policy regulation, and futures prices moved sideways in the first half of the month. However, market expectations for a tight balance in new-crop corn supply also became stronger and stronger. Under such circumstances, futures prices strongly broke above the 2,100 yuan/tonne line in the second half of the month.

    Looking at the spot situation in September, state reserve auctions continued. Port corn traders, on the one hand, remained optimistic about the forward market because state reserve inventories had fallen sharply; on the other hand, traders at southern ports believed that port supply was still relatively ample, so they were in no hurry to restock. Overall, prices of high-quality corn at northeastern ports remained stable. The flat-price of high-quality corn in Dalian port was 1,990-2,010 yuan/tonne at 14% moisture. The purchase price of high-quality corn in Jinzhou port was about 1,940 yuan/tonne, with a flat price of 1,990-2,010 yuan/tonne. At southern ports, the transaction price of corn for pig feed and chicken feed in Guangdong port was 2,060-2,070 yuan/tonne, while corn of relatively slightly lower quality traded at 2,020-2,060 yuan/tonne.

    In mid-to-late September, new corn began to be harvested in small quantities, and prices in Yushu, Jilin were relatively stable. The listing price of corn at Yushu COFCO was 1,700 yuan/tonne at 14% moisture, but the purchase volume was extremely small. The cost for traders after threshing and drying was about 1,630-1,640 yuan/tonne at 15% moisture. The ex-warehouse price of old corn for traders was 1,820 yuan/tonne, while the ex-warehouse price of corn from state reserve auctions was 1,750-1,780 yuan/tonne.

    (2) Demand growth pushed strong gluten wheat futures prices up another step in September

    Since September, the domestic flour market, affected by the holiday effect and by an increase in urban group consumption after universities reopened, has seen stage-specific growth in the wheat purchasing demand of milling enterprises for flour processing. In addition, because farmers in producing areas were still not very active in selling grain, supply in the purchase and sale market was relatively low, which in turn drove wheat prices in some producing areas to rise again. The price in China's strong gluten wheat futures market rose another step overall in September. After the main 1105 contract set a new high of 2,580 yuan/tonne in the first ten days of the month, it showed a high-level oscillating trend under the influence of state regulation.

    Looking at the spot situation, by the end of the month, wheat prices in Henan remained stable. Among them, the purchase price of Zhengzhou flour mills was about 1,980 yuan/tonne, the purchase price of Nanyang flour mills was 1,950 yuan/tonne, the purchase price of traders was 1,900 yuan/tonne, and the station price was 1,950 yuan/tonne. The wheat purchase price of flour mills in Linyi, Shandong was 2,040-2,050 yuan/tonne, that of traders was about 2,020 yuan/tonne, and that of grain depots was about 2,040 yuan/tonne. The circulation volume in the purchase and sale market was still relatively low.

    (3) Lacking bullish support, early indica rice weakened and moved downward in September