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The current supply-demand game in the corn market is intensifying, with the supply side facing concentrated listing of new crops and inventory pressure, while the demand side feed consumption has not increased, and the demand for deep processing is steadily improving.
Abundant supply in corn market: dual drive of new releases and high inventory
At present, the domestic market is in a period of concentrated listing of new crops, especially the large-scale listing of new corn in northern regions, which has put significant pressure on market prices. The data shows that the progress of grain sales by farmers in the northern region is about 22%, while in the northern region it is 27%, both higher than the five-year average, indicating that farmers have a high enthusiasm for selling grain.
At the same time, the expected production of new season corn in China is expected to decrease to a certain extent, with an estimated reduction of 5 to 10 million tons. This reduction in production is mainly affected by factors such as climate conditions and fluctuations in planting area, but overall the market supply is still relatively sufficient.
In terms of the international market, favorable weather conditions in South America have strengthened expectations for high crop yields. Especially in Brazil and Argentina, the new season corn production in both countries is expected to achieve year-on-year growth. It is worth noting that Brazil has become the primary source of corn imports for China in recent years, and its corn export pace has a significant impact on the domestic market. The new season corn production in the United States and Ukraine is expected to decline year-on-year, partly due to the impact of geopolitical risks and weather factors on crops.
On the other hand, Mexico recently stated that it will reach an agreement with the United States on the import of genetically modified corn, which may indirectly affect the global corn market landscape. In addition, according to traders, Algeria has recently launched a new round of international bidding, planning to purchase up to 240000 tons of animal feed corn, mainly from Argentina and Brazil. This fluctuation in international demand will also affect the actual performance of global markets in terms of high yield expectations.
In terms of domestic inventory, the corn inventory in both North and South ports is currently at a historical high. As of November 22, the corn inventory in the four northern ports reached 4.06 million tons, an increase of 3.26 million tons year-on-year, becoming the highest level for the same period since 2018. The grain inventory situation in southern ports should not be underestimated, with domestic corn inventory of about 907000 tons and imported corn inventory of 33000 tons. The high inventory of enterprises has had a significant suppressive effect on domestic market prices.
The warehouse receipt data also shows significant inventory pressure. As of early December, the number of domestic corn warehouse receipts was 78200, a significant increase compared to October. This high position warehouse receipt phenomenon further exacerbates the downward pressure on futures prices. Overall, the current domestic corn market is facing dual challenges on the supply side, including inventory pressure and the concentrated launch of new crops.
Differentiation of Corn Demand Pattern: Stable Feed Growth and Simultaneous Growth in Deep Processing
In terms of feed demand, the market performance is average. The operating rate of deep processing enterprises has decreased, while the profitability of the aquaculture industry has not shown significant improvement. Although there has been some improvement in breeding profits since May, the overall sustainability and intensity are insufficient. In addition, the inventory level of sows capable of breeding is still relatively high, and it is expected that there will be sufficient supply of live pigs, which limits the growth space of feed consumption.
From the annual trend, it is still difficult to see significant improvement in feed consumption. Especially in the breeding sector, the current profit level is not sufficient to significantly stimulate capacity expansion, and the conservative strategies of breeding enterprises have also constrained feed demand.
In contrast, the demand for deep processing is showing a stable and positive trend. Data shows that the processing profit in the domestic corn deep processing field continues to improve, and the operating rate of enterprises has increased, leading to an increase in demand for corn. It is expected that the demand for corn in the deep processing industry will increase by about 2 million tons next year. The growth in demand for deep processing is mainly due to the improvement of enterprise technology and the upgrading of market demand, while policy support also provides impetus for the development of the deep processing industry.
In addition, the State Administration of Grain Reserves recently announced that it will continue to expand the scale of corn procurement and storage. As of the end of November, China Grain Reserves Corporation has released 42 additional storage points.
Future prospects
The market generally expects that during the concentrated listing period of new corn at the beginning of next year, prices may fluctuate due to supply pressure. At the same time, the market is closely monitoring the impact of extreme weather on production and logistics, as well as factors such as the speed of capacity depletion in the breeding end.