Sino-Singapore Jingwei Client, August 12 (Wu Yihan) Recently, the increase in corn prices has caused widespread concern in the market. Data show that since March, the average spot price of corn has risen by more than 400 yuan/ton, while the futures price has broken through a five-year high in July. A feed operator lamented: "I haven't seen such a high corn price for many years."
According to market participants, the increase in corn prices since March this year is related to the gap in supply and demand in the domestic corn market. Looking ahead, since the supply and demand gap will still exist for a certain period of time, corn prices will have a long-term high-level operation basis. However, as the current corn price has risen to a high level, it may face callback pressure in the short term.
New latitude and longitude in the data map. Photo by Wu Yihan
Corn prices have continued to rise since March
Since March this year, corn prices have continued to rise. According to China Feed Industry Information Network, the average spot price of corn rose from RMB 1,902.11/ton on March 2 to RMB 2,328.16/ton on August 11, an increase of RMB 426.05/ton. Among them, the price increase of 190.4 yuan/ton was realized in more than a month since July.
From the perspective of the transaction, the market demand for corn remains high. From May 28, 2020 to August 6, 2020, 11 rounds of auctions of temporarily stored corn were conducted. In these 11 rounds of auctions, except for the second round of auctions with a turnover rate of 99%, the remaining 10 auctions had a turnover rate of 100%, and most of them were at a premium.
The rise in corn spot prices and the hot market for corn reserve auctions have also boosted corn futures prices.
Wind data shows that corn futures prices accelerated in July. Among them, the September corn futures contract was only 2090 yuan/ton when it closed on June 29, and on July 31, the contract price rose to 2366 yuan/ton, setting a new high for corn futures prices in the past five years.
Mr. Xu, who runs a feed business in Fujian, told the Sino-Singapore Jingwei Client that he had not seen such a high corn price for many years. Due to the increase in corn prices, Mr. Xu had to increase the price of his own feed, which affected the sales of feed to a certain extent. For this reason, Mr. Xu said that he has begun to reduce the purchase of corn in the near future. “Because I think the price of corn has risen so fiercely some time ago, the price will definitely be adjusted in the near future, so unless the inventory runs out recently, I will basically stop buying. "
The Li Honglei team of the Nanhua Futures Research Institute told the Sino-Singapore Jingwei client that the increase in corn prices this year was mainly due to a certain degree of supply and demand gaps in domestic corn, and one of the most important reasons was the relative decline in corn supply.
Li Honglei's team stated that since the corn industry began to implement supply-side reforms in 2016, corn reserves have been destocked for 5 years, and the current stocks of temporarily stored corn have dropped to a low level. In addition, the corn planting area has also declined, which has made the supply of corn relatively reduced. Judging from the current situation, the gap between supply and demand of corn due to the reduction in supply may exist for some time.
In addition to the relative reduction in supply, in the view of some market participants, the increase in demand for corn in the domestic market in the second half of the year, especially the increase in demand for corn in the feed industry, has further affected the supply and demand situation of corn and pushed up the price of corn.
According to data from the Ministry of Agriculture and Rural Affairs, in June this year, the stock of reproductive sows achieved a year-on-year increase of 3.6%, which is the first year-on-year increase since April 2018. Mr. Shen of Hengtai Futures pointed out that due to the sharp reduction in the number of live pigs in 2019, the demand for corn feed in 2019 will be greatly reduced. This year, the number of live pigs has recovered rapidly, and the demand for corn feed has rebounded sharply. It is expected that the demand for corn feed consumption will increase this year. It reached about 170 million tons, an increase of 10 million tons year-on-year.
The end of the market? August futures prices fell for 6 consecutive days
However, it is worth noting that after the previous surge, corn prices have seen a clear correction trend since August.
Wind data shows that after entering August, the price of the September corn futures contract fell for 6 consecutive trading days. It was not until August 11 that it closed up 0.05% slightly to 2219 yuan/ton, compared with 2366 yuan/ton on July 31. The high price of China has pulled back 6.21%.
In addition, on August 6, the eleventh round of auctions of temporary storage corn was held this year. Although the transaction rate of this round of auction was still 100%, the average premium was slightly lower. Among them, Jilin Province plans to trade 950,000 tons, with an average premium of 392 yuan/ton, down 39 yuan/ton from the previous auction.
According to Dai Junmei, an agricultural product analyst at Meierya Futures, the recent cooling in the corn market is related to the changes in the mentality of traders and the listing of corn substitute wheat.
The analyst pointed out that traders were hoarding stocks to rise, causing short-term corn supply and demand tension. However, recent policies have continued to increase, and every change directly points to the hype phenomenon in the temporary storage corn market. At the same time, the downstream demand in the market has also begun to find other paths under the situation of low supply. Traders’ attitudes to price have become loose. .
"In addition, because the old corn on the market currently mainly supplies the feed market, and wheat is already on the market, the continuous increase in corn prices before that has caused the price difference between the two to gradually narrow, and wheat has a price advantage relative to corn. According to Tianxia Granary According to statistics, the replacement of corn by wheat in the feed sector has indeed begun, and there have been companies that have reached 100% of the level of wheat substitution.” Dai Junmei said.
Li Honglei's team at Nanhua Futures believes that the drop in corn prices since August is a reasonable callback after the sharp rise. In the first few rounds of temporary corn storage auctions this year, the prices of corn auctioned by traders were relatively low. As these temporary corn storages were gradually released from the warehouse, traders had demand for capital turnover and profit settlement, so they began to export. Sell corn. Under this circumstance, corn prices will naturally see a correction.
How will corn prices go in the future?
Now, as the price of corn has risen to a high in recent years, the market's views on the future trend of corn prices have begun to diverge.
In Dai Junmei’s view, the current corn market has broken through the previous operating logic. (This time the price of corn has fallen) is not a short-term correction, but a far-reaching change. The trend of subsequent corn futures will be affected by temporary storage and export. , Substitute market share, weather speculation and other factors. From the perspective of market forecasts, there will be greater downward pressure on corn in the short term, and the magnitude of the downward trend is related to the speed at which corn from temporary storage is exported and substitutes flow into the market.
Jinxin Futures also believes that the spot price of corn futures may not be able to maintain for a long time at the current position, and risks are gradually accumulating. According to the agency, as the supply of the corn market in the future improves in the following aspects, the pressure on the market trade link will gradually increase, and traders may continue to sell the spot in hand to realize profits, and there is room for further correction in the current spot price:
First of all, after August, the preliminary corn storage auction will gradually usher in the final out-of-stock period, and the supply of corn will increase; in addition, the state-owned enterprises have recently increased their purchases of US corn. The US Department of Agriculture indicated on July 30 that private exports Merchants sold 1.937 million tons of corn to China, surpassing the 1.762 million tons reported in the previous two weeks; finally, the southern new season corn in mid-to-late August is also expected to slightly increase market supply.
However, the Li Honglei team of Nanhua Futures believes that although the supply of corn will increase due to temporary storage and export of corn, foreign corn imports and other factors will increase in the short term, but in the medium and long term, the supply and demand gap of corn will still exist for some time. "Because the increase in the supply of corn due to temporary storage and export is biased towards the short-term, while foreign imported corn is subject to quota restrictions. Therefore, despite the short-term pressure on corn prices, there is still room for growth in the medium and long term." The team said, optimistic. It is predicted that this round of corn prices may exceed 2,700 yuan/ton.
Mr. Shen of Hengtai Futures also believes that from the perspective of supply and demand fundamentals, under the influence of the reduction of corn planting area and the interference of weather factors, the output of corn in 2020 and 2021 will decrease, and the demand will follow the recovery of pig stocks and Deep processing enterprises (corn is the raw material for the manufacture of starch and alcohol) have increased their replenishment. The domestic corn market is entering a new stage of a long-term supply gap, and the new pattern of short supply will be the main driving force for the rise of corn prices. (Zhongxin Jingwei APP)
(The opinions in the article are for reference only and do not constitute investment advice. Investment is risky, and you need to be cautious when entering the market.)
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