The new corn is about to be launched one after another, and traders' corn inventory may be available for sale in August September. At present, corn inventory in the southern market is at a high level, and downstream grain consuming enterprises are not in a hurry to replenish inventory. However, the pressure on traders to sell grain is gradually increasing, and based on this, corn prices may continue to remain weak in the short term.
Corn futures have been continuously declining since early July, with the main 2409 contract falling from 2,520 RMB/ton at the end of June to the current 2,260 RMB/ton, a drop of up to 10%. We assess that the main reason for the current corn decline is that the production and supply of corn in North China this year are relatively loose compared to the same period last year. Based on current market inventory, valuation, and new product price expectations, we believe that the short-term corn market price may continue to maintain a weak trend.
The progress of traders selling grain is accelerating
Since early July, the explicit inventory of corn has remained at a relatively high level, and the turnover rate has been slow.
Firstly, the energy grain inventory in Guangdong ports remains abundant and at a high level compared to the same period last year. According to institutional data, as of the week of August 2nd, the total grain inventory in Guangdong ports was approximately 2.41 million tons, compared to approximately 1.34 million tons in the same period last year. In terms of sub items, the domestic corn inventory is about 550,000 tons, the imported corn inventory is about 360,000 tons, the imported sorghum inventory is about 620,000 tons, and the imported barley inventory is about 770,000 tons. According to the data from the next 2-3 weeks to the port, it is estimated that the total grain inventory of Guangdong ports will be about 1.91 million tons by the week of August 23, compared to about 1.18 million tons in the same period last year, an increase of 730000 tons year-on-year. From this, it can be seen that although the grain inventory in Guangdong ports will decrease in the near future, the decrease will be relatively small.
Secondly, from the perspective of corn warehouse receipts, it can also indicate that there is currently significant inventory pressure on traders. According to data from the Dalian Commodity Exchange, as of August 5th, there were approximately 891.31 million corn warehouse receipts, which is at a high level in recent years. The corn warehouse receipts data for the same period from 2018 to 2024 were 37,968, 86,978, 28,840, 35,724, 145,636, 43,360, and 89,131, respectively. Based on the above data, it can be seen that the corn warehouse receipts for the same period in 2019, 2022, and 2024 are at a high level. In years when corn warehouse receipts are at a high level, corn market prices generally show a downward trend. Considering that new corn products are about to be launched at the current time, the available time for traders to sell corn inventory may be concentrated in August and September. Due to the current high corn inventory in the southern market, downstream grain consuming enterprises are not in a hurry to replenish their inventory. However, the pressure on traders to sell grain is gradually increasing, and based on this, the short-term corn price may continue to remain weak.
Expected year-on-year decrease in new scale opening
As of August 6th, the closing price of corn futures contract 2501 was 2,250 RMB/ton, compared to 2,652 RMB/ton in the same month last year, a year-on-year decrease of 402 RMB/ton. We believe that this year's corn market participants have lowered their expectations for the price of new corn, mainly due to the decrease in the cost of planting new corn. Based on market research data, taking Heilongjiang Province as an example, the lease price for land in the Heilongjiang region in 2024 is 600 RMB/mu, compared to approximately 800 RMB/mu in the same period last year. Considering that the costs of seeds, fertilizers, machinery, etc. remain unchanged, assuming a corn yield of 1,290 jin/mu in Heilongjiang Province, it is estimated that the cost of collecting new season corn at the port in 2024 will be about 2265 RMB/ton, and the same period last year will be about 2575 RMB/ton. It should be noted that the actual planting cost of corn is greatly affected by yield and land rent, so the above estimated data may differ slightly from the actual port cost. However, overall, considering the decrease in land rent in the Heilongjiang region in 2024, the conclusion that the cost of collecting new corn at ports this year has decreased year-on-year is recognized by corn market participants.
The cost of collecting new corn at the port is about 2,265 RMB/ton, and as of August 6th, the closing price of corn futures contract 2501 is 2,250 RMB/ton. From the perspective of new planting costs, the further downward space for the 2501 corn futures contract is relatively limited. However, it should be noted that cost pricing is only one factor in price analysis, and it is normal for corn market prices to fall below cost at a certain stage. Therefore, it is recommended that investors consider all factors that affect corn prices while participating in corn futures.
In summary, the short-term corn market may continue to remain weak. At the current time point, corn traders are facing pressure from third-party funds expiring or being forced to sell corn. In addition, new corn is about to be launched, and the time window for selling old corn is relatively short. At the same time, in the process of price decline, corn terminal grain enterprises generally consume high priced inventory in the early stage to reduce inventory days. Based on this, it can be inferred that the selling pressure in the corn market has been relatively high recently. Of course, from the perspective of the cost of planting new corn, there is limited room for the 2501 corn futures contract to continue to decline.
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