Corn was a bit of a surprise today.
Because normally at this time, corn is still being harvested and supply is still coming onto the market in large volumes. Although the decline has slowed over the past couple of days, there really seems to be no sign of a sudden reversal.
But today, corn futures saw a sharp rally.
Closed at 2218 points, up 1.28%.
The market was excited again.
Yesterday still opened high, closed lower, and saw open interest rise as prices fell. So why the sudden change today?
A bit baffled.
But ever since the Internet became widespread, news has really spread fast, and all kinds of market analyses soon emerged.
This time, everyone’s expectations were consistent: they believed this was merely a recovery after an oversold decline, not a major counteroffensive, so there was even less reason to talk about a reversal.
That sounds quite reasonable.
Since corn came onto the market, it has fallen in a straight line, dropping below 2200 and breaking through support.
It has already fallen to around the cost line, so there is limited room to fall further at this point. Although corn is weak, this is due partly to supply and demand and partly to the concentrated increase in supply during the harvest season. So if we take a longer-term view, it is unlikely to fall below the cost line.
So an oversold rebound is inevitable.
Now, let’s look at spot market conditions.
Shandong has really been performing well over the past couple of days. Arrivals have remained low, and deep-processing companies have started raising prices to attract grain. But I believe no one thinks Shandong corn prices are about to surge, because everyone knows how Shandong operates. In particular, the corn harvest has just finished, so arrivals won’t stay low for long, and naturally, the market won’t be able to hold steady either.
In places like Hebei and Henan, corn prices are still falling, so prices are not rising across all of Shandong and North China.
Looking at Northeast China, the situation is even more disappointing.
First, prices in Northeast China are still edging downward.
Northeast China is not like Shandong, and the pressure there is also far greater than in Shandong, so there is considerable pressure on corn prices to rise.
Second, volumes in the Northeast are still increasing.
For example, volumes in Heilongjiang were still surging yesterday. This is a stark contrast to the low volumes in Shandong.
This also points to an issue: the focus for corn is in Northeast China, where the pressure is indeed considerable.
Now let’s look at policy, which is also quite interesting.
Recently, COFCO has been acting noticeably more frequently, but its actions have not been one-sided: it has both bought and sold.
For example, over the past few days, purchases in Lanzhou, Inner Mongolia, and Yunnan have all been 100% completed. Since the new crop came onto the market, cumulative purchases of new grain have exceeded 440 ten thousand tons. There really is a hand supporting the market at the bottom.
But there are also quiet periods. For example, all the lots in the Beijing branch’s special corn procurement session went unsold, and the clearance rate at the storage and transportation session a few days ago was only three or four tenths.
The floor price is posted there, but the market does not accept it, which shows that this “policy floor” has not yet been fully established.
And soon, nearly 10 tonnes of imported genetically modified corn will be auctioned off.
So the policy side is also taking both kinds of action, making it hard to figure out what is going on.
But a much bigger test is coming soon: the weather.
For the past few days, we’ve kept saying that the “stability” in Northeast China these days has been borrowed from the rain, snow, and low temperatures; it’s not that the corn has stood firm on its own.
Now here's the problem: the Jilin Provincial Meteorological Observatory forecasts a significant rise in temperatures across the province from 23 to 24. On 23, highs in the central and western regions will reach 16 to 17℃. On 24, temperatures in the southeast may reach 17 to 18℃, and on 23, the central and western regions will also see southwesterly winds at force four to five.
This means corn is about to face a major test.
So this further confirms that the recent rebound in corn prices is merely a short-term dislocation, not a reversal in supply and demand.
The bottom may indeed be getting closer, but there is still an entire peak period of increased supply from Northeast China between “prices can’t fall any further” and “a major rally is coming.”
Don’t rush; let the dust settle a little longer.