As the saying goes, the only constant is change.
Corn is no exception, of course. After a long period of deadlock, things have finally started to change today.
First, volumes in Shandong began to increase.
It used to be one or two hundred vehicles, then increased to three or four hundred vehicles, then increased again to more than 500 vehicles, and today it has increased again to more than 700 vehicles.
There is no doubt that Shandong’s growth has begun to slow significantly. If it continues to grow at this rate, it is foreseeable that Shandong’s growth will soon come to an end.
However, today’s focus is not the Shandong market, but Northeast China.
Northeast China corn had been consistently weak, then bulls and bears reached a stalemate. Starting around the day before yesterday, it began to show a somewhat clearer uptick, but that only lasted for a day or two. By today, it could no longer move higher.
Why can’t it be lifted anymore?
Ultimately, the problem is that sales are sluggish. If buyers have nowhere to sell the goods they collect, their incentive to buy naturally decreases.
However, some changes have taken place in the market recently, creating some opportunities for corn in Northeast China:
First, corn from Northeast China may now be able to enter customs.
As mentioned earlier, Northeast China is facing significant pressure from corn. Besides pressure from a bumper harvest, another concern is that corn is not flowing out smoothly. Prices are not competitive for shipments from Northeast China to North China and Shandong, so a large quantity of corn is staying in the region.
Fortunately, the weather was favorable, easing the urgency to sell the grain, but this is by no means a long-term solution.
However, market conditions have changed recently.
The theoretical rail-station price for Northeast China corn delivered to Shandong has already fallen below 2200 yuan/ton. In theory, although shipping Northeast China corn to Shandong might not be profitable, it might also break even.
This provides a possible condition for Northeastern Chinese corn to enter the customs area. If it becomes profitable later on, the window for Northeastern Chinese corn to enter the customs area will reopen, which would also help ease pressure in the production regions.
Second, North China corn is “in trouble,” and feed mills are starting to switch to Northeast China corn.
Although the North China corn harvest was good this year, toxin levels were generally poor. The reason goes back to the half-month period during the harvest.
From late 9 to early 10, rain fell continuously across North China and the Huang-Huai region for more than half a month. There was very little sunshine, and the wet conditions prevented mechanized harvesting, pushing the harvest schedule back again and again.
After all the effort it took to harvest the corn, its moisture content was generally high, and some of it was not dried promptly, so the rate of mold damage increased somewhat.
And for feed companies, this is a serious drawback.
Corn exceeding toxin limits is not a matter of price, but whether it can be used. If it is found to fail inspection after being received, it has to be returned. As a result, the rate of rejected deliveries of North China corn has been noticeably high recently, prompting many companies to shift their purchasing focus to Northeast China corn.
Meanwhile, Northeast China’s corn producers are worried about finding an outlet for their crops. If this channel opens, it will also ease the selling pressure on corn from Northeast China.
Third, the weather was favorable, with freezing conditions continuing.
The weather in Northeast China has continued to cool recently, and the coming days will still bring lower temperatures and snowfall. This is very good news for corn in Northeast China.
In the past, a major reason farmers in Northeast China sold their grain was not a lack of money, but that they could not store it for long. Now that the weather has turned much colder, storing corn has become easier, so they are less eager to sell.
In addition, Sinograin continued expanding its collection points and purchasing operations in Northeast China, which gave grain holders greater confidence. As a result, they felt less anxious, and their reluctance to sell increased further.
This also brings opportunities to the Northeast corn belt.
But opportunity is one thing; a big rally is still out of the question.
Because demand had, at most, only ticked up slightly, without a major increase in volume.
After all, hog prices are plunging, feed companies dare not build up large inventories, and the current outlook for corn is also unclear, so demand will not surge.
If corn demand does not increase significantly, its boosting effect will also be limited.
Secondly, selling pressure has eased at most; it has not disappeared.
The Spring Festival falls early this year, so in theory the pre-holiday window for selling grain is short, leaving farmers at the grassroots level with a tight schedule. This is especially true for those who need to sell grain before the holiday, as they do not have much time to put it off until the last minute.
Moreover, even if Northeast corn enters the region, with feed companies’ demand shifting, this volume is still not large; at least compared with the supply pressure from Northeast corn, it is a drop in the bucket.
Northeast China’s deep-processing sector is unlikely to rush to raise prices and secure grain over this level of demand.
Third, the weather remains the biggest variable.
At present, grain holders are not in a hurry or worried. The main reason is that the weather is favorable, so the corn can be stored. But the weather is unpredictable and can change suddenly, especially since this year, under the influence of El Niño, is very likely to be a warm winter.
If the weather suddenly warms up later, that will be a major test for grain holders.
So the opportunities mentioned earlier will only affect the pace of fluctuations in Northeast China corn, not change the weak trend. Theoretically, neither a sharp rise nor a sharp fall is likely in 11, but fluctuations will be more frequent than in 10.