Corn continued to edge up yesterday.
Shandong's shipments remain low, with only 200 more vehicles. The situation in Shandong is clear: low shipment volumes are due not to the weather, but to sellers holding back their goods.
So corn has little room to fall.
Meanwhile, the Northeast continues to see small increases in rotation.
There is little suspense about market conditions in Shandong. The main focus is Northeast China, which the market is watching to see when corn there will come onto the market in large volumes. That is also when Northeast China corn prices will fall.
However, the Northeast market is also seeing a strong reluctance to sell, with sellers holding firm on prices. This sentiment is not unfounded; it has a basis.
First, there is the issue of the cost line.
The cost line is not actually rigid either, because it is common for prices to fall below cost during emotional overselling. However, under normal sentiment, no one is willing to sell grain below cost.
Second, purchases by the reserve stockpile provide a price floor.
This is also a signal the market is watching.
Corn is highly dependent on policy, especially when it first comes onto the market. Large volumes can easily disrupt the market, and at such times, the purchase price offered by reserve warehouses often becomes a market indicator.
In particular, the many recent failed purchase auctions by Sinograin also reflect the strong reluctance among grain holders to sell. As mentioned yesterday, under these circumstances, there is a high probability that reserve depots will raise their prices.
So corn has continued to post modest gains, and then another piece of news emerged, further boosting the outlook for corn.
The Central Meteorological Observatory issued a blue alert for blizzards today. This is also the first blizzard alert issued in the second half of this year.
Among these areas, some parts of northern Shanxi, western and northern Hebei, and northwestern Beijing will have heavy snow. Some parts of northern Shanxi and western Hebei will have blizzards, with 10 to 12 millimeters of precipitation and 2 to 6 centimeters of new snow accumulation; locally, more than 8 centimeters.
From tomorrow through the day after, the affected area will be larger: widespread rain and snow in central and eastern regions, with heavy to blizzard-level snow in parts of Shanxi, Hebei, Beijing, Liaoning, and other areas, and locally exceptionally heavy snow in northeastern Hebei and southwestern Liaoning.
Once the snow arrives and the ground freezes, the corn comes back to life.
First, once the ground freezes, grain can be stored.
What is northeastern corn most afraid of right now?
The biggest worry is bad weather and grain that cannot be stored. But once the ground freezes, the temperature of the grain pile drops, cutting the risk of mold by more than half. Farmers are then less likely to rush to sell their grain.
Second, the road is blocked.
From tonight through the day after tomorrow, Shanxi, Hebei, Shandong, Henan, Anhui, and Jiangsu will have force five to six winds, with gusts of force seven to eight, along with rain and snow.
It is easy to imagine that trucks from North China and Shandong will once again be unable to get through, making it even harder to push down prices for deep processing.
Third, drying costs will rise.
Actually, because coal prices have risen, the cost of drying corn in drying towers has already increased. And with more wet grain after the snow, demand for drying is even greater, so costs will have to rise further.
As drying costs rise, the dry-grain equivalent price of damp grain cannot come down, giving the posted price more support.
Fourth, and most importantly, those waiting on the sidelines have more confidence.
The proportion of corn stored in the Northeast is already high this year, and farmers at the grassroots level are unwilling to accept low prices. Now that temperatures have dropped and the ground has frozen, there is no longer any concern about corn being piled up in the yard. Who would still be in a hurry to sell?
So, corn has perked up again, but a major rally will still be difficult. Most likely, the current pattern of alternating gains will continue.
Of course, some people also say this only pushes the pressure further down the line. But think about last year: the market said the same thing and waited in the same way. Did corn prices eventually come down?
No.
Although it appears to be a stalemate on the surface, companies continue to replenish stocks out of necessity, and corn is steadily being consumed. By the time the selling pressure is actually released, it is no longer as great.
So corn prices can’t fall any further.
Will this year's market conditions repeat last year's?