The price of corn has entered a long bear market.

Since June, domestic corn futures prices have accelerated down, and the monthly line of corn 1601 contracts has gone out of 6 consecutive falls, indicating that corn prices have the characteristics of a bear market. Under the pressure of the adjustment of collection and storage policy, the huge backlog of inventory, the listing of corn in the new season, flagging demand and so on, the price of corn is "heavy" and difficult to return.

The "importance" of the Adjustment of Collection and Storage Policy

Since the implementation of the corn temporary storage policy in 2008, the annual corn temporary storage purchase price has shown an upward momentum year by year. The market price of corn supported by the temporary storage price has also increased year by year, which is an important thrust of the strong domestic corn price in recent years.

With the superposition of various factors such as oversupply in the domestic corn market, huge inventory accumulation, the wide gap between domestic and foreign corn prices, and so on, the corn temporary storage policy is forced to usher in the opportunity to adjust. Since June, the market has been rumored that the temporary reserve policy will be adjusted this year, although there are many versions, but the empty adjustment idea is the mainstream of market rumors. From the perspective of the temporary reserve purchase price, it is rumored that the temporary reserve purchase price may be adjusted downwards for the first time, although the rate of adjustment is still controversial, but the direction of downward adjustment has been accepted by the futures market.

From the implementation level, in the context of the huge backlog of corn inventory, strict acquisition standards, strict control of mildew and other indicators, it is possible to reduce the scale of acquisition, the previous "open acquisition" model will also meet challenges. The trend of policy negative adjustment will make the price at the bottom of the domestic corn market sink.

The "heavy" backlog of huge inventory

Temporary corn was acquired rapidly in 2013, 2014 and 2015, but the sluggish auction sales led to large inventory balances. In 2013-2014, temporary storage corn acquired 69.19 million tons; in 2014-2015, temporary storage corn purchased 83.28 million tons, bringing the total corn acquisition volume in these two years to 152 million tons. A total of 29.65 million tons (including 3.7 million tons of imported corn) were sold during the May-November 2014 corn auction, while only 3.83 million tons (including 140000 tons of imported corn) were sold at the April-August 2015 corn auction.

Through a simple comparison, we can see that there is at least a huge stock of more than 110 million tons of corn in the temporary warehouse. The inventory level of more than 100 million tons is enough for China's feed enterprises to consume corn for one year, and a huge amount of inventory is carried forward, which poses a heavy pressure on the domestic corn market.

The "weight" of Corn listing in the New season

In the pattern of sluggish market sales this year, the listing of new corn has become a fatal straw to overwhelm the price of old corn. Compared with the same period last year, the inventory of old corn in the hands of traders and grain depots in North China is still on the high side, while the new season corn begins to occupy the market one after another from south to north, with quotations of less than 2000 yuan per ton of new corn, directly squeezing the price of old corn out of the market.

From the point of view of the listing time, new corn has been listed in Shanxi, Henan, Shandong and other places, which is getting closer and closer to the time point of mass listing at the end of September. The rhythm of new corn entering the market at low prices will greatly reduce the center of gravity of corn prices.

The flagging demand for corn is "heavy"

Corn processing industry and corn feed consumption are both in the doldrums, and the domestic corn market has entered a cold autumn of low demand.

Due to the weak consumption of downstream products of deep processing enterprises, sales prices have been on a downward track since the end of June. By the end of August, the sales prices of starch and alcohol have fallen by more than 200 yuan per ton, and deep processing enterprises have continued to lose money, which has dragged down the operating rate of enterprises. At present, the operating rate of the alcohol industry is only 40%, while that of the starch industry has dropped to 53%. The demand for deep-processed corn is hardly optimistic.

However, the market share of domestic corn has been declining this year under the impact of a surge in imported corn, imported sorghum and barley substitution, and sow stocks have been on a downward trend for 23 consecutive months since August 2013. According to industry forecasts, corn feed consumption, which accounts for about 68 per cent of the corn market, will fall by 10 million-15 million tons.

On the whole, under the heavy pressure of negative adjustment of collection and storage policy and oversupply, domestic corn prices have entered a long bear market. Investors are advised to operate with homeopathy and be cautious about the short-term rebound in corn prices.