Weather and temporary storage auction of corn in 12 provinces and regions after drought

Liaoning has been hit by the worst drought in more than 60 years since July, and some farmland is facing no harvest.

Twelve provinces and regions suffered the worst drought in Liaoning and Jilin provinces.

Corn in the future, look at the weather, look at the temporary storage auction.

■ Cheng Tong

Affected by the El Ni ñ o phenomenon, since July, moderate to severe meteorological droughts have occurred in many places in China. 12 provinces and regions, including Henan, Shandong, Shaanxi, Inner Mongolia, Shanxi and Xinjiang, have been affected by the drought. Parts of central and eastern Henan have reached a special drought. Liaoning has suffered the worst meteorological drought in more than 60 years, and some farmland is facing no harvest. The meteorological department predicts that there will be no precipitation to alleviate the drought in Liaoning Province in mid-August, and the sunny and hot weather will continue.

The dry weather boosted corn futures prices. After entering the critical period of corn growth in July and August, the price of 1501 corn futures contract has risen from a low of 2287 yuan / ton on July 15 to a peak of 2414 yuan / ton on August 13, an increase of 5.55%, setting new highs. As of August 14, the main corn C1501 contract closing price of 2400 yuan / ton, up 1 yuan / ton, 1409 contract closing price of 2540 yuan / ton, up 21 yuan / ton compared with the previous day's closing price.

After a period of speculation, the future trend of corn futures depends on the weather "face" and the temporary storage auction. Corn futures may remain strong in the future.

Drought boosts futures prices

Recently, domestic corn futures prices have been rising, and the rise in 1409 and 1501 contracts is closely related to the drought in this year's important period of corn growth.

"the drought in the Central Plains has led to the failure of corn harvest in some areas, which has had a certain impact on corn production this year, but what is more serious is the drought in northeast China," said Sun Yu, a researcher on Galaxy futures agricultural products.

Jilin Province is an important corn producing area, with an average precipitation of 9.5 mm in the first ten days of August, 82% less than in the same period of the year. "Maize is currently in a filling period, which is an important period for determining corn yield, when there is less precipitation and more sunshine, and drought is more disadvantageous to corn grain filling, which will affect grain formation and ultimately affect yield," Sun Yu said. if the drought develops further in the later stage, the corn yield in Northeast China will be seriously affected.

The temporary reserve auction or the quoted price will go up.

Since 2013, temporary storage auction as the main channel to buy corn, its transaction rate and price have become a weather vane to measure the supply and demand of the spot market.

Affected by the drought, in the temporary storage auction held on August 13, all the 2012 corn auctions in Liaoning Province were sold, with an average transaction price of 2310 yuan per ton; the 2012 corn auction turnover rate in Inner Mongolia was 44.16%, with an average transaction price of 2152 yuan per ton; and the 2013 corn auction turnover rate was 88.11%, with an average transaction price of 2432 yuan per ton. The high transaction rate and price of this temporary storage auction show that there has been a certain degree of shortage in the spot market.

Some analysts pointed out that due to the advantage of temporary storage prices, all stocks in the hands of farmers and traders have flowed into the national temporary storage, and grass-roots grain sources may have been swept away. All the temporary storage auctions in Liaoning have been sold, indicating that spot prices are tight and futures prices may rise further.

Loose global corn supply and demand

The total global corn production continued to increase in 2014, while consumer demand did not improve, resulting in an increase in corn carry-over inventory at the end of the period in China, the United States and even the world. According to the USDA report in August, the global corn final inventory estimate for 2014 and 2015 is 187.82 million tons, an increase of 16.73 million tons compared with the same period last year, and the inventory pressure is obvious; the inventory estimate for the 15-year period in the United States increased by 7 million bushels month-on-month, or 562 million bushels over the same period last year, which is 2.2 times that of the United States at the end of 2012.

Wang Shufei, an analyst at Huizhou Merchants Futures, said that global corn supply is still increasing, while demand growth is limited, resulting in an increase in corn supply and demand surplus, an increase in carry-over inventory at the end of the period, and a sharp increase in ending inventory in China and the United States. China's ending inventory of 115 million tons accounted for 70 per cent of total consumption for the year.

In the case of drought in the inland and northeast regions, short-term hype is expected to continue, but the upward height is limited, if most of the drought in the country is alleviated, prices may fluctuate back down. "

From the after-market position point of view, the total position of each contract, the top 20 long positions totaled 168202 hands, and short positions totaled 193671 hands. For the late corn futures price trend, the market has been divided, long and empty hold their own views.

Sun Yu believes that, "at this stage, under the joint action of good, corn futures prices have risen continuously, and the impact of the late weather and temporary storage auctions will directly determine the price trend, and prices are expected to remain strong before this."