Cut the purchase price of corn six times in a row. Why did the price of corn fall again and again?

On December 19, 2016, Cofco biochemical Energy (Yushu) Co., Ltd. recently lowered the corn purchase price for the sixth time in a row. The latest purchase price: from 8: 00 on December 19, 2016, the price of 14% moisture above the second class is 1380 yuan / ton, the price of the third class 14% moisture is 1340 yuan / ton, the price of the fourth class 14% moisture is 1320 yuan / ton, and the moisture exceeding 42% is rejected. In about a week, after six consecutive price cuts, 14% moisture second-class corn has been reduced by 40 yuan / ton, and 14% moisture third-and fourth-class corn has been reduced by 60 yuan / ton.

From 2004 to 2015, China's grain output achieved "twelve consecutive increases". However, since the second half of 2011, under the influence of the temporary collection and storage policy, there has been a continuous "upside-down" phenomenon that the price of imported grain is lower than that of domestic grain. This has led to the embarrassment of imported grain entering the market and domestic grain storage, which has also led to a continuous increase in grain imports.

Take corn as an example, with the continuous increase of corn inventory, the contradiction of new grain collection and storage and the pressure of safe grain storage in the northeast and other core producing areas are also more prominent. The temporary storage policy for eight consecutive years has distorted the domestic corn market price, especially in the international grain supply surplus environment, the government needs to solve the huge amount of corn inventory (about 250 million tons of inventory, new production of 220 million tons, annual consumption of about 180 million tons).

Government purchase prices encouraged domestic production but also spurred a surge in imports as food and feed producers turned to cheaper imports of corn. On the other hand, due to price comparison, farmers tend to choose safer varieties that support the market, such as choosing to plant corn instead of soybeans, resulting in a backlog of corn stocks and a structural shortage of soybeans.

It is this day's corn inventory that has led to the continuous decline of the corn market!

In recent years, the price of corn in the United States is low, the price at home and abroad is upside down, and the domestic corn is in danger. According to the agreement, the import quota of corn is 7.2 million tons, in fact, the import volume has not yet reached this number, but the imports of other agricultural exports that can replace corn as feed have greatly increased, such as sorghum, wood, barley and so on. These varieties can bypass quota restrictions and enjoy low tariffs, plus tariffs are also very cheap. As a result, the sale of domestic corn was difficult, and the inventory was as high as 250 million tons.

What would it be like if there were no tariff quota restrictions on corn?

Not only will the import of these substitutes be directly represented as corn, in fact, the import demand is much more than that. In the past two years, the competition for corn import quota by feed and deep processing enterprises is extremely fierce. In 2015, more than 1,000 enterprises competed for the only quota, including New Hope, Zhengda, Dabinong, Wen, Zhengbang, Cofco and other enterprises. Feed production alone consumes 150 million tons of corn every year.

At the same time, if domestic corn wants to be sold, it has to continue to reduce prices, and it is unstoppable to collect 70 cents per jin. The price of shopping with imported corn will be unprofitable.