Will the corn market really cool down?

As we all know, the current domestic corn market as a whole has been restricted by the very limited food supply in circulation in the market, and the price has begun to enter an upward channel. The main buying and selling activities in the market are concentrated in the policy grain oriented sales fair held every Tuesday (Wednesday). Even though this batch of corn for targeted sale is mainly based on the old grain of 2012, its turnover rate has been continuously pushed up, rising from nearly 50% in the previous two games to a high of nearly 70%, and then since last week, the overall turnover rate has fallen back to 50% again. After the overall volume returned to the initial volume of more than 2 million tons this week, the turnover rate fell again, and the overall turnover rate of yesterday's auction was only 36.13%. A sharp reduction in volume and a further decline in the trading rate, does this reflect that the overall supply of the corn market is no longer in short supply, and that the corn market will usher in a cooling due to the relief of the supply shortage in the short term in the future?

Through investigation and analysis, it is concluded that the recent decline in the turnover rate of corn targeted sales can not really reflect the changes in the supply and demand pattern of the corn market. In other words, the decline in turnover is not due to the easing of supply pressure in the corn market itself. On the contrary, the author thinks that although the total amount of corn put into the market by the recent policy grain has reached as much as 8.56 million tons, it seems that the quantity is huge. However, if we calculate from the amount of corn used in the whole year, the amount of corn used for feed in China is about 110 million tons every year, and after the import of imported grain has been restricted on a large scale this year, the overall use of corn is expected to increase on the original basis, while the average consumption of corn in deep processing enterprises is about 5500-60 million tons. In addition, the task of eliminating corn production capacity this year has been highlighted at the two sessions and other major meetings, that is to say, the use of deep-processed corn this year is likely to exceed 60 million tons. Well, these two items add up to more than 170 million tons, with an average monthly consumption of more than 14 million tons, while the current season is a starting point for the peak demand for feed farming, in other words. After entering the third quarter, its use of corn will reach a peak this year. Then the average amount of corn used each month is conservatively estimated to exceed 15 million tons. In retrospect, let's take a look at the 8.56 million tons of corn sold in a month, which can only meet the average amount of corn used in the country. Moreover, a large part of the corn in 2012 can not be used by feed processing enterprises, that is to say, this batch of targeted sales of corn can basically meet the use of deep processing enterprises, but the overall demand of feed enterprises is still difficult to meet.

Let's look at the decline in the turnover rate of this auction from another point of view. From the targets of the auction, it is not difficult to see that the early transaction rate has maintained almost all transactions in Hebei, Shandong and Henan, and its volume has been greatly reduced. Even so, Hebei and Shandong only put in a total of about 30,000 tons are still snapped up. And Henan Province stopped putting it into operation. Taking into account yesterday's turnover, the total turnover in Hebei, Henan and Shandong provinces reached 3.64 million tons, accounting for 42 per cent of the total. The sharp reduction in the transaction rate is precisely due to the sharp reduction or even suspension of filming in the above three provinces.

Therefore, the fundamental reason for the sharp drop in the auction turnover rate in the past two weeks, especially yesterday (June 30, 2016), is mainly due to the fact that a large part of the remaining targets do not meet the structure of market demand. after a month of auction, the supply pressure has been alleviated in a short period of time, while feed enterprises can only choose to sit on the sidelines when the old grain at auction cannot be used. As a result, the turnover rate of the auction has declined. On the other hand, the sharp reduction and suspension of bidding in the three provinces of North China, including Hebei, Shandong and Henan, where the turnover rate has been more than 90%, have objectively become the main reasons for the sharp reduction in auction turnover. Because of this, the decline of the current corn market policy grain auction turnover rate can not reflect the real relationship between supply and demand in the corn market, let alone draw the conclusion that the supply pressure in the corn market has been alleviated and corn prices will fall in the future. In the short term, the supply pressure of the corn market, especially the supply pressure of high-quality corn used by feed enterprises, is still very great. The full launch of the national auction of corn in 2014 can solve the supply pressure of the current corn market. It is still quite difficult for the spot price of the corn market to fall back from the high level in the short term.