Highlights from Yumi.com cash corn market report, Dec. 5, 2008
China announced its increase in planned temporary reserve purchases in Heilongjiang Province: Soybean 1.03mmt, corn 1.3 mmt, paddy rice 2.6 mmt.
Latest statistics on corn procurement as of Nov 20, in 10 major provinces (Hebei, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Shandong, Henan, Sichuan, Shaanxi, Gansu) grain enterprises procured an estimated 4.929 mmt of corn, an increase of 3.746 mt from the same period last year. Of that total, 1.188 mmt (24%) was purchased for central reserves, up 0.996 mmt from last year.
The NDRC, grain bureau, finance ministry, and agricultural development bank issued a notice that the national plan for temporarily increasing grain inventories will be raised by 14 mmt, including 7.5 mmt rice, 5 mmt corn, 1.5 mmt soybeans.
Farmers are cautious in selling corn, waiting for the price to go up, so the actual pace of sales is sluggish. Farmers are eager to sell because they need to repay loans by the end of the yaer, but demand among purchasers is not that strong. Industrial users are having to compete with state reserve purchasers. The market for industrial products is not booming so enterprises are taking a wait-and-see approach. Some companies are cutting their procurement prices.
This week the corn price in Manchuria was basically stable. Prices are supported by state reserve purchases. From the point of view of traders and processors, the situation is not so clear. The weather has turned cold, moisture has dropped, so drier corn brings a higher price. Putting all these factors together, prices are more of less stable.
In the Yellow-Huai Rivers North China region the corn price continues to fall. Demand from industrial users and feed mills is low. Contracts for purchases for state reserves have not been finalized and purchases not yet started. Traders are on a “buy as you go” pattern, shipments from grain stations light. The market has been hit by the global crisis, and market’s confidence is low. The livestock market is still weak. Pork costs are still high, so the pork price is not falling. Poultry prices are in a slow decline. There is not a lot of room for further decreases in meat prices. Right now the sow inventory is very big, which creates a big supply of feeder pigs, but farmers are not eager to expand their herds. Farmers are tending to slaughter hogs now. Feed mill purchases are not that great; they are letting inventories fall to a low level.
Northern ports. Since farmers are eager to sell grain, a lot of new corn is coming on the market. The price in southern port areas is also going down. A lot of corn (600-700,000 mt) has arrived at northern ports and been shipped to the south in the last two weeks. The inventories are up, however, and expected to push prices down.
World prices have fallen below Chinese prices. The CBOT corn price is about $3.11/bu, under $3.60 at Gulf ports, and the cash price in South Dakota is under $3. By comparison, the prices received by farmers in northern China are $4.50-$5.50. The price at Dalian is $5.64, and it's $5.86 in Guangdong.
A few months ago there was talk of China exporting corn if the harvest was good. China is piling up surplus corn, but the drop in world prices will probably make Chinese corn uncompetitive unless they subsidize it. Chinese corn imports are probably not on the horizon given the weak domestic demand and big reserves.
Heilongjiang: 1230-1300 ($4.56-$4.82/bu)
Jilin: 1350-1400 ($5-$5.20/bu)
Shandong: 1420-1480 ($5.27-$5.49/bu)
Guangxi: 1650 ($6.12/bu)
Heilongjiang, Harbin 1380 ($203/mt; $5.15/bu)
Jilin, Changchun City 1400 ($5.20/bu)
Shandong, Weifang 1510
Liaoning, Dalian 1520 ($222/mt; $5.64/bu)
Guangdong, Shekou port 1580 ($231/mt; $5.86/bu)
Sichuan, Chengdu 1640
Jiangxi, Nanchang 1640
Northern 1500-1520 ($219-$222/mt)
Southern: 1580-1700 ($231-$248/mt)