A corn inspection tour by the China Grain Net reports that this year's corn harvest in Shandong and Hebei Provinces is afflicted with high rates of mold growth due to wet weather. (Mold releases mycotoxins that can cause digestive problems in livestock consuming feed that contains moldy grain.)
Due to the high incidence of mold in the region, feed companies in Shandong and Hebei are being cautious about buying local corn. The survey team says about 50% of this year's corn has been sold by farmers in Binzhou and Liaocheng of Shandong and less than 20% in Handan, Hebei Province. Feed mills are instead buying corn from the northeastern provinces where the corn is drier. This means demand for northeastern corn is unusually high, pushing prices up there while prices in Shandong-Hebei are weak. Thus, the usual price relationship is inverted--prices in the northeast are higher than in Shandong-Hebei.
The survey team visited a number of feed mills and industrial processors of corn. They found that feed mills are substituting a lot of wheat for corn since corn prices exceed wheat prices. Some poultry feed is using 100% wheat. The proportion is lower for laying hens and piglets.
There are a lot of industrial processing enterprises in Weifang and Binzhou of Shandong. Their requirements for corn quality are not as strict as those for feed mills. The industrial processors buy most of their corn locally, but some comes from Henan Province. However, the processors say the industry is in a downturn now and prospects are grim. A person from the Xiwang Group says that processors are operating at less than 50% of capacity now and the situation is grim.
The livestock sector has seen falling prices after the spring festival. The team says the hog price fell from 12 yuan/500g before the festival to 8 yuan now. The egg price fell from 4 yuan to 3 yuan. It is said that producers are not enthusiastic about increasing animal inventories, so feed demand is soft.
The survey team says the weather in north China has been relatively good lately, favorable for drying corn. This is expected to improve sales and prices of corn in the region but the potential for price increases is limited.