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Low Inventory and Blocked Transportation Made Corn Futures Fluctuate Higher

February 13 2020 10:27:47     SunSirs (Daisy)

Recently, the price of corn futures fluctuated upward. On February 12, 2020, the closing price of C2005, the main corn contract, was 1923 RMB / ton. The total position of corn was 17.47 billion yuan, an increase of 457 million yuan compared with the previous trading day and maintained at a higher level compared with the last five years.

In terms of spot price, the spot price of corn increased significantly after the festival. As of February 12, 2020, the spot price of corn in Dalian was 1940 RMB / ton, 62 RMB / ton higher than 1878 RMB / ton before the festival. Nanhua futures Agricultural Research Center, Li Honglei, told the First Financial’s reporter that the main reason for the rising price of corn futures and spot prices was the impact of COVID-19. And that corn transportation was blocked, and the sales area was short of grain. 

"On the other hand, in the early stage, due to the impact of African swine fever, the demand for corn market was low. And corn stocks in enterprises, traders and ports were all at a low level. In addition, there was rigid demand for replenishment after the festival. Therefore, under the joint influence of short-term supply shortage and rigid replenishment demand, corn prices rose sharply." As per Li Honglei.

Judging from the current supply situation, in order to solve the problem of feed shortage caused by transportation and other reasons in some enterprises in the south, the State Grain Trading Center recently launched the first batch of 2.96 million tons of policy corn for bidding. 

According to the trading results, on February 7, the first day of listing, the actual trading volume of policy corn was about 1.08 million tons, and the average price per ton was 1919 RMB, which was roughly equivalent to the market price level, with a trading ratio of 36.45%. The outstanding 1.88 million tons of corn will continue to be listed for sale.

As of the end of trading on February 11, the total trading volume was about 1.32 million tons, with a trading ratio of about 45%. Li Honglei said that as the relevant departments of the state increased the coordination and facilitation of road traffic and material transportation, the supply of corn was too some extent guaranteed and the market panic was gradually eliminated. At present, the supply of corn market in the sales area is sufficient. The feed grain of the breeding enterprises is guaranteed. And the supply and demand are returning to the normal level.

Jiang Boheng, deputy manager of Luzhen economic and Trade grain department, told the First Financial’s reporter that up to the end of the transaction on February 11, among the 2.96 million tons of policy corn put in, 1.64 million tons of surplus corn had not been traded, with a turnover rate of about 45%. It shows that the downstream enterprises do not panic to rob grain, reflecting the rational attitude of enterprises to participate in the auction as required. But it also reflects the concern of enterprises that prices will continue to rise in a limited way after the recovery of corn supply in the later period. 

In terms of demand, corn is the raw material for alcohol production. With the development of the epidemic situation, the demand for medical alcohol increases, so does the demand for corn. Specifically, the capacity layout of deep processing in the lower reaches of corn presents a "622" pattern, namely 60% starch, 20% alcohol and 20% other acids. Jiang Boheng believed that the increase of alcohol demand in the lower reaches had a certain impact on the overall demand for corn, but the impact was limited.

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