Future Daily: Corn May Decrease In Later Time

After the Spring Festival, the overall operation of Lian corn's dominated contract C2005 is under great pressure. After the Spring Festival, the national corn supply showed a gradual tightening trend, resulting in a strong spot price of corn. 

Before the Spring Festival, the corn traders in the middle reaches were cautious in purchasing, and the port corn inventory was low. During the Spring Festival, public health events occurred in China. In order to prevent the spread of COVID-19, some villages and towns in the main corn production area blocked traffic, and grain sales at the grass-roots level were limited. In addition, logistics and transportation was affected by this public health event, especially automobile transportation. 

During the Spring Festival, the corn stock consumption of deep processing and feed breeding enterprises is in urgent need of replenishment after the festival. However, due to the small amount of corn arriving at the plant, the downstream enterprises raise the price and guarantee the quantity. The spot price of domestic corn is strong.

After the Spring Festival, rain and snow occurred in Northeast China, North China, Huanghuai and other places. And heavy snow occurred in some areas, further increasing the difficulty of releasing surplus grain at the grass-roots level. 

Corn spot prices are hard to keep rising in the short term and are expected to fall again. At present, the situation of fundamentals of national corn has not changed significantly compared with that before the festival, and the situation of loose corn supply is still continuing. 

On the one hand, 40-50% of the new season corn in 2019 / 2020 has not been sold yet, and at present, it is only affected by the logistics and transportation that cannot form an effective supply.

However, pigs and poultry are sold more before the festival. And nonplague and avian influenza also have an impact on the stock. The stock volume after the festival is at a low level, so it is difficult to recover the feed demand in a short time. With the recovery of logistics and transportation in the later stage, 40-50% surplus grain at the grass-roots level will form a great supply pressure. At present, many traders are cautious in purchasing corn, which also reflects the market's pessimistic attitude towards the price trend of corn. It is expected that corn will fall in the short term.

In the medium and long term, corn is still bullish. On the one hand, the No. 1 document of the Central Committee of the people's Republic of China mentions accelerating the resumption of pig production. It is predicted that there will be a recovery growth in China's pig stock, which will benefit the price of corn in the medium and long term. 

On the other hand, the spodoptera frugiperda attacks on the south of China, and the No.1 document of the Central Committee of the people's Republic of China in 2020 clearly proposes to do a good job in the prevention and control of the meadow moth. In 2019, the moth invaded 1518 counties of 26 provinces in southwest, South China, South China, middle and lower reaches of the Yangtze River, Huanghuai, northwest and North China, covering an area of more than 1 million hectare, with an actual area of 0.164 million hectare. 

Since 2020, Spodoptera frugiperda has occurred in winter corn planting areas of Yunnan, Guangdong, Hainan, Guangxi, Sichuan, Guizhou and other provinces (regions), Yunnan, Hainan, Guangdong and other provinces generally, and some regions have high insect populations. At present, it mainly attacks on winter maize, most of which are sown after April to May in the north of the Yangtze River, which has not been affected temporarily. 

It is difficult to prevent and control the moth because of its strong reproductive ability, migration ability, destructive and wide characteristics. If it can't be controlled in time, the spodoptera frugiperd may reach the Yangtze River Basin in early April, the Yellow River Basin in May and the Northeast in June, which will have a great impact on the corn yield per unit area in China's main corn producing areas.

In summary, in the short term, corn supply pressure is large, and the demand is difficult to be boost. Besides, in the medium and long term, corn feed demand is expected to recover, while the situation of the meadow moth is not optimistic. Therefore, it is expected that the pattern of near weak and far strong corn has been formed, and investors can consider carrying out reverse operation, that is, to sell the 2005 contract and buy the 2009 contract. In addition, it is expected that the corn 2005 contract will not be able to break through effectively in the short term, so it can be considered to continue to sell the call option of the 2005 contract.

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