Temporarily-Stored Corn is About to be Auctioned, but It Can’t Crack Down Corn Market Prices Obviously

Since May 21^st, national temporarily-stored corn has been auctioned officially, with the planned auction volume of 3 million MT/week. Of which, grain produced in 2014 can be auctioned by qualified companies, and grain produced in 2015 is feed grain and trade grain; the bidding price in Jilin is RMB 1,750/MT, RMB 100/MT higher than last year. However, it would bring limited crack-down on corn market prices.    
 
Judging from the quality of grain, northeastern old grain can’t meet the demand from scaled pig feed companies and starch companies. It can relieve the situation of a tight supply of some companies such as inedible starch companies, industrial alcohol companies and fuel alcohol companies, who have no high requirements on quality.    
 
In the view of auction prices, corn purchase prices in Heilongjiang and Jilin range between RMB 1,900-1,950/MT; corn purchase prices in Shandong range between RMB 2,150-2,250/MT. In consideration of the expenses for warehousing-out and the freight, the costs of temporarily-stored corn arrival in the factories would reach RMB 1,850/MT, with a limited decline compared to corn market prices.  
 
After the resuming of tolling the highways on May 6^th, corn logistics costs improved, pushing up corn prices. In north China and Huang-Huai Region, corn prices ascended obviously, and even saw the growth of RMB 100/MT in some areas; in the northeast and in the southern ports, the settlement price of corn witnessed a growth of RMB 40-60/MT. Corn prices still would increase in the short term, but slightly. The main reasons are as follows:  
  
(1) Corn costs of further processing companies hit a record high in the last five years. Although corn further processing companies improved the quotations of further processed products, yet it can’t offset the growth of corn prices. Except that starch companies in Jilin made a tiny profit, alcohol companies in Heilongjiang and further processing companies in Shandong all fell into loss. The operating rate of corn starch and alcohol companies descended to 50-60%, and corn stocks owned by further processing companies hit a low in recent years. The inhibiting effect of high corn prices on the demand is emerging.
 
(2) Cereal imports increased and the number of cereal arrival at the ports would be considerable in the near future. From January to March, the imports of corn, sorghum and barley were 1.251 million MT, 0.633 million MT and 1.015 million MT, up 27.4%, 295% and 28.8%. According to the report released by the USDA on May 7^th, corn exports to China recorded 0.686 million MT. It was predicted cereal imports arrival at the ports in May would exceed 1 million MT, bringing certain inhibiting effect to domestic corn market prices.    
 
(3) Temporarily-stored corn is about to be auctioned. After the starting of auctioning temporarily-stored corn, the demand from further processing companies with low requirements on quality of corn would be met.
 
(4) After one month, wheat in north China and Huang-Huai Region would enter the period of harvesting, which can relieve the situation of a tight supply of corn in some areas.