The temporary storage corn market has finally returned to the right track?

The temporary storage corn market has finally returned to the right track?

The temporary storage policy began in 2007 with the original intention of encouraging corn cultivation in the main producing areas and ensuring national food security. However, after 2011, the prices of international agricultural products, including corn, plummeted, while the price of Chinese corn storage increased year by year, which caused domestic stocks to accumulate and corn to have a serious oversupply.

The entire industrial chain of corn is obviously distorted, and the grotesqueness is mixed, and the market effectiveness is greatly reduced. This is obviously not in line with the principle of promoting market-oriented economic reforms. The current situation of purchasing and storage is contrary to the original intention of the policy.

The No. 1 Document of the Central Committee in 2016 proposed to promote the structural reform of the supply side of agriculture. Liu Xiaonan, deputy director of the Economic and Trade Department of the National Development and Reform Commission, said last month that the three provinces in Northeast China and Inner Mongolia Autonomous Region have adjusted the temporary corn storage policy to a new mechanism of “market-based acquisition” and “subsidy”. At this point, the removal of protection prices from corn storage is considered to be the official start of China's agricultural supply side reform.

The industry believes that after the corn cancellation policy, the next reform is likely to focus on wheat and rice.

Zhong Jin Securities analyst Zhong Kaifeng believes that “price separation” is the direction of policy reform and the core of this policy reform. After the reform, the price will re-reflect the significance of the actual situation of supply and demand, play a role in resource allocation, promote production efficiency, and then promote the promotion of China's agricultural competitiveness from a long-term perspective.

Temporary storage led to distortion of the corn market

For the cancellation of the corn reserve protection price, the National Development and Reform Commission experts explained that in the past two years, the drawbacks of the corn storage policy have become more prominent, and it has been unable to adapt to the new situation and new changes.

Supply of severe excess inventory remains high

Thanks to the policy of purchasing and storage, China has surpassed the United States since 2014 and has become a country with a large corn planting area. In 2015, China's corn planting area was 37.12 million hectares. Corn production in 15/16 has reached a record high of 224.6 million tons.

From the point of view of exporting countries, China is the world's second largest producer of corn, but in recent years, the export volume is extremely small. Even because of the serious inversion of domestic and foreign corn prices, although domestic stocks remain high, imports still appear, and the number has increased slightly.

From the perspective of global inventory, according to the US Department of Agriculture data, as of the end of 2015, the global inventory was 206 million tons, and the ending inventory consumption ratio was 21.34%, which has steadily increased for four consecutive years. Among them, more than half of the inventory is in China, and China is a country with a large inventory-to-consumption ratio among the major producers and sellers in the world, that is, countries with high destocking pressure.

But the consumer side is behind the supply side. Since 2007, China's corn has achieved self-sufficiency in supply and demand. There is a serious oversupply of corn. Haitong Securities analyst Gao Shang introduced:

The corn starch industry's production capacity has expanded dramatically, and downstream consumption has grown slowly. The output of corn starch in 2005 was 5 million tons. In 2011, it has exceeded 20 million tons. In recent years, the output has continued to be at a high level. Compared with the rapid expansion of corn starch processing capacity, it is obvious that the downstream consumption is slow in the short term, which leads to the stage of oversupply of corn starch. The industry is located near the break-even point for a long time, and the short-term dilemma is difficult to change.

The amount of starch sugar replacement continues to increase, and there is limited flexibility in the future. As the current price difference between starch sugar and white sugar continues to expand, the consumption substitution of starch sugar is expected to continue to grow. Taking Coca-Cola, a large end-consumer beverage company, as an example, its beverage formula is changed from 75% starch sugar and 25% white sugar to 95% starch sugar and 5% white sugar. It is believed that as the spread continues to expand, the replacement quantity is expected to continue to increase. However, the elasticity of possible growth will be reduced and the space for continued growth will be limited.

The alcohol industry is generally losing money, and the downturn is difficult to reverse. The alcohol industry generally has poor profitability, and the whole industry is facing losses. In the first quarter of 2016, the northeast enterprises increased their losses due to the rising cost of raw corn and the lack of subsidies. The North China enterprises fell sharply due to the sharp drop in raw corn prices. The decline in corn has eased corporate losses. On the whole, the downstream consumption of alcohol will enter the off-season, and the alcohol industry may not be able to change the loss situation in the short term.

Under the condition that the entire industrial chain is distorted, the corn purchasing and storage policy has caused strange images. Industrial Securities analysts Chen Jiao, Jiang Weihua, research assistant Wang Wei and Mao Yifan team made a summary:

Weird one: good corn into inventory, the industry only collects poor corn / sales area corn back to the production area

Even if the national corn storage and storage price is lowered in 2015, the first-class corn purchase price is 2,080 yuan / ton, the second-class is 2040 yuan / ton, and the third-class is 2,000 yuan / ton. However, in the Shandong and Shandong regions where the purchasing and storage policy was not implemented, the corn market price has fallen to 1600-1700 yuan/ton. This has led farmers to be more willing to sell corn to the temporary storage. This year, there are even cases of corn in the sales areas of East China and South China flowing back to the northeast and Huanghuaihai areas.

In order to alleviate the pressure on storage and storage, the quality standards for the purchase of corn by the Reserve Bank have been raised. The mildew rate must be controlled below 2% and the water content is below 14%, but this has not prevented a large amount of corn from flooding to the National Reserve. Under the contradiction between huge supply and demand, only the corn can enter the temporary storage, and the poor quality corn can only find its way out.

The downstream deep processing enterprises of corn are facing the problem of difficult food collection. According to comprehensive calculation, the corn cost breakeven point of the Northeast Corn Starch Plant is about 1,500 yuan / ton, far lower than the cost of storage. The corn cost break-even point for corn alcohol companies is about 1,600 yuan.

In order to solve the problem of purchasing raw materials and avoid competition with temporary storage and storage, deep processing enterprises have to be forced to reduce the corn purchase standard. The rate of corn mold acquired by the deep processing enterprises in Northeast China is generally between 5% and 10%, much higher than the temporary storage. 2% standard.

Weird 2: From "buy food can not buy" to "sell food can not sell"

At the end of the new grain market at the end of 2015, farmers generally expect high corn prices, and there is a phenomenon of reluctance to sell goods. In order to get the corn quota as soon as possible, some generations of storage will increase the purchase price by 20-30 yuan/ton.

Corn deep processing enterprises are suffering from food shortages. Due to the inverted price of finished products, the purchase price of these processing enterprises is significantly lower than the temporary storage price. In order to maintain production, some companies have raised their prices to 1,900 yuan / ton, while lowering the rate of mildew, but it is still difficult to receive corn from the market.

However, the cancellation of this year's corn purchasing and storage policy is expected to heat up significantly. With the end of the collection and storage work on April 30 this year, the peasant's mentality has changed, and the enthusiasm for selling grain has increased significantly after the Spring Festival. Whether it is a storage warehouse or a processing enterprise, the fleet that queues to sell grain at the door is a big one.

In contrast, the attitude of the downstream demand side has turned sharply. Due to the strong expectation of falling corn prices, traders, corn processing companies, and even corn-based products such as corn starch and alcohol are not willing to rush. Most companies' corn raw material stocks have been cut by more than half compared with previous years, and most traders have stopped collecting food.

This sudden shift in supply and demand has exacerbated market panic and corn purchase prices have fallen.

To sum up, the upstream supply of the domestic corn industry chain is abundant, the inventory pressure can not be underestimated, and the competition in the middle and lower reaches is fierce. The terminal production enterprises are basically in the vicinity of the break-even point, and the opportunity to consume corn in a short period of time is difficult. From the perspective of supply and demand, the excess state of corn is difficult to reverse.

Therefore, the above-mentioned Haitong Securities and Industrial Securities research team, as well as Guojin Securities analyst Zhong Kaifeng believe that the trend of falling corn futures prices has formed. For domestic corn futures, Haitong team will see 1,300 yuan / ton.

Zhong Kaifeng expects that corn supply in 2016 will be much larger than demand. The inventory consumption ratio remained high. In 2015, the corn stock consumption ratio reached 149.61%. The high domestic stocks made the corn price rebound insufficient. In view of the high inventory pressure and the marketization of pricing, corn prices will continue to fall further. Domestic corn prices are expected to fall back to the level of imported corn, so corn prices may fall back to 1400-1500 yuan / ton.

The Industrial Securities team expects that the corn deep processing industry (especially in the Northeast) will be significantly better under the driving force of lower cost. In addition, since corn is an important feed material, as the aquaculture industry enters the boom cycle, the breeding company will have a two-wheel drive with falling costs and rising prices. Zhong Kaifeng also holds the view of this cost bonus.