The corn market in Northeast China experienced a persistent price decline during the third quarter, with levels falling below the average of recent years during the same period. Some trading enterprises have adopted a cautious, hold-back approach towards high-quality corn, primarily due to concerns over a potential deterioration in the quality of the new season's crop. A comprehensive assessment of factors including crop growth, planting area, downstream demand, and carryover inventory suggests that the total output of the new Northeast corn season may see a slight increase, while the opening purchase price is projected to decline year-on-year.

Northeast corn prices continued their downward trend in Q3

Since the start of the third quarter, corn prices in the Northeast have sustained their downward trajectory. Data from SCI shows that as of August 14, the average corn price in the region for August had dropped to RMB 2,181.63 per ton, a decrease of 2.23% from the previous month and 2.18% compared to August of the previous year. The core reason lies in increased supply paired with weakened demand, creating a loose supply-demand balance. The data indicates that since May of this year, the monthly average corn price in the Northeast has consistently remained below the seven-year average for the same period, with the first half of August's average falling RMB 148 per ton short of that historical mean. The primary supply pressure in August came from large trading firms and those utilizing third-party funds, some of whom have increased their reluctance to sell high-quality naturally dried corn due to growing losses, reflecting expectations of lower quality for the upcoming crop.

Regional variations mark the new crop, yet production may still rise

Reports indicate significant regional differences in the condition of the new Northeast corn crop this year. The prevailing view among trading enterprises is that the average yield per unit area will see a slight decrease compared to last year, but will remain on par with, or slightly higher than, normal years. Combined with an expansion in planted acreage, there is still potential for an increase in total output. Currently, the crop's development is generally normal, with most plants in the grain-filling stage. Compared to last year's favorable rain and heat conditions, this year's corn in the Northeast has endured a sequence of low temperatures, drought, persistent rainfall, and further dry spells, leading to an expanded area affected by disasters. Specifically, low-lying and river bend areas in regions like Suihua and Mudanjiang in Heilongjiang, Tonghua and Yanbian in Jilin, and Shenyang and Fushun in Liaoning have seen significant production cuts or even total crop failure. During the critical pollination period, persistent rainfall or high temperatures have caused issues like bare tips and empty stalks in some areas. Traders report that areas such as Heishan in Jinzhou and Tai'an in Anshan may see yield reductions of 30% to 50%, with quality also lower than last year. In terms of output, Liaoning's new corn production is expected to decline year-on-year. However, with planting area in Jilin remaining largely stable, and significant shifts from soybean to corn cultivation in Heilongjiang and eastern Inner Mongolia, alongside some conversion from potatoes and onions, the total corn output in the Northeast is expected to increase by approximately 5 to 10 million tons year-on-year. The final quality will still depend on weather conditions during the yield determination phase.

Port and processing enterprise opening prices may fall short of last year

This year's opening price for the new corn season is primarily influenced by carryover inventory, the new crop's condition, and downstream demand. After mid-September, new season corn will gradually come to market in the Northeast, with machine-harvested grain from parts of Jinzhou, Anshan, and Shenyang in Liaoning, as well as eastern Heilongjiang farms, arriving first. The opening price will mainly reference prices at Jinzhou Port and deep-processing enterprises. Given that channel inventories in the Northeast are higher than last year, the sequential arrival of spring corn from the South and North China with a clear price advantage, and the continued use of new wheat and imported substitutes, trading enterprises in the Northeast lack confidence in the future market. Some industry participants expect the opening price at Jinzhou Port to be in the range of RMB 2,200-2,250 per ton, down about RMB 40 per ton from the same period last year. The significant year-on-year increase in last year's opening price was largely due to low carryover stocks and a supply gap in North China. This year, however, spring corn in North China holds advantages in yield, quality, and price, and local channel inventories there are also higher than last year. Consequently, demand from downstream processing enterprises for Northeast corn has weakened, with only rigid demand remaining for high-quality supplies. Additionally, policy grain will continue to be released from August to September, keeping the market supply relatively ample. Regarding planting costs, increases in land rent and fertilizer prices have raised the cost for the new Northeast corn season by RMB 0.10-0.15 per jin year-on-year. If market prices fall below these costs, grassroots farmers may hold back their sales. However, machine-harvested grain comes to market quickly and is not suitable for long-term storage, suggesting that the bargaining power for opening prices remains with the port and deep-processing enterprise buyers.

In summary, the Northeast corn market in the third quarter is characterized by increased volume and decreased prices. As the new season's crop approaches the market, bearish factors persist, including higher year-on-year channel inventories, ongoing substitute usage, and increased spring corn supply. It is expected that the opening price for the new Northeast corn season in September will decline by approximately RMB 40 per ton year-on-year. Key factors to monitor include the release of policy grain and any changes to wheat support policies.