A recent analysis from Tianfeng Futures indicates that spot corn prices have been experiencing persistent, weak fluctuations since July. This is primarily due to ample supply of substitutes, with a particularly abundant wheat harvest this year. The ongoing decline in spot wheat prices has made it a more attractive option for feed use, significantly curbing corn's demand in that sector. Concurrently, deep-processing enterprises have entered their maintenance season, and downstream product demand is lackluster, leading to a continuous decline in operating rates, which have fallen below last year's levels. This combination of weak demand, a shrinking sales window for old-crop corn, and a diminishing willingness of midstream traders to hold prices has prompted a rise in forced sales, creating a market with a relatively loose supply-demand balance and driving spot prices into a sustained weak consolidation.

The current corn sales season shows similarities to last year, both marked by a bumper wheat harvest, strong substitution advantages, and high channel inventories. In July, as spot prices fell below traders' cost bases, midstream enterprises accelerated their shipments to avoid further losses. This behavior might alleviate the pressure of inventory clearance before the new crop harvest and reduce stockpile pressure ahead of the new season's arrival, potentially lowering the risk of a sharp price decline during the harvest period. As of mid-August, wheat prices are still consolidating weakly, but with the gradual digestion of inventory pressure and the implementation of price-supporting policies, it is anticipated that spot wheat prices will stabilize by the latter half of August. Based on historical data and current inventory levels, a supply shortage is unlikely before September. Therefore, barring extreme weather, spot prices are expected to continue their weak consolidation trend. However, with wheat prices stabilizing, the downside for corn prices is limited. Entering September, market attention will shift to the opening prices for new corn across various regions. Given the increase in planted acreage for the new season, the market is likely to maintain a bearish sentiment. Traders, having experienced poor profitability in recent years, will be cautious in their purchasing. Without extreme weather events, it is unlikely that spot prices will see a meaningful rebound at the start of the marketing season and may even fall below cost again. However, the pressure from old-crop inventory, having been released in the third quarter, combined with low inventory levels maintained by downstream producers due to their bearish outlook, could lead to increased purchasing interest from mid-and-downstream players. Supported by grain procurement and stabilization policies, this could trigger a bottom and rebound in corn prices.

On the futures side, the recent rebound in near-month and main contracts is more about basis convergence, weather-driven production cut expectations, and rising planting costs. The recovery in spot prices is limited, and the probability of a rapid and significant improvement in the loose supply-demand structure of the spot market is low. Therefore, the upside for futures is limited, and the downside remains open. However, prices are unlikely to stay below production costs for an extended period. Attention should be paid to the support levels at key integer points on the futures market. Below the cost of production, a medium-to-long-term position could be considered.

Increased Planting Area and Higher Production Costs for New Corn

The July supply-demand balance sheet for China's corn for the 2026/27 marketing year remains essentially unchanged from the June forecast. August rainfall may cause waterlogging in some low-lying areas of North and Northeast China, but the impact on yield is currently seen as minimal. In fact, short-term rainfall is beneficial for corn growth. Historically, weather conditions during the harvest season have a more significant impact on yield and quality, so the influence of typhoons and rainfall in the coming month requires close monitoring. The increase in planted area this year is expected to be a bearish factor during the harvest season. Furthermore, higher corn prices have driven up land rents and the costs of inputs like fertilizers, increasing total production costs by 10-15% year-on-year. This rise in production costs is likely to lift the long-term price floor for corn.

Port Inventories Decline Month-on-Month as Market Transactions Slow

Since August, both port arrivals and shipments have been trending at the bottom of their range. This is due to a bearish market sentiment and logic, leading to cautious downstream purchasing. With midstream enterprises having reduced their inventory pressure through earlier sales, the urgency to sell has decreased, resulting in lower overall market activity. As weekly arrivals are lower than shipments, the market is still in a de-stocking cycle. As of the week of August 7, arrivals at the four northern ports were 108,000 tonnes, a decrease of 100,000 tonnes from the previous week, while shipments were 303,000 tonnes, an increase of 50,000 tonnes. Total inventory at these ports stood at 1.84 million tonnes, a decrease of 200,000 tonnes week-on-week but an increase of 70,000 tonnes year-on-year, placing it below the average level of recent years. Customs data shows that China imported 129,500 tonnes of corn in June 2026, a 116.67% increase month-on-month but a 17.10% decrease year-on-year, with main sources being Russia and Argentina. Total corn imports for the 2025/26 marketing year have reached 2.72 million tonnes, up 62% year-on-year. The annual import quota for the 2025/2026 season is expected to be 6 million tonnes. If the full quota is used, about 3 million tonnes remain, which is not a massive absolute amount. Since the second quarter, profits from importing South American corn within the quota have been substantial, suggesting a potential increase in corn arrivals in the third quarter. The rapid increase in import inventories since July confirms higher arrivals in the third quarter compared to the first half of the year, but the overall volume has a limited impact on domestic supply. In the US, weather speculation, strong demand from the deep-processing sector and exports have reduced corn inventories, leading to a tightening of medium-to-long-term supply-demand dynamics and a rising long-term trend in futures and spot prices. While current high import profits and the limited impact of imports on domestic supply mean domestic corn prices have not followed international trends, a continued rise in international corn prices could provide support for domestic corn prices in the medium-to-long term.

Substitute Auctions Impact, with Wheat's Feed Advantage Clear

This year's wheat harvest is abundant. Issues with invoicing have complicated trading for upstream and grassroots traders, forcing many to sell at low prices. Combined with the summer being a slow season for flour mills, the market is well-supplied, leading to a continuous decline in spot wheat prices since mid-July. This has narrowed the price spread between wheat and corn. With the rise in soybean meal prices, wheat also offers a protein advantage over corn in feed. Consequently, since mid-to-late July, the substitution advantage has expanded, leading to an increase in the volume of wheat used for feed. Recently, the government has initiated price-support procurement policies, causing spot wheat prices to rebound slightly and the price spread between wheat and corn to widen a bit. Last week, China Grain Reserves Group conducted six auctions to purchase corn, planning to buy 41,268 tonnes, with 36,032 tonnes successfully transacted, a success rate of 87.31%, up 14% week-on-week. They also held 19 auctions to sell corn, offering 196,957 tonnes, with 66,669 tonnes sold, a success rate of 33.85%, down 7.59% week-on-week. Import auctions have essentially stopped in recent weeks. For the 25/26 crop year, a cumulative 6.71 million tonnes of imported corn have been offered, with 5.89 million tonnes sold. Auctions of aged rice and imported corn have nearly stalled due to the continued decline in spot corn prices. However, current channel inventories are high, and wheat still has a substitution advantage, so the market supply remains ample. The fact that sales volumes exceeded procurement volumes last week, with a much lower success rate for sales, confirms that the market is currently in a state of oversupply.

Downstream Enterprises Reduce Inventories, Weak Purchasing Sentiment

As of August 5, the operating rates for the two main corn deep-processing products, starch and alcohol, were 60.7% and 38.9%, respectively. This represents a weekly increase of 1 and 3.3 percentage points but a year-on-year change of +6 and -5 percentage points. The ongoing decline in spot corn prices has lowered procurement costs, and with maintenance entering a stable phase, operating rates have rebounded slightly. However, demand for deep-processed products is weak, and spot prices are falling, leading to a continuous decline in processing margins. Therefore, short-term demand from deep-processing enterprises is expected to remain stable, and any improvement is likely to be limited. With these enterprises primarily purchasing on a need-to basis and being cautious about restocking, the pace of de-stocking is normal. Since the third quarter, hog breeding enterprises have been experiencing significant losses, broiler chicken enterprises are making thin profits, while layer chicken operations are quite profitable. In terms of corn's use in feed, hog feed accounts for the largest share. The current losses in the hog sector are driving a slow pace of capacity reduction. However, as hog capacity remains high in the third quarter, overall feed demand has stayed at elevated levels. Given the deep losses across the sector in Q3, feed and breeding enterprises are cautious with their purchasing due to tight cash flow, preferring to deplete their own inventories and seek cheaper energy ingredients. This has led to a continuous decline in feed enterprise inventory since the third quarter. As of August 3, the inventory available for feed enterprises was 25.6 days, a decrease of 0.1 days from the previous week and 4.8 days year-on-year. As feed enterprises largely maintain low inventories and purchase on a just-in-time basis, their impact on prices is minimal when supply is ample. However, should supply become tight, making procurement difficult, their restocking needs could provide support or even push prices higher.