The outlook and key drivers for the corn market in the second half of the year can be segmented into the third and fourth quarters.
The primary factors influencing the third quarter are competition from substitutes, the pace of old-crop sales, downstream procurement, and inventory restocking rhythms.
In the fourth quarter, the main influences will be the new-crop yield forecast, initial pricing at harvest, policy adjustments, and the selling patterns at the grassroots level.
Third-Quarter Market Dynamics
Currently, the wheat harvest is nearly complete. Despite some sprouted wheat due to earlier rains, market data and field surveys indicate a bumper crop this year. Combined with weak prices for old-crop grains and related commodities, traders show little enthusiasm for purchasing. Consequently, spot wheat prices have been weak and volatile since June. Both sprouted and standard wheat now hold a cost advantage for feed substitution. This, alongside auctions for aging rice and imported corn, plus the influx of other imported grains, creates significant headwinds for a corn price rebound in Q3, as demand from both feed and deep-processing sectors lacks a clear catalyst for improvement.
The main support for corn prices in Q3 stems from traders' acquisition costs. The impact from substitutes is more about market sentiment and adjustments. The overall supply-demand balance is heavily influenced by the pace at which traders release their inventories. This release schedule is closely tied to funding pressures, price expectations, and the need to clear space for the new crop. In the short term, corn is likely to trade within a range due to these multiple factors. However, if supply pressure from competing commodities persists, traders may hold onto stocks due to low prices, merely postponing the supply pressure. With the new corn harvest approaching, this could open up further downside potential. Recent broad commodity sell-offs, triggered by a sharp correction in crude oil, add to the pressure. If futures and spot prices break through key psychological levels under the influence of related markets, they may seek new, lower support levels.
Fourth-Quarter Market Focus
The fourth quarter will primarily trade the 2026 new-crop corn. In Northeast China, the new crop is in the seedling stage with generally favorable growth. Encouraged by relatively good returns from last year's crop, planting area for the new corn has increased. Correspondingly, costs such as land rent have also risen. While these higher planting costs provide a theoretical floor for prices, historical patterns show that if market sentiment is pessimistic at harvest time, prices can still fall below cost—though such dips are often temporary. Subsequent policy interventions typically provide strong support at the bottom and fuel a rebound.
Futures Market Perspective
The C2609 contract is currently the most actively traded. The futures market is trading at a discount to spot, reflecting expectations of selling pressure as traders face the need to offload inventories ahead of the new harvest, compounded by recent negative factors from substitutes. Short-term support for spot corn lies in traders' cost bases, while futures find psychological support at round-number levels. The near-term view is range-bound trading. However, analysis of recent yearly price patterns and technical wave theory suggests further downside may be possible. A break below key round-number support in futures, driven by related markets or macro sentiment, could open this downside. Given the numerous factors at play in Q4, trading strategies may benefit more from focusing on the support from planting costs and adopting a medium- to long-term horizon.
Increased New-Crop Area and Planting Costs
The China corn supply-demand balance sheet for 2026/27 released in June remained largely unchanged from May's forecast. Year-on-year, due to expanded planting area, the 2026/27 production forecast was raised by 3.76 million tonnes compared to 2025/26. However, total consumption for 2026/27 was reduced by 1 million tonnes, primarily due to an expected decline in feed use linked to hog herd reduction. The projected annual surplus is 340,000 tonnes, indicating a roughly balanced market. By mid-June, corn in the Northeast was in the seedling stage. Most areas had sufficient sunlight and heat, with improved soil moisture supporting good crop development. Rising corn prices have driven up land rents and costs for inputs like fertilizer, increasing planting costs by 10-15% compared to last year. This increase in production costs is likely to raise the long-term floor for corn prices.
Port Inventory Declines Sequentially as Market Activity Stabilizes
Since June, the volume of grain arriving at and leaving northern ports has fluctuated with an overall declining trend, as market trading activity gradually stabilizes. The latter part of Q2 entered a port destocking phase, but the pace has been relatively slow, primarily due to cautious purchasing by downstream users and southern ports. As of the week ending June 19, inventory at the four major northern ports stood at 2.87 million tonnes, up 30,000 tonnes from the previous week and 70,000 tonnes year-on-year. As of June 24, with north-to-south shipping margins in negative territory and a large volume of imported grains arriving, port inventories remain high, and the overall market is in a stable state.
Customs data shows China imported 584,000 tonnes of corn in May 2026, up 20% month-on-month but down 69% year-on-year. Cumulative imports for the 2026/27 marketing year total 2.59 million tonnes, against an annual forecast of 6 million tonnes, indicating limited impact from imports. Regarding other grains, domestic imports of barley this year are at the second-highest level since 2015, and port stocks of grains are at historically high levels for this period. However, sorghum and barley are primarily used for brewing, with limited use in feed unless price advantages are significant. While barley has a theoretical nutritional advantage for substituting corn in feed, its actual impact is currently minimal. Nevertheless, the high inventory levels exert some downward pressure on corn price expectations and market sentiment.
Auction of Substitutes Creates Pressure; Feed Wheat Holds Clear Advantage
Around mid-May, heavy rains in parts of central and southern China during the wheat harvest period led to significant amounts of sprouted wheat, which can only be used for feed. This initially put substantial pressure on spot corn prices. However, subsequent weather improvements and timely harvesting by farmers limited the actual scope and volume of the impact.
The成交 prices from the Heilongjiang aging rice auction on May 29 and the imported corn auction on June 9 were advantageous compared to corn prices, but the成交 rates were not high. This indicates the market is currently well-supplied. With spot prices relatively stable and接近 traders' cost bases, recent auctions for aging rice have been temporarily suspended. This week's imported corn auction for 213,000 tonnes saw a 67%成交 rate with a modest premium of 2 yuan/tonne, reflecting generally subdued procurement and restocking sentiment focused on meeting immediate needs. The overall market supply is slightly loose.
Downstream Inventory Levels Low Year-on-Year, Creating Restocking Demand
As of June 24, the operating rates for the two main downstream products of corn deep-processing—starch and alcohol—were 60.7% and 47.6%, respectively. These represent weekly decreases of 3.1 and 5.0 percentage points, but are up 6 percentage points and down 2 percentage points year-on-year, respectively. From a profitability perspective, although corn prices have generally trended lower since Q2, prices for downstream products have also fallen due to weak demand, leading to an overall decline in processing margins. Consequently, operating rates at deep-processing plants have fallen sequentially. Alcohol producers, in particular, have seen larger cuts in operating rates due to expanding losses as fuel ethanol prices corrected. With operating rates generally weak, inventory drawdowns at deep-processing enterprises have been slower than expected. Q3 is typically a maintenance season for these plants, and without significant profit improvement, their operating rates are expected to remain weak and volatile, limiting their willingness to restock.
Since Q2, hog farming enterprises have maintained deep losses, broiler operations have seen slim profits, while layer farms have enjoyed relatively high profitability. In terms of corn's share in feed, hog feed represents the largest portion. Current losses in the hog sector are driving a slow herd reduction process. However, with hog inventories remaining at high levels overall in Q2, feed demand has stayed elevated. Given the sector's deep losses, feed mills and farming companies, facing tight cash flows, have procured cautiously, focusing on drawing down their own inventories and seeking cheaper energy ingredients. As a result, feed mill inventories have trended lower since Q2. As of June 15, feed mill inventory cover stood at 27.04 days, down 3 days from the Q2 peak and down 6 days year-on-year. With feed mills generally maintaining low inventories, ample supply allows them to buy as needed, having little price impact. However, if supply tightens periodically, making procurement difficult, it could provide support or even drive prices higher.