Recent policy actions have exerted a triple-pronged pressure, leading to a pullback in corn prices from recent highs. First, the ongoing state wheat auctions initiated earlier this year continue to supply the market, setting the tone for annual policy adjustments. Second, the year's first auction of rice for feed use commenced on May 29th, offering 1 million tonnes with 634,000 tonnes sold at a low average premium of just 7 yuan per tonne. Third, auctions of imported corn are set to resume, as per a notice from Sinograin, with sales restarting on June 15th. Against a backdrop of concentrated new wheat supplies and pessimistic sentiment regarding feed substitution, these policy announcements have intensified bearish market sentiment. Consequently, substitution pressures are becoming increasingly prominent, leaving corn lacking a fundamental basis for upward movement. However, elevated inventory costs for traders and the gradual reduction of grain sources in the latter half of the marketing year are expected to provide ongoing support for corn prices. As a result, corn futures and spot prices rebounded after testing support around 2,300 yuan and subsequently retreated upon encountering resistance near 2,350 yuan.
Fundamental Overview and Analysis
Northern Port Inventories Show Slight Year-on-Year Increase, Destocking Pace Moderates
As the current marketing year's procurement and sales gradually wind down, port inventories have entered a destocking phase. Data from MySteel indicates that as of June 5th, inventories at four northern ports stood at 3.119 million tonnes, slightly higher than the 3.059 million tonnes recorded during the same period last year. This shift from being lower to slightly higher year-on-year suggests a slowdown in the destocking progress, likely due to recent concentrated supplies of substitutes creating significant substitution pressure. For the week from May 29th to June 5th, weekly inventories decreased by only 10,000 tonnes. Domestic corn inventories at Guangdong ports have been continuously declining, with MySteel data showing only 262,000 tonnes as of June 5th, far below the 1.016 million tonnes from a year ago. However, total grain inventories at southern ports have risen to an absolute high of recent years at 2.762 million tonnes, a significant increase from 1.817 million tonnes last year. This indicates that grain substitution for corn is prevalent at southern ports. The corn market will remain in a destocking phase from June to September. However, due to hog herd reduction, losses in the deep-processing industry, and pronounced substitution pressure, the subsequent destocking pace is expected to slow compared to last year.
Downstream Enterprises Adopt Hand-to-Mouth Purchasing, Providing Limited Boost
MySteel data shows that as of June 12th, feed enterprises' routine corn inventories stood at 27.13 days, a substantial decrease of nearly 6 days compared to the same period last year. Raw material corn inventories at deep-processing enterprises were 4.316 million tonnes, down from 4.651 million tonnes a year ago, marking the second-lowest level since 2021. This indicates that downstream feed and deep-processing enterprises have reduced corn inventories, primarily adopting a hand-to-mouth purchasing strategy. The main reasons likely include ample availability of substitute feed ingredients and the reality of deep losses in the livestock sector, with purchased piglet operations losing 236.31 yuan per head and farrow-to-finish operations losing 274.64 yuan per head. Deep-processing enterprises also face persistent losses, but recent brisk starch sales and rapid inventory drawdowns have kept operating rates relatively high. As of June 12th, the operating rate at major starch enterprises was 62.4%, compared to 48.71% a year ago. Overall, downstream enterprises maintain a hand-to-mouth purchasing approach. Looking ahead to the third quarter, considering seasonal maintenance at deep-processing plants and potential substitution pressure from wheat and rice, downstream demand is expected to enter a seasonally weak period, making a significant demand-side boost unlikely.
Feed Substitution Exerts Pressure, Corn Lacks Upward Momentum
Regarding imported corn auctions, sales were conducted between July 2025 and April 2026. Market statistics indicate cumulative sales of 5 million tonnes from October 2025 to April 2026. On June 9th, 2026, an auction of 202,700 tonnes of imported corn was held again. The market anticipates a rhythm of two auctions per week for this round, supplying 400,000 tonnes weekly. It is estimated that auctions could continue for 16 weeks until the end of the marketing year, corresponding to roughly 6.4 million tonnes of corn. By this calculation, total auction supply for the marketing year could reach 11-12 million tonnes. Future attention should be paid to changes in the release schedule for imported corn.
Concerning rice auctions, following the 1 million tonne auction of over-age rice on May 29th, after no release information in the first week of June, a plan for feed-use rice auctions was officially announced in the second week, with a volume of 1,000,199 tonnes. Market rumors suggest subsequent rice auctions will be held every two weeks, divided into two categories. One category targets deep-processing enterprises, with single auctions of about 500,000 tonnes and a total estimated volume of 2 million tonnes. The other targets feed use, with single auctions of about 1 million tonnes and a total estimated volume of 8 million tonnes. The combined scale is approximately 10 million tonnes. Based on milling yield conversion, the estimated substitution quantity for corn from this rice is around 8 million tonnes.
Regarding wheat, domestic new wheat is currently being harvested and supplied to the market in large quantities. At the start of the marketing year, a reduction in carryover stocks of about 10 million tonnes led market expectations for regular wheat substitution to increase to around 30 million tonnes. Currently, two factors may compress wheat's feed substitution potential: potential grain imports and rice auctions might limit the space for wheat feed use, and the volume of sprouted wheat may fall short of expectations, which would reduce the amount of sprouted wheat passively flowing into feed as a corn substitute. However, with new wheat purchase prices at the grassroots level at only 1.1-1.2 yuan per jin, the wheat-corn price spread has narrowed to around 100 yuan per tonne, giving wheat a clear cost advantage over corn. Feed enterprises have significantly increased the proportion of wheat in their rations, severely squeezing corn's feed demand.
Overall, recent auctions of imported corn and rice, coupled with the wheat harvest, have placed significant substitution pressure on corn, thereby limiting its potential for further price increases.
Price Logic Analysis
In summary, the previously tight supply-demand situation for corn may gradually ease due to rice auctions, imported corn auctions, grain imports, and the concentrated wheat harvest. Most importantly, while the market impact from the volume of policy-driven grain releases like rice auctions, imported corn auctions, and grain imports is limited, the greater influence lies with wheat prices and its feed usage volume. Currently, the concentrated wheat supply and resulting price pressure have weakened the wheat-corn spread, channeling wheat into the feed market. However, on one hand, the quantity of sprouted wheat is limited, and on the other, as the peak of new wheat supply subsides in late June and wheat prices stabilize, the bearish pressure from substitutes is likely to be fully absorbed, potentially further limiting the downside for corn prices. Against this backdrop, corn prices are likely to consolidate within a range. This analysis is for reference only.