The corn market is currently experiencing a tug-of-war between supply and demand, characterized by mounting pressures from both endsOn one hand, there is a burgeoning supply due to the influx of new crops and existing high inventory levels, while on the other, demand from feed consumption has not shown significant growth, though the need for deep processing remains stable and even promising.

The Corn Supply Side: An Abundance Amid High Inventory

As the new crop season unfolds, farmers, especially in the northern regions, are rushing to market with their fresh cornReports indicate that the selling pace in the northern zone is already around 22%, with the number reaching 27% in North ChinaBoth figures surpass the five-year average, illustrating a strong willingness among farmers to sell their produceThis active selling juxtaposes sharply with the anticipated yield reductions forecasted for this harvest, which are estimated to be somewhere between 5 million to 10 million tons

Various factors contribute to this downtrend, most notably fluctuating climatic conditions and variations in planting areas; however, the market nevertheless remains adequately supplied.

On the global scale, favorable weather in South America, particularly in Brazil and Argentina, has bolstered expectations for record crop yieldsBrazil has established itself as China's leading source of corn imports in recent years, making its export rates particularly impactful on the domestic marketConversely, we see a contrast with the United States and Ukraine, where yield forecasts indicate a decline due to geopolitical uncertainties and adverse weather patterns that are also affecting crop outputs.

Compounding these dynamics, recent announcements from Mexico regarding agreements with the U.Srelated to genetically modified corn imports signal potential shifts in global market structures

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On another front, Algeria has initiated an international tender aimed at procuring up to 240,000 tons of animal feed corn mainly from Argentina and Brazil, highlighting fluctuations in international demand that could influence global market expectations for crop production.

Domestically, corn reserves at ports across both northern and southern regions are currently at historical high levelsAs of November 22, inventories at four major northern ports peaked at 4.06 million tons, representing an increase of 3.26 million tons compared to the same date last year—marking the highest levels recorded since 2018. The southern ports also show no slouch in corn stock, with domestic corn inventory at approximately 907,000 tons and imported corn at 33,000 tonsHigh inventory levels are undeniably exerting downward pressure on domestic prices.

Warehouse receipts reflect similar pressure; by early December, the number of domestic corn receipts reached 78,200, a marked increase since October

Such elevated levels of warehouse receipts exacerbate downward pressure on futures pricesAnalyzing the situation holistically, the current domestic corn market faces dual challenges stemming from high inventory levels alongside the influx of newly harvested crops.

Demand Dynamics: Feed Usage Lagging While Deep Processing Shows Promise

In regard to feed demand, market performance has been mediocre at bestOperational rates among deep processing enterprises have dwindled, and the profitability of the livestock sector has not markedly improvedThough there has been some recovery in profits since May, its sustainability and intensity leave much to be desiredAdditionally, the inventory levels of breeding sows remain high, leading to anticipations of ample pork supply which in turn limits the potential for increased feed consumption.

Examining broader trends, it appears that significant improvements in feed consumption are unlikely

The current profit margins within livestock production do not present enough incentive for substantial capacity expansion, and the conservative strategies deployed by livestock enterprises are limiting potential growth in feed demand.

In contrast, the demand for deep processed corn products exhibits an encouraging upward trendRecent data show that processing profits in the domestic corn deep-processing sector are on the rise, resulting in increased operational rates and subsequently heightened demand for corn suppliesProjections suggest that corn demand from the deep-processing industry could rise by approximately 2 million tons next yearThe expansion in demand is largely thanks to technological advancements within enterprises and an evolution in market needs, alongside supportive policies that foster development within the deep-processing sector.

Furthermore, the National Grain Reserves Administration has announced plans to expand corn procurement and storage initiatives, with the establishment of 42 new storage points by the end of November.

Looking ahead, market analysts generally expect that as new crops become available early next year, price volatility could arise due to persistent supply pressures