Amid significant tariff disruptions, sentiment in the corn futures market has begun to fluctuate again

External market: As of the week ending April 4, 2024, global corn prices have mostly risen, mainly due to Mexico, the top buyer of US corn, being exempted from Trump's new tariffs, easing market concerns about a slowdown in US corn exports. However, the expected increase in corn planting area in the United States this spring and the sharp drop in international crude oil have constrained the upward space of the corn market. As of last Friday (April 4th), the Chicago Board of Trade (CBOT) May corn futures closed at approximately $4.6025 per bushel, up 1.5% from a week ago; The spot price of No. 2 yellow corn for the March shipping schedule in Meiwan is $5.3575 per bushel, an increase of 2.5%.

Spot goods: The weather in the main production areas of China is gradually warming up this week, making it more difficult to store grain sources. The inventory costs of grain holding entities are high, and some grain holding entities are experiencing a slight increase in supply due to high sales. China National Grain Reserves Corporation is gradually reducing its corn procurement volume, and deep processing and feed enterprises are mainly driven by rigid demand, with low purchasing enthusiasm and downward pressure on prices.

Futures: This week, domestic corn futures prices opened lower and rose higher, mainly due to the bottoming out of surplus grain in major domestic production areas. Traders who hoarded grain before the year had lucrative profits, and their willingness to sell at high prices increased, resulting in a phased increase in corn volume. Market bullish sentiment weakened, and spot prices fluctuated and fell; However, as the volume at the grassroots level slows down, the decline in spot corn prices is slowing down, and coupled with further escalation of tariff disputes, imports of US corn may significantly decrease. Based on expectations of countermeasures, the market is expected to bottom out and rebound. As of last Friday (April 3rd), the opening price of C2505 contract was 2270 yuan, the closing price was 2284 yuan, the highest price was 2285 yuan, the lowest price was 2268 yuan, and the settlement price was 2276 yuan.

Overall, the United States has announced the implementation of comprehensive new tariffs, which will damage US agricultural exports, boost ethanol demand, reduce quarterly inventories, and cause short-term fluctuations in US corn futures prices. However, the tight balance pattern of old US corn remains unchanged, which may still limit the downward space of US corn prices in the later stage. In the short term, the progress of grassroots grain sales has exceeded 90%, and the support for national reserve purchases has weakened. The pressure of high inventory in ports in the north and south is slowly released, and the inventory of grain consuming enterprises is above 1-2 months. The demand increment is relatively insufficient, and short-term spot prices continue to fluctuate. In the medium term, with the rebound of downstream demand, the impact of tariffs on imported US corn may significantly decrease, and the demand for domestic corn is expected to strengthen. The supply and demand pattern is expected to gradually tighten, and there may be expectations of an increase in corn prices in the medium and long term.