CCM: China’s corn starch price expected to rise steadily in short term 09-02-2016

Affected by the ongoing state storage and purchase tightening the corn supply in the market, it is expected that the corn starch price will climb up stably in China.


China’s corn starch price expected to rise steadily in short term

                              

Summary: Affected by the ongoing state storage and purchase tightening the corn supply in the market, it is expected that the corn starch price will climb up stably in China.

 

Due to the ongoing state storage and purchase of corn, the market supply of corn is reducing. According to the information released by the State Administration of Grain, as of 5 March, 2015, there were total 110.41 million tonnes of new-harvested corns purchased by the grain enterprises in 11 main corn producing areas in Hebei Province and Heilongjiang Province, increasing by 6.48 million tonnes compared to the same period last year. Along with processing enterprises restarting their productions, corn spots are reducing and the producers’ inventories are also declining. At present, due to the tight supply of corn spots coupled with the increasing volume of state storage, enterprises need to raise the purchase price of corns to maintain the raw material supply for production.

 

Regarding the whole industry, China’s starch enterprises have suffered from losses for three consecutive years and they are out of funds. Therefore, the enterprises with a large number of stocks are relatively few and the stocking level remains low. Besides, after the Chinese Spring Festival, starch enterprises recover production slowly and some of them suspend production for a longer period than previous years, thus resulting in the tight supply of corn starch in the market. Since 2015, China’s corn starch price has kept rising steadily, from USD469/t to USD471/t. Under the unsatisfied economic environment in 2014, the corn starch demand also remained weak, which led to declining purchases and inventories of corn starch processing enterprises. It is predicted that enterprises will start purchasing corns since March 2015.


 


In view of the whole corn starch market in March, the operating rate of domestic corn starch industry is gradually increased to over 50% (45% in Feb.). Since there are still some enterprises undergoing production suspension for overhaul, as time goes on, the operating rate will further increase and the corn starch supply will be gradually improved.

 

After entering into March, the prices of corns in the ports of South and North China increase. The reasons are:

 

1. The ongoing state storage and purchase of corns reduces the spot corns in the market;

2. Feed factories in South China strengthen efforts to purchase corns in order to reduce the influence of the fluctuant corn prices.

Additionally, in recent two months, the snowy weather in Northeast China hinders the corn transportation, thus reducing the supply of corn spots to some extent.

 

So far, the demands from the downstream sectors of corn starch industry remain weak. For instance, the downstream starch sugar, papermaking, food and fermentation enterprises do not restart operations mostly, which causes unsatisfied transaction volume overall. These downstream enterprises still consume the previous stocks currently and fewer purchase raw materials (corn). It is worth noting that, wheat, as the substitute of corn, occupied a large feed processing market instead of corn based on its low price in 2014 (part of wheat producing areas suffered from continuous rainy weather in 2014, resulting in serious germination). Moreover, wheat is widely used in feed and alcohol production to replace corn, which to some extent reduces the market demand for corn.

 

Although substitute enters into market by dint of cost advantage, it makes little impact on the corn market since the demands from downstream feed and alcohol sectors are relatively weak. In addition, because the state storage and purchase of corn will last to April, so the corn spots will continue to reduce. The stocking demand of processing enterprises and the reducing corn spots create the conflicts. Therefore, CCM predicts that the corn starch price will continue to rise in the future.

 



Due to the ongoing state storage and purchase of corn, the market supply of corn is reducing. According to the information released by the State Administration of Grain, as of 5 March, 2015, there were total 110.41 million tonnes of new-harvested corns purchased by the grain enterprises in 11 main corn producing areas in Hebei Province and Heilongjiang Province, increasing by 6.48 million tonnes compared to the same period last year. Along with processing enterprises restarting their productions, corn spots are reducing and the producers’ inventories are also declining. At present, due to the tight supply of corn spots coupled with the increasing volume of state storage, enterprises need to raise the purchase price of corns to maintain the raw material supply for production.

 

Regarding the whole industry, China’s starch enterprises have suffered from losses for three consecutive years and they are out of funds. Therefore, the enterprises with a large number of stocks are relatively few and the stocking level remains low. Besides, after the Chinese Spring Festival, starch enterprises recover production slowly and some of them suspend production for a longer period than previous years, thus resulting in the tight supply of corn starch in the market. Since 2015, China’s corn starch price has kept rising steadily, from USD469/t to USD471/t. Under the unsatisfied economic environment in 2014, the corn starch demand also remained weak, which led to declining purchases and inventories of corn starch processing enterprises. It is predicted that enterprises will start purchasing corns since March 2015.

 

In view of the whole corn starch market in March, the operating rate of domestic corn starch industry is gradually increased to over 50% (45% in Feb.). Since there are still some enterprises undergoing production suspension for overhaul, as time goes on, the operating rate will further increase and the corn starch supply will be gradually improved.

 

After entering into March, the prices of corns in the ports of South and North China increase. The reasons are:

 

1. The ongoing state storage and purchase of corns reduces the spot corns in the market;

2. Feed factories in South China strengthen efforts to purchase corns in order to reduce the influence of the fluctuant corn prices.

Additionally, in recent two months, the snowy weather in Northeast China hinders the corn transportation, thus reducing the supply of corn spots to some extent.

 

So far, the demands from the downstream sectors of corn starch industry remain weak. For instance, the downstream starch sugar, papermaking, food and fermentation enterprises do not restart operations mostly, which causes unsatisfied transaction volume overall. These downstream enterprises still consume the previous stocks currently and fewer purchase raw materials (corn). It is worth noting that, wheat, as the substitute of corn, occupied a large feed processing market instead of corn based on its low price in 2014 (part of wheat producing areas suffered from continuous rainy weather in 2014, resulting in serious germination). Moreover, wheat is widely used in feed and alcohol production to replace corn, which to some extent reduces the market demand for corn.

 

Although substitute enters into market by dint of cost advantage, it makes little impact on the corn market since the demands from downstream feed and alcohol sectors are relatively weak. In addition, because the state storage and purchase of corn will last to April, so the corn spots will continue to reduce. The stocking demand of processing enterprises and the reducing corn spots create the conflicts. Therefore, CCM predicts that the corn starch price will continue to rise in the future.




About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.

 

For more information about CCM, please visit www.cnchemicals.com or get in touch with us directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.



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