Summary: Affected by COVID-19, China's corn sector faced strict traffic control, restricted trade flows, reduced purchasing and sales, and inventories about to run out, reflecting a highly stressed market.
Corona Virus Disease 19 (COVID-19) outbroke in Wuhan City (Hubei Province) in Chinese New Year holiday has tremendously stricken the domestic corn industry chain.
Limited logistics was the main factor. Most regions encountered traffic control, affecting trade flows and corn purchasing & sales. In this context, planters became difficult to sell corn, whilst at the same time farmers and deep-processing enterprises needed foods considerably. Many enterprises were about to run out their inventories after the festival. In north China, corn prices quoted by producers who already resumed production rose by USD1.40/t-USD10.10/t (RMB10/t-RMB70/t) due to tight market supply, and that for ports and distribution areas grew by USD7.20/t-USD20.20/t (RMB50/t-RMB140/t). However, few goods were delivered and scarce deals were made owing to reduced employee counts and restricted transportation.
The breeding industry has been the largest victim by COVID-19. Generally, farmers will stock a certain amount of feed before the Chinese New Year holiday, and will restock after the festival based on production resumption schedule of feed and slaughtering plants. Nevertheless, market supply of corn got insufficient and slaughtering factories postponed their reopening at this point, making livestock starving.
COVID-19 occurred in Hubei Province first and spread to Guangdong, Henan, Hunan, Anhui, Shandong, Jiangsu, Zhejiang (Chinese major breeding provinces), Jiangxi, Sichuan provinces, and Chongqing Municipality. Many regions in south China were on lockdown, significantly affecting the breeding sector. Livestock numbers are predicted to decline in Q2, causing reduced sales of feeds made from corn and bean pulp. Amidst the COVID-19 outbreak, the Ministry of Agriculture and Rural Affairs (MOA) announced on 1 Feb. that an outbreak of the H5N1 influenza virus occurred in Shaoyang City, Hunan Province, making over 17,000 poultries culled.
Consumption of deep-processing products also fell, as most people were in isolation for the short term by postponed business operation/school reopening and discouraged dinner gathering, in response to the central government's COVID-19 prevention and control measures. However, the majority of corn alcohol enterprises remained normal production in the Chinese New Year holiday, particularly those producing 75% medicinal alcohols, the crucial epidemic prevention supplies. With inventories restocked before the feast, most producers could continue their production currently, whereas ensuring long-term manufacturing was difficult under the COVID-19 outbreak – because the procurement of raw materials can't be guaranteed and they had to increase their purchasing prices to attract suppliers.
Logistics transportation will remain a problem before the epidemic is controlled. Follow-up government policies may help alleviate the epidemic situation after which corn farmers will sell their stocks smoothly, producers will restock inventories, and traders will open positions, likely boosting corn prices.
You can also find out more information about the article at CCM Corn products China Newsletter or email emarket1@cnchemicals.com.