Market Focus

Recent corn futures on the Dalian Commodity Exchange have experienced significant volatility, bottoming out and rebounding in August before peaking and pulling back in September, surrendering earlier gains. After new grain from North China entered the market, prices fell rapidly, with the Northeast production region and northern ports following the decline. A consensus has formed around the current weak reality, and northern port prices have temporarily fallen below the planting cost in production areas (including land rent). Attention is focused on the seasonal harvest pressure after the National Day holiday.

Entering the fourth quarter, expectations for policy stockpiling will have a major impact on the market, with subsequent focus on the sequence of "valuation bottom—policy bottom—market bottom." Deep processing products are suffering deep losses, and the duration and magnitude of losses in the hog sector have been considerable, meaning negative feedback on raw material demand will persist. The 2026/27 marketing year may be the year that forces the industry to adopt options strategies and enrich risk management tools.

Recent Price Action Review

In August, Dalian corn futures bottomed out and rebounded. Early in the month, weak reality pricing continued, with prices dipping to a stage low of 2,197 yuan per ton on August 18. After mid-August, domestic and international drivers resonated, with CBOT corn strengthening significantly, mainly due to the USDA lowering its new-crop yield estimate, combined with Black Sea export disruptions and El Niño disturbances reducing EU production, while speculative funds continued to increase net long positions. Dalian corn followed the broader strength in agricultural products, with single-day volume surging to 1.2 million lots on August 19 to complete the shift to strength, closing the month at 2,299 yuan per ton, up about 2% for August.

In September, Dalian corn opened high and moved lower. Prices surged to 2,310 yuan per ton on September 3, a two-and-a-half-month high, but failed to hold the peak. With concentrated listings of summer corn in North China and the gradual opening of purchases for high-moisture grain in the Northeast, supply pressure materialized rapidly, with prices dropping to 2,166 yuan per ton on September 21, down about 5% for the month, essentially erasing all of August's gains.

Looking back at recent price action, fundamentals remain dominated by the weak reality. Losses in the livestock sector are weighing on feed demand, with feed enterprises purchasing on an as-needed basis and operating with low inventories. Deep processing margins are sluggish, and Shandong arrivals exceeding a thousand trucks quickly trigger price pressure. From August to November, imports of grains and by-products are relatively large, combined with wheat and brown rice substitution, continuously diverting corn consumption.

In early September, new-season corn from North China began sporadic listings with quality noticeably better than last year. In southern Henan, 15% moisture rough grain prices fell rapidly by more than 150 yuan to 1,960 yuan per ton, becoming the national price low. Northeast opening prices were high but moved lower, and with partial listings in Liaoning, prices fell quickly. Northern port purchase prices also followed North China and futures prices in rapid decline. However, the peak of new grain arrivals has not yet ended, and the short-term market is dominated by weak consolidation to digest supply pressure.

Fourth Quarter Key Watchpoints

According to earlier field research, increased acreage in the Northeast production region offset localized yield declines, keeping production stable, while North China saw a recovery in production of 5-8 million tons. Nationwide output is expected to increase slightly year-on-year. Northeast land rents rose sharply, with the average port-gathering cost in Heilongjiang and Jilin (including land rent) at around 2,200 yuan, and current prices have already fallen below cost. Concentrated harvesting and listing in the Northeast will occur after the National Day holiday, with some production areas listing 5-7 days later than usual. Considering poor downstream margins, the production-demand gap for the 2026/27 marketing year is expected to narrow year-on-year.

A consensus has formed around the current weak reality. Northern port prices have temporarily fallen below planting costs in production areas (including land rent), and there is still short-term downside room. Attention is focused on seasonal harvest pressure after the National Day holiday. From a static perspective, combined inventories at northern and southern ports are at elevated levels, with regional price inversions. After North China's September listings triggered a sharp decline, corn feed substitution reversed, and the North China wheat-corn price spread passively strengthened.

With CBOT corn strengthening significantly, import costs for Q1-Q2 next year will rise, and domestic energy grain imports for the 2026/27 marketing year are expected to decline slightly year-on-year. However, domestic corn import dependence is low, and the internal-external linkage attribute is weak. Current warehouse receipt levels are elevated, and the C1-C5 spread is also at a low level. The "weak reality-strong expectation" carry structure reflects corn's seasonal patterns.

Old-crop overdue aged paddy, imported corn auctions, increased import substitutes, and a significant decline in wheat stockpiling volumes have had a major impact on the market since May. Entering October, attention should be paid to whether auctions of overdue aged paddy and imported corn continue. Additionally, after new grain is listed, grain invoices will affect market buying and selling, and attention should be paid to whether effects similar to those seen in the wheat market during Q2-Q3 occur.

Entering the fourth quarter, expectations for policy stockpiling will have a major impact on the market, with subsequent focus on the sequence of "valuation bottom—policy bottom—market bottom." El Niño's impact on domestic corn production conditions is relatively low, with high intensity from November this year to February next year. Attention should be paid to its impact on new-season wheat production conditions. China-US agricultural tariffs have limited impact on domestic grains. Considering reduced new-crop US sorghum production, increased procurement of Brazilian sorghum is expected next year.

Furthermore, deep processing products are suffering deep losses, and the duration and magnitude of losses in the hog sector have been considerable, meaning negative feedback on raw material demand will persist. The 2026/27 marketing year may be the year that forces the industry to adopt options strategies and enrich risk management tools.

Chart: Corn Basis

Chart: Jinzhou Flat Price

Chart: Henan Feed Corn Price

Chart: Henan Wheat-Corn Price Spread

Author Profile

Zhang Dalong, Senior Agricultural Product Researcher at COFCO Futures Research Center. Trading Advisory Number: Z0014269.