Corn futures and spot prices have entered a sustained downturn, with market sentiment turning increasingly bearish as harvest season gets underway.
Entering mid-September, corn is transitioning from south to north into its harvest period. Based on recent harvest progress and weather conditions across northern and eastern China, this year's corn output in North China and East China is expected to increase substantially. Many traders, along with starch processors and feed mills, are clearing warehouse space in anticipation of new crop supplies, resulting in tepid purchasing interest. On the demand side, deep-processing enterprises are grappling with negative margins, keeping new operating rates at conservative levels. Pig and broiler farming operations, while seeing narrowed losses, remain in unprofitable territory, leading to weak feed stockpiling appetite as producers seek out more cost-effective energy feed alternatives. Businesses are largely maintaining low inventories with procurement limited to essential needs, reflecting an overall subdued purchasing stance.
Where the Market Stands Now
With spot markets weak, expectations of ample supply, and international agricultural prices entering a corrective phase, market optimism has faded, allowing short-side capital to gain the upper hand. Both futures and cash prices have continued their downward trajectory. In early September, some reserve grain depots and processing enterprises began issuing quotes that were slightly above year-ago levels, yet market acceptance has remained lukewarm. Given that many traders have endured extended periods of selling old-crop corn at a loss in recent years, enthusiasm for pre-harvest accumulation is minimal. Combined with channel inventories of old crop running higher than last year and the gradual arrival of central and eastern corn, spot prices have kept sliding, with bearish sentiment prevailing and new-crop opening bids drifting steadily lower.
The recent decline is largely attributed to underwhelming weather-driven speculation, concentrated corn arrivals in North China, and mounting pressure from old-crop inventory overhangs. Spot prices have fallen continuously, dragging futures lower in tandem. In the near term, market fundamentals and sentiment offer little prospect of meaningful improvement, sustaining the bearish outlook. However, given that downstream inventories are lean, occasional phased restocking by deep processors may provide some support to cash prices, though any rebound is expected to remain limited.
On the futures front, the recent slide stems primarily from weakened expectations and spot market drag. Both nearby and benchmark contracts have opened up downside room, with prices likely to fluctuate within a weak range short-term. While intermittent volatility may occur, retesting previous highs appears unlikely without a significant catalyst. For the medium-to-long term, market direction hinges on weather developments. Should conditions remain unproblematic, a turnaround in the prevailing pessimistic tone may require proactive grain procurement by mid- and downstream traders and processors, or government policy support. Historical patterns suggest, however, that corn cash prices rarely remain below production costs for extended periods.
Market Outlook by Category
Futures: Weak range-bound trading. Midstream sellers remain cautious about liquidation, but the pullback in Shandong spot prices combined with new-crop supply pressure keeps futures biased toward weak consolidation.
Supply: Bearish. Channel inventories are elevated, and new-crop supplies are arriving in concentrated waves.
Imports: Neutral. Import volumes are up sharply year-on-year, though absolute quantities remain modest with limited overall supply impact.
Demand: Neutral. Feed and deep-processing enterprises are cautious in stocking up, yet feed inventory levels have fallen to lows, creating essential replenishment demand.
Substitutes: Neutral. The wheat-corn price spread has narrowed, and with new corn gradually coming to market, substitution volumes are declining.
Sentiment: Bearish. Expectations of a bumper crop in North and Central China, coupled with a broader pullback in agricultural commodity prices, have allowed bearish sentiment to dominate.
Costs: Bullish. Rising land rents and higher input costs have increased total planting expenses.
Basis: Neutral. While the basis has rebounded considerably, this reflects regional price differentials that may normalize later.
Recent Price Action Review
Late September marks the transition between old and new crop cycles. Old-crop corn is circulating at low volumes with generally mediocre quality, while new-crop supplies are entering the market on a limited scale with opening prices drifting lower, reinforcing the cautious mood. Trader inventories remain above year-ago levels, fueling a strong inclination to destock, but weak demand has sent cash prices across producing and consuming regions into decline. As of September 17, second-grade corn flat-price at northern ports stood at 2,260 yuan per tonne, down 40 yuan week-on-week, while Shandong deep-processing enterprise average purchase prices fell 30 yuan week-on-week to 2,245 yuan per tonne. The benchmark contract C2611 broke below key support this week, pressured by deteriorating expectations and falling cash prices.
Domestic Supply and Demand Fundamentals
Production costs and output seen rising for the new season. Supply-and-demand forecasts for the 2026/27 marketing year remain consistent with last month's projections, with only the 2025/26 corn import figure revised down by 1 million tonnes, broadly aligning with expectations. August weather in major producing areas provided adequate sunlight and soil moisture, with corn crops developing normally or slightly better than average. September temperatures in the northeast are forecast to be near or above normal, with first frost dates close to or later than typical, favoring proper grain filling and maturation. North China and Huang-Huai regions expect normal temperatures with average-to-slightly-below rainfall, aiding moisture dispersion in previously waterlogged fields and supporting yield formation. While August field surveys identified localized production cuts in the northeast, their overall impact appears limited so far. With central China corn harvests underway in mid-September and strong prospects for a good crop, no nationwide production adjustments have been made. Additionally, higher land rents and input costs driven by corn prices have lifted planting costs 10%-15% from last year, raising the longer-term price floor for corn.
Northern port inventories declining slowly. September has seen modest month-on-month increases in both port arrivals and shipments. This year's channel inventories exceed last year's, creating destocking pressure for traders holding old-crop corn, with arrivals at northern ports rising correspondingly. Last week's shipment increase was primarily due to increased contract executions at southern ports and by enterprises, though overall market activity remains cautious. Weekly arrivals are running below shipments, resulting in modest inventory declines. During the week ending September 11, arrivals at the four northern ports totaled 190,000 tonnes, down 60,000 tonnes from the prior week, while shipments reached 265,000 tonnes, up 10,000 tonnes. Northern port inventories stood at 1.696 million tonnes, down 75,000 tonnes week-on-week, but still up 1.05 million tonnes year-on-year. Shipment velocity lags last year's pace, with inventory levels noticeably higher than the same period last year. Historically, September typically marks a period of sustained modest inventory drawdowns at ports.
Northeast processing enterprises see stable arrival volumes. Purchasing volumes at northeast deep-processing facilities have largely held steady through early-to-mid September. With new-crop supplies approaching, traders have needs to clear warehouse space, recover working capital, and lock in profits, making them less inclined to hoard grain than during the earlier weather-reduction scare. However, processing enterprises remain cautious buyers given the new crop's arrival and expectations of reduced northeast output, focusing primarily on covering immediate requirements. Trading volumes are expected to increase gradually after the Mid-Autumn and National Day holidays as new-crop market activity picks up.
Shandong processing inventory arrivals drop sharply. Early-to-mid September has seen a significant decline in grain arrivals at Shandong deep-processing enterprises. Following earlier stockpiling, processors have little appetite for additional purchases beyond essential needs. With new grain gradually reaching market, caution has deepened further, prompting reduced listing prices and fewer trucks arriving at facility gates. North China and central China corn show no production-reduction expectations this year, with both quantity and quality expected to surpass last year. Absent harvest-time rainfall disruptions, bumper crop prospects appear strong, which will create short-term supply pressure on North China and Shandong during early market arrivals.
Guangdong port domestic corn inventories fluctuate at low levels. Southern port prices have tracked the soft tone set by northern ports throughout September. With cautious southern consumption region buying, increased corn imports, and abundant barley and other grain substitutes at record-high warehouse levels, imported grains are suppressing demand for domestic corn, keeping domestic corn shipments moderate. However, with northern port corn prices dropping substantially, north-south shipping margins have turned positive, accelerating port shipments. As of September 17, dry grain purchase prices at southern ports stood at 2,410 yuan per tonne, down 10 yuan week-on-week, while north-south shipping profit reached 20 yuan per tonne, improving 40 yuan from the prior week. As of September 11, domestic corn inventory stood at 127,000 tonnes, down 6,000 tonnes from last week and down 464,000 tonnes from a year ago.
Corn imports surge month-on-month and year-on-year. Customs data shows August corn imports of 180,000 tonnes, up 780% year-on-year, bringing January-August cumulative corn and corn flour imports to 1.68 million tonnes, up 91% year-on-year. Total 2025/26 marketing year corn imports reached 3.25 million tonnes, an 80% increase year-on-year. Despite rising US corn prices due to weather-driven production concerns, import margins remain positive. With roughly 1.8 million tonnes of import quota still available for the annual target, third-quarter port arrivals are expected to increase to approximately 500,000-1 million tonnes. However, relative to domestic supply, these volumes remain minor with limited actual market impact, serving primarily as a sentiment factor. On related grains, domestic barley imports are running at their second-highest level since 2015, with port grain inventories at historically high levels for this period. However, sorghum and barley are predominantly used for brewing rather than feed, with substitution occurring mainly when price advantages are significant. From a theoretical nutritional ratio standpoint, barley offers some advantage as a feed corn substitute, but the margin is modest and actual market utilization remains limited. Overall, while imported corn and related grains present some substitution advantages affecting market supply-demand dynamics to a degree, their influence is more psychological than substantive.
Feed and livestock sector conditions: losses persist; feed inventory edges higher. September has seen commercial hog prices ease slightly, widening farming losses, while broiler chicken cash prices continue to slide, deepening losses for that segment. Layer hens, benefiting from peak seasonal demand, maintain elevated cash prices delivering solid profits, though pessimistic forward expectations have accelerated culling schedules. With pig and broiler operations in loss-making territory and facing tight cash flows, plus layers heading into a faster culling phase, feed producers remain cautious about raw material procurement, relying primarily on existing inventory to cover essential needs. Last week, continued declines in North China and Shandong corn prices prompted feed enterprises to increase bargain-buying, nudging feed inventory levels slightly higher, though still near multi-year seasonal lows. As of September 11, feed enterprise inventory coverage stood at 25.2 days, up 0.7 days week-on-week but down 1.4 days year-on-year.
Wheat substitution advantage narrows. August's official wheat price support policies, combined with reduced supply pressure following earlier liquidation, kept wheat prices in narrow oscillation. Recent sharp corn price declines have significantly widened the wheat-corn spread, diminishing wheat's substitution appeal. Sinograin continues auctioning 2021 and 2022 vintage imported corn, with sales held twice every two weeks. Recent auction volumes have decreased from around 200,000 tonnes per session, with low clearance rates indicating ample market supply. The adjustment mechanism's corn reserves remain substantial. As new-crop supplies arrive, imported corn auctions are expected to taper further to alleviate pressure on the fresh corn market. For now, both imported corn and substitute feeds are sufficiently available.
Processing operating rates stay range-bound. As of September 16, operating rates for starch and alcohol production, the two primary downstream products from corn deep processing, stood at 60.7% and 55.5% respectively, down 1.2 percentage points and up 2 percentage points week-on-week, and up 13 percentage points and 4.5 percentage points year-on-year. From a profitability perspective, since late August, sharply lower Shandong corn prices have substantially improved starch producer margins, while northeastern processors, facing smaller corn price declines, have seen processing profits continue to deteriorate. With raw material procurement costs heavily influencing margins in the near term, operating rates at deep-processing facilities remain conservatively managed. Historical patterns suggest that if raw material prices fall at harvest onset, starch operating rates tend to rise; otherwise they typically decline, before climbing into the post-National Day peak demand season.
Corn inventories at processing enterprises decline. Despite differing sales paces among midstream traders in North China and Shandong, downstream enterprise procurement has focused on essential needs and bargain-priced purchases, using existing inventories as a buffer, driving overall inventory drawdowns since September. According to Mysteel Agricultural Products data, for the week ending September 19, total corn inventory at 96 major deep-processing enterprises nationwide stood at 2.48 million tonnes, down 190,000 tonnes week-on-week and down 6,000 tonnes year-on-year. Market confidence has yet to fully recover, with processors purchasing cautiously and primarily drawing down existing stocks. Inventories are expected to continue drifting lower, though with stocks at relatively low levels, bargain-purchasing opportunities may emerge later. Since late September, weak downstream demand for starch has led to continued inventory accumulation, with corn starch inventories reaching 1.36 million tonnes as of September 16, up 2,000 tonnes from the prior week.
Basis and Spread Analysis
Near-month basis keeps climbing; starch-corn spread appears undervalued. High channel inventories and the gradual arrival of central and northern China corn have driven sharp spot price declines in North and East China, pulling futures prices down correspondingly. Meanwhile, northeastern corn has remained relatively firm. With basis calculations referencing northern port corn prices, the futures basis has rebounded substantially. As northeastern corn follows the broader downturn, the basis recovery has narrowed. Market participants should monitor basis normalization following northeastern corn's arrival in mid-to-late October. At present, the significant basis rebound alone cannot justify conclusions about futures being undervalued. Since September, corn starch inventory accumulation combined with off-season demand has kept the starch-corn spread at low levels with narrow fluctuations. Attention should be paid to recent operating rate trends, as sustained weakness may trigger a spread recovery.