Margins for industrial corn processors have continued to decline, with margins for starch reaching the lowest level since 2016.
The premium of front month starch futures relative to front month corn futures hit 172 yuan per ton on Monday before recovering slightly over the course of the week. As of Friday’s close, the spread sits at just 187 yuan per ton.
January corn futures on the Dalian exchange have been trending higher in recent weeks, hitting the highest level since June and remain above major moving averages.
In comparison, starch futures remain near their recent lows and are trading under their major moving averages. Since August 1st, corn futures are up 5.6% while starch futures are down 1.8%.
Downstream demand for industrial products like starch has been under pressure due to less export demand along with a weaker domestic economy.
Corn demand from the feed sector has been strong as hog prices have rallied sharply in recent months, however, industrial demand for corn accounts for around 30% of total demand over the past 5 years.
If industrial demand remains weak, this could lead to more corn going to feed use, reducing import demand for corn or feed alternatives.