Corn futures prices in China have nosedived since last Tuesday and broke through a key support level this week as the country further loosened its Covid policies and improved the prospect that domestic transportation will face fewer disruptions.
The main corn futures contract (March 2023) on Dalian Commodity Exchange (DCE) slid to its two-month low of 2,798 yuan/ton ($401/ton) on Wednesday after falling for seven consecutive trading sessions.
The contract touched a five-month high at 2,933 yuan/ton ($420/ton) last Tuesday but has since then slumped nearly 5%.
The selloff last week was driven by a change in global grain supply as wheat production in Australia is expected to be higher than previously thought, and the planting progress of wheat and barley in France has been smooth.
Hence, wheat and corn futures on CBOT were under pressure last week, which spilled over to the Chinese market. Wheat futures in Europe were also down sharply.
Nonetheless, the selloff of corn futures in China extended this week as China announced drastic changes to its zero-Covid policies including the abolishment of health code checking for public transportation and large venues, and the dropping of regular PCR tests.
The Covid policy shift in China this week sent a positive signal in the domestic market that logistics conditions could improve significantly without Covid-related disruptions as truck drivers were wary of going to other provinces due to the risk of quarantine.
“Transportation was affected previously [by Covid], and new crops can’t easily get out of harvest areas,” said one China-based analyst, adding that the situation is better now with eased Covid measures.
Cash corn prices in northeastern China, where most corn is planted, were heard falling in the past week as well, according to traders.