Market Analysis - Monthly Report - October, 2020 - Xanthan Gum

Market overview for this period

Raw materials:

After the double festival, a small amount of state-owned old grain was released to supplement the market supply. The early weather factors and artificial rising factors led to the overall delay of maize listing period in Northeast China. The overall supply of corn market was still tight, and the inventory of downstream processing enterprises was generally low. In order to ensure production, the price of corn in domestic production and marketing areas was increased and replenished.

In the late October, the listing progress of Maize in Northeast China is still slow, and the tight supply and demand situation in domestic corn market has not been effectively alleviated. The reduction of production and speculation in capital market has boosted the domestic corn futures to a large extent. The trading entities in the production and marketing areas are generally optimistic about the corn market price in the future market. Traders have obvious intention to store grain, and farmers are reluctant to sell and maintain prices. Deep processing enterprises continue to ensure production At the same time, the domestic pig stock continued to rise, and the feed demand continued to warm. In addition, with the support of industrial and deep processing, the domestic corn market price rose again at a high level, with an overall increase of 4.01% in October.  

In October, the domestic pig price dropped by 11.43% and the egg price fell by 4.97%. The market of the breeding industry continued to decline, the feeding cost continued to rise, and the breeding profit space decreased significantly. The overall attitude of farmers to supplement was cautious, and the growth space of feed demand in the future market was limited.

The corn in the new season has not yet been fully listed. The main body of grain storage trade is reluctant to sell and maintain the price. The demand for deep processing enterprises in the lower reaches has not decreased, and the demand for breeding and feeding has continued to rise. With the support of many favorable factors, the domestic corn market price will continue to run strongly in the short term. After the peak of domestic corn in the new season in the future, the domestic corn market price will gradually return to rationality.

Factory condition:

Fufeng: affected by the rising price of corn, Fufeng xanthan gum has been closed for half a month at the request of the group company. The price has been increased twice, and the overall price has been adjusted by about 200 US dollars. It is reported that Fufeng's inventory is overstocked in the second half of the year. The standing stock of 2W tons has risen to 4W tons. The Xinjiang production line has been shut down, and the production line in Inner Mongolia is still in normal production. Affected by the epidemic situation in foreign countries, the demand of both oil companies and food factories has declined this year. Under such pressure of supply and demand, Fufeng is still determined to raise prices. It is not known whether it is a short-term build-up or other premeditation.

Meihua: there are 4 production lines, 2 oil grade and 2 food grade production lines this month. The tight situation of oil grade delivery has improved slightly, and there is a small amount of inventory of food grade. Affected by the rising price of corn, the price of plum blossom fluctuates upward this month. The price increase is slightly lower than that of Fufeng, with an overall price increase of about $70-80.

Zhongxuan: the demand for xanthan gum is stable this month, and the price is stable, and the order received by Zhongxuan is slightly more moderate than that before. In terms of cost, due to the higher sales price of Zhongxuan, the impact of raw material price fluctuation is smaller than that of other factories, so the price policy of this month has no obvious change compared with that of last month.

Jianlong: at present, Jianlong company is affected by the rising price of corn raw materials, but the market price has not been raised rapidly. Jianlong continues to stop production and mainly sells inventory.

ECHEMI summary:

In this period, the price of raw materials has increased greatly, the price of corn has reached a historical high, and the cost of xanthan gum has increased a lot. The raw material price continued to rise, the downstream trade entities had strong willingness to prepare goods, the rigid demand did not reduce and the cost continued to rise, the xanthan gum market price was stronger. It can be seen from the curve that the price of xanthan gum has returned to its peak after several falls in the second half of the year.

Market forecast for the next period

Raw materials:

With the price of corn rising to the high level in the same period of history, especially in the new grain listing period, the risk of corn market gradually accumulated, which will gradually reflect the pressure on the price of corn.

First, the market volume of corn in the new season will gradually increase, and the supply capacity will be improved periodically.

Second, the enhancement of wheat feed substitution effect will help to fill the gap between supply and demand of corn and restrain the rising space of corn price.

Third, the import volume of corn and its substitutes has increased significantly, which will provide certain guarantee for the market supply in the later period. According to customs data, in September, China imported 1.08 million tons of corn, up 6% month on month; 1.34 million tons of barley, up 202.6%; 570000 tons of sorghum, down 11.4% month on month; and 35000 tons of DDGS, up 125.6% month on month.

Fourth, the national regulation and control has been strengthened. Recently, the Ministry of agriculture and rural areas and the State Grain and material reserve bureau have successively "voiced their voices", which will strengthen the supervision on the ex warehouse of early auction corn, urge the buyers and sellers to timely leave the warehouse and enter the market as soon as possible, and at the same time, pay attention to the supply of alternative varieties, such as storing wheat and rice over time for feed processing.

It is expected that in the short term, the corn market price will further rise with limited space, and will maintain a high level with a small range of fluctuations.

Meihua: at the beginning of November, Meihua plans to continue to raise the price of xanthan gum slightly. If the inventory is not overstocked, it will continue to build momentum in combination with the rising price of corn market and encourage customers to execute orders. If demand fails to meet expectations in the second half of the month, prices may fall.

Fufeng: according to the policy of Meihua, we will continue to make adjustments. We will fight price war between oil grade and plum blossom to strive for more market share. We will mainly maintain old customers at food level. We are expected to make a small adjustment according to the fluctuation of corn price.

Demand:

Christmas Eve is the peak season for food grade xanthan gum in western countries. However, with the closure orders of European countries, it is hard to say that the demand will increase, and the demand in November will decline.

ECHEMI forecasts:

The price of raw corn has exceeded the reasonable price range of the market, and the government's macro-control is likely to come. The price of corn in the next period is uncertain, and the possibility of continued soaring is low. Affected by the rising price of raw materials in the early stage, all factories are actively increasing their prices. Buyers of xanthan gum sign in advance and store more goods. In the short term, factory delivery will continue to be tight. However, with the current price increase, it is difficult for buyers to quickly accept the high price under the condition of sluggish xanthan gum Market for half a year. Based on the current market demand and the high price of corn, the xanthan gum market may be again It cooled rapidly after the surge.