India’s push to produce ethanol from maize, intended to reduce dependence on crude oil imports and lower carbon emissions, has had unexpected consequences. While ethanol-blended petrol was meant to reduce the carbon footprint, the diversion of maize for biofuel production has caused significant ripple effects across various sectors, including poultry, cooking oil, and sugar.
The Poultry Industry’s Struggles
Maize has long been a key ingredient in poultry feed, and its increasing use for ethanol production is now threatening the poultry sector. India’s poultry industry consumes around 60% of the country’s maize, with the rest used for livestock feed, starch, and beverages. However, the ethanol sector’s growing demand for maize has led to a severe shortage of the grain for poultry feed.
Dr. KG Anand, General Manager of Venkateshwara Hatcheries (Venky’s), explains that the use of maize for ethanol rose sharply from 1 million tonnes in 2022-23 to 7 million tonnes in 2023-24, with projections reaching 13 million tonnes by 2024-25. This surge in demand has led to a 20% rise in maize prices, reaching INR 26 per kilogram in 2024, with prices spiking above INR 30 during peak periods. To mitigate losses, poultry farms have been passing these costs onto consumers, pushing up chicken prices. Anand warns that if maize prices rise further and the cost of soybean meal increases, they may be forced to cut chicken production or raise prices further, which could disrupt the market for eggs, which is particularly price-sensitive.
The Impact on Livestock and Cooking Oils
Maize’s diversion for ethanol has also impacted the edible oil industry. The industry generates revenue not only from cooking oil but also from oilmeal, the by-product leftover after oil extraction. Oilmeal, primarily used as feed for cattle, poultry, and fish, has traditionally been sourced from oilseeds like soybean, mustard, and cottonseed. However, as maize ethanol production increases, the by-product from this process—Distiller’s Dried Grains with Solubles (DDGS)—has grown, offering an alternative to traditional oilmeals.
DDGS, which contains protein and oil, is now being used in cattle feed at prices much lower than those of soybean meal. This has caused the price of soybean meal to fall, which has led to a drop in the price of soybeans themselves. Consequently, oilseed processors have seen a decline in revenue, which in turn has pushed down the prices offered to soybean farmers. This drop in prices led to significant dissatisfaction among farmers, as soybean prices dipped below the Minimum Support Price (MSP), creating a political issue ahead of elections in Maharashtra, India’s second-largest soybean-producing state.
To protect soybean farmers, the government raised import duties on cooking oils by 20%, which led to a 20-30% rise in cooking oil prices. This increase, along with higher vegetable prices, contributed to a spike in retail inflation, reaching a 14-month high of 6.21% in October, which further strained household budgets.
The Sugar Industry’s Concerns
The sugar industry, which has long been a significant contributor to ethanol production, is also feeling the pressure from the growing maize ethanol sector. In the 2024-25 period, the sugar industry offered 970 crore litres of ethanol, but oil marketing companies only allocated 837 crore litres, leaving 79 crore litres unallocated. The Indian Sugar and Bio-energy Manufacturers’ Association (ISMA) expressed concern that this under-allocation could lead to unused capacity, resulting in financial losses for the industry. Reduced ethanol demand from the sugar industry, combined with the halt in sugar exports, has also caused a decline in sugar prices, threatening the financial stability of sugar farmers.
Government Measures and Growing Imports
In response to the maize shortage, the Indian government has taken steps to mitigate the impact on feed industries and farmers. For instance, the government has facilitated maize imports from neighboring countries like Myanmar through agencies like NAFED. However, these measures have not fully alleviated the pressure. India, which was previously a net exporter of maize, has become a net importer, with maize exports dropping significantly while imports have risen.
Agricultural experts project that by 2024-25, India will need an additional 8 million tonnes of maize to meet both ethanol and food/feed demands. However, maize production is expected to increase by only 4 million tonnes, exacerbating the pressure on prices and potentially leading to further imports. As a result, sectors like poultry and starch production may experience higher prices, with a knock-on effect on food prices.
The Future of Maize in India
With the government’s goal of increasing ethanol blending in petrol to 20% by 2025, the demand for maize is expected to keep growing. This shift could lead to a change in crop patterns, with more farmers likely to switch to maize cultivation, reducing the area available for other crops like soybean, tur, mung, and urad.
While maize farmers may benefit from higher prices, the growing demand for ethanol could create challenges for other sectors, particularly those reliant on maize for feed. The maize-for-ethanol shift represents a complicated trade-off between energy goals and agricultural stability, leaving policymakers to navigate a tricky path.
