Indian corn prices drop below support level but exports yet to pick pace

Corn (maize) shipments from India, particularly to the South-East and Gulf region, are yet to pick up despite the cereal’s prices dropping below the minimum support price of INR 1,962 a quintal. With prices declining over 10 per cent in the last couple weeks, traders are waiting for the market to stabilise.

The modal price (rate at which most trades take place) of maize prices has currently dropped to around INR 1,850 in Davangere, a key market in Karnataka. As a result, exporters have cut their offer quotes by USD 25 a tonne to USD 280 free-on-board (f.o.b) currently.

Shipments held up

However, experts say corn exports could face challenges from domestic demand for feed, starch and ethanol and prices could rise over the next few weeks.  Corn prices have declined mainly on rabi harvest gathering momentum and hopes that production will likely be higher than the Centre’s estimates of a record 34.61 million tonnes (mt).

For most part of last year, corn prices had ruled higher on export demand, particuarly since supplies from Ukraine, which has 30 per cent share in the global market, were affected.

Though current offer prices are lower than other destinations, particularly Pakistan which had become competitive in the Asian region recently, export demand is yet to pick up. “Quite a few shipments have been held up at Vietnam ports as buyers they are are bargaining. From India, only ships that have confirmed orders are leaving,” said M Madan Prakash, President, Agri Commodities Exporters Association.

“Corn prices have dropped over 30 per cent within a matter of a few weeks. Traders would not want to commit themselves until the market stabilises. Therefore, export demand is slack,” said Mukesh Singh, Director of Mumbai-based MuBala Agro Commodities Pvt Ltd.

Short window

“Demand for Indian corn is mainly circumstantial — when there is a worldwide shortage in the supply (as is the case now). I foresee the demand reducing over the coming months as traditional exporters, such as  Brazil and Argentina, begin the new harvest season. Consequently, India’s export window for maize is expected to be relatively short,” said Amith Agarwal, co-founder & CEO, Agribazaar.

“Export is taking place but at a slower pace. There is demand for Indian corn. But it all depends on how it is priced. With freight rates declining, countries such as Brazil and the US become competitive in the global market,” said S Chandrasekaran, a Delhi-based trade analyst.

According to the International Grains Council, corn from Brazil and Argentina is quoted at USD 294 a tonne f.o.b, US corn at USD 303. On the Chicago Board of Trade, corn for delivery in June is quoted at USD 6.40 a bushel (USD 251.9 or INR 20,675 a tonne).

Domestic rates may rebound

In the global market, corn prices are at a two-month high on concerns over lower supply and strong demand for ethanol. Russia stopping exports from Ukraine by declining to extend the deal guaranteeing free grain shipments from Black Sea ports has added to the rising trend.

A section of the trade feels that corn shipments could witness a pick up in demand but Chandrasekaran said domestic prices could begin rising since the offtake of coarse cereal might increase in the wake of wheat production and broken rice availability being lower.

“Also, Indian corn has to be competitive by USD 5-10 a tonne to be exported to China, for example, given the falling shipping rates. Already, chances of corn exports to Africa has been hit as South Africa’s production is high this year,” the analyst said.

Demand for feed

He said demand for corn as feed will increase as wheat production this year is likely to be lower than the Agriculture Ministry’s estimate of 112.18 mt. This is because of unseasonal rains affecting the crop in key growing regions of North-west.

On the other hand, broken rice availability is low as the kharif paddy output was affected by deficient south-west monsoon in the eastern parts of the country.

Though the Agriculture Ministry has estimated rice production at a record 130.8 mt this crop year to June, kharif output has been pegged lower at 108 mt (111 mt last year).

Prakash agreed that there could be demand for corn as feed. At a summit in New Delhi, Agriculture Secretary Manoj Jha said demand for corn will come from the ethanol sector too.

Substitute feed grains

“Domestic maize demand is expected to increase this year by 2.3 per cent  year-on-year to 28.8 mt due to an increase in feed demand by 2.5 per cent to 17 mt. Food and industrial demand will increase by 2 per cent to 11.7 mt. Hence strong growth in maize demand coupled with firm prices for substitute feed grains would keep the maize prices sentiment bullish,” said Ashok Prasad, co-founder and CEO, Unnati.

Agarwal said from producing ethanol to producing fireworks, maize is becoming all-pervasive. “These factors also fuel the domestic demand for the crop,” he said.

According to data from the Agricultural and Processed Food Products Export Development Authority (APEDA), corn exports during April-January period of the 2022-23 fiscal were 28.6 lakh tonnes (lt) valued at USD 931 million with Bangladesh accounting for 15 lt of it followed by Vietnam at 5.7 lt.

Source: The businessline