Maize and Soyabean crops: Production and price trends likely in India in 2020

MAIZE:In India, sowing of Rabi maize has commenced under favorable conditionsand as per reports, nearly 9.4 lakh ha area had been planted till middle of December. The normal for the season is 17.50 lakh ha. Crop sowing is under progress in vegetative growing stage and rainfall received until second week of Decemberis also considered beneficial for the crop.
Major growing states for Rabi Maize are Bihar, Maharashtra, Andhra Pradesh, Telangana and Karnataka.But area sown for this year is lower in most states when compared to the last year. As on December 13, 2019, the Rabi crop area had reached around 9.43 lakh hectares, butlower than 10.23 lakh hectares sown during corresponding period last year. In Bihar, area sown is around 3.39 lakh hectare, again lower compared to last years’ 3.76 lakh hectare acreage. In Tamil Nadu, area covered is roughly 1.40 lakh hectares, lower than 1.85 lakh hectare during corresponding period last year. Lower sowing is reported in Andhra Pradesh also, where the acreage is 0.43 lakh hectares, lower than 0.63 lakh hectares planter last year. On the other hand, sowing area has increased year on year in districts of West Godavari (14,332 hectares), Krishna (8,630 hectares), Srikakulam (5,398 hectares), Vizianagaram (4,121 hectares), Kurnool (3,091 hectares) and Prakasam (2,448 hectares).
With respect to the major Kharif maize crop, production last year was lower than the governments’ estimate due to low acreage, and also becausedue to the adverse effect of widespread armyworm infestationin Karnataka. The lower production forced the government to import maize after a gap of two years. In order to meet the requirement of the poultry industry, India had imported about 130,000-ton maize last year. This years’ scenario is somewhat similar considering lesser coverage area versus last year leading to reduction in production estimates. Sources also suggest that maize acreage in Karnataka had shrunk by roughly 5% due to the pest attack, but the decline had been more than offset by Madhya Pradesh, where the acreage had increased by 14% year on year.
Rising prices in recent years have encouraged farmers to prefer sowing maize against other crops. One of the leading markets namely Nizamabad, highest recorded prices were near INR 2,430 per quintal this year in July, nearly double the prices that were prevailing a year ago. Going by various industry reports, production prospects for Rabi Maize seems better than Kharif Maize, but total production seems lower because of a lower Kharif crop size. Average production estimates for this year is between 21-22 million tonnes, versus 24 million tonnes last year.
Heavy rains in the leading producing regions, during July and August has resulted in lower production of Kharif Maize, mainly due to widespread crop damage. Import prospects are quite high for this year as consumption is likely to surpass the supply levels. Which is estimated ~25-26 million tonnes approximately. So, maize prices are likely to remain northward in 2020.
SOYBEAN:Domestic soybean prices are maintaining firm levels due to lower production expectations from Madhya Pradesh and Maharashtra. Even soya oil and palm oil markets have gained significantly which is favoring the rise in prices. Farmers and traders expect domestic soybean prices up to INR 5000 per quintal in this marketing season.Sowing was significantly affected in both states – Maharashtra and Madhya Pradesh due to which production estimates are below 90 Lakh tonnes. USDA’s latest estimate is still 100 Lakh tonne crop for Indian soybean.
Planters, Traders and Farmers are reportedly holding nearly 60-65 lakh tonnes of Soybean stocks. India had crushed 6.50 lakh tonnes of soybean in October 2019, which is less than last years’9.50 lakh tonnes crushed soybean. SOPA’s report statistics estimated carry over stock from last year at 1.70 lakh tonnes and 1.54 lakh tonnes carry forward in the next year. Therefore, a drop in production and carry forward stocks will favor further rise in crop price in coming months.
Imports of India may remain near 3 lakh tonnes as per present market scenario and roughly 12 lakh tonnes of soybean shall be retained for sowing. Direct consumption is estimated at 2 lakh tonnes while exports for 2019-20 may touch a record 1.50 lakh tonnes figure. Indian production is expected lower mainly from crop loss in Madhya Pradesh and drop in yield expectation in the third largest soybean producing state of Rajasthan.As per International Grain Council, Global soybean output may decline by 18 million tonne to 341 million tonnes because of marginal production drop in U.S Soybean and lower planting area in Brazil so far. In Argentina however, sowing has commenced under generally favorable conditions, due to satisfactory rainfall in the recent weeks.
Soybean continues hovering higher but there is limited support from the local soymeal markets. Exports from the country are not feasible due to disparity from foreign export offers. As per data released by the Solvent Extractor’s Association of India (SEA), soymeal exports in August were recorded at 32,226 tonnes compared to 76,558 tonnes in July 2019.Availability of Indian soymeal at significant premiumover other major exporting countries has affected the exports adversely. As on first week of October, Indian soymeal was offered near at USD 507 per ton, while US soymeal was quoted around USD 335 per ton, Argentina at USD 294 and Brazil at USD 363 per ton.
Therefore,Indian exporters of soymeal shall continue facing a stiff competition from North and South American peers. This in turn will keep chances of any significant price appreciation in soybean prices. However, if exports of soymeal start picking up, then mandi prices may even touch INR 5000 per quintal in coming months. Under such scenario the feed manufacturing units may have to switch over the other substitutes like bajra/broken rice/wheat in order to optimize their manufacturing costs against expensive maize prices. Though with respect to soybean, till date the price does not appear a concern as the upside price movements are kept in check because of subdued demand from the soymeal importers. Hence the feed manufacturing units as of now, shall be comfortable in maintain the traditional quantity of soybean crushing, needed to produce soymeal. So, soybean fundamentals are strong, but further upside depends upon soybean meal demand.
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by Abhijeet Banerjee, Religare Commodities