Short term outlook of sluggish Maize market

The pandemic resulted in weak demand for maize against its abundant supplies. Prices for rabi crops in major producing states were reported to fluctuate between Rs 1150-1275/quintal (Gulabbagh Maize prices) starting April to date. Prices touched bottom in May month while currently, it is near Rs 1240-1250/ quintal levels.
The prices are quite low compared to the last few years due to the impact on its demand from the poultry industry. As more than 55% of total maize production in India is consumed by the poultry feed industry. The pandemic has badly impacted the demand for poultry and poultry products and therefore, the poultry feed industry.
Though the first two quarters of the year have seen a downward trend, still sowing operations have progressed satisfactorily due to government intervention during the lockdown period. As per official reports, maize acreage in the country rose by 2.36 percent to 74.30 lakh hectares from 72.58 lakh hectares in the corresponding period ending July 31. The Rabi crops from Bihar and Andhra Pradesh were also higher compared to the previous year.
Due to the weak demand from poultry or animal feed industry, the maize processing firms reduce their operational capacity to 40-45% in the second quarter.Lack of procurement from private and government sector made the maize farmers sell their produce in distress at lower than the minimum support price which is Rs 1850/quintal.
Present scenario in Maize producing states
In mandis of Punjab the distressed maize farmers sell their produce at Rs 1000 to Rs 1200 per quintal. Earlier the state government has been actively promoting maize cultivation as part of its crop diversification plans. But in the current season state governments’ own agencies failed to offer any relief for the maize farmers who were forced to sell their produce at 40-60 percent lesser than the MSP of the crop.
During the second quarter procurement in southern states, AP and Telangana could check the price fall to some extent. Both these states have reportedly procured 10-11 lakh tonnes. Import deal was also finalized in January while the supply of imported maize also contributed to price slide during the first quarter. Due to disparity in import offers, so far, no deal has been finalized in the current fiscal.
The supply-demand scenario of India poultry industry is also improving. Though the egg market has stabilized in the last couple of months. The demand for poultry and poultry products is also improving. As per trade sources, poultry feed manufacturers and maize processing units are currently operating at 60-70% of the production capacity, relatively higher than a few months back when it was just 40-45%.
Export Scenario
Recent maize exports of ~5-6 lakh tonnes to Nepal and Bangladesh could arrest the price fall to some extent. With the removal of trade restrictions and continued requirements from these countries and other destinations will further improve the chances of overseas trade. Industry estimates export figures to reach somewhere around 9-10 lakh tonnes during the present financial year. But as per the present scenario, fresh exports are not economically feasible. As mentioned by Mr. Bimal Bengani, a leading exporter, India is unable to negotiate fresh deals at present. Our offer is around USD 195-200 per tonnes while other exporting nations are offering a lower quote of USD 185-190 per tonnes.
Short-term outlook
Maize price at mandis of Sangli and Gulabbagh is fluctuating between Rs 1430-1480 and Rs 1220-1250 per quintal respectively. In near future, the demand for most of the edible agricultural commodities is expected to improve, in addition to poultry and related products which might also result in more stocking. Before the arrival of Kharif season crops, the traders and exporters are expecting a gain of at least Rs. 100-125 per quintal from the current level. As the Kharif arrivals may reach the market in November and further pick up by December. Therefore, the short to medium-term price outlook of maize seems relatively better compared to the first half of the year.
The crop supply from the Kharif harvest should be decent enough to suppress the market during the last two months of the year. If in case the pandemic issue remains there or demand of poultry industry remains subdued then trading environment may not be so friendly. Mr. Amit Sachdeva of US Soybean Council does not foresee any significant improvement in the business atmosphere at least for next few quarters which is due to the uncertainty over the elimination of the pandemic and also improvement in financial conditions of the entire value chain. He also stated that maize prices have been almost stable for the past few months, thereby there are hardly any chances of earning any relevant profit by farmers, traders, or processors.
by Abhijeet Banerjee, Religare Broking