February 5, 2007

India corn trade at standstill
 

Dollar-based trade in corn has come to a standstill in India.

While imports are a non-starter, exports are petering out. Analysts say though Indian corn is hot overseas, it still isn't popping locally.

Therefore, despite the recent initiative taken by the government to reduce import duty to zero, the demand-supply equation remains delicately poised.

India is no longer signing export contracts because it is losing its competitive edge in the South-east Asian market.

With local corn price still at least INR 1.50/kg (US$0.034) cheaper than the landed price of imported corn, there seems no incentive to import. A slight increase in corn prices might not be sufficient to ensure import price parity.

Corn mills have been buying the local crop at INR 8.50/kg (US$0.19). If they import from overseas, at current world market prices, it would cost them INR 10/kg (US$0.22). The difference is too much for the local corn user industry to absorb.

Other users of corn, such as poultry and dairy industries, are also unlikely to pay more than INR 9/kg (US$0.204) for corn.

A higher price would mean a switch to wheat and more soymeal, said an industry watcher. As a result, India might not be able to import before May-June, when the US corn crop is harvested.

Incidentally, if Indian corn prices reach US$200 a tonne, countries like Malaysia and Indonesia would find it profitable to buy from other countries.