India corn prices likely to fall below government support level

 

 

Rising global supplies and the poor quality of Indian corn may push prices below the government support level. 

 

India's corn stocks have swelled as exports declined sharply due to quality issues.

 

A trader said there is nearly no exports this year due to quality issues, and with sufficient stocks and an impending new crop harvest, prices may fall further.

 

Indian corn exports could drop by 60% in the year to September due to poor quality of the domestic crop, lower global prices and good crop prospects overseas, said traders and industry officials.

 

Physical market prices at Nizamabad, the major trading centre, are now in the range of Rs850-Rs870 (US$18.3-US$18.7) per 100 kg, just above the government intervention price of Rs840 (US$18), traders said. In Madhya Pradesh prices have already fallen below Rs840, traders said.

 

The domestic poultry and starch industries have also completed most of their purchase at Rs915-Rs950 (US$19.7-US$20.4) two months ago on fears that prices would rise once exports pick up, traders said.

 

But quality issues have held back exports, becoming Indian corn's Achilles' heel. More than 100,000 tonnes of Indian corn set to be exported to Southeast Asian countries were rejected at local ports a month ago due to poor quality, as late rains had caused excessive moisture in the grain.

 

India became one of Asia's major corn exporters two years ago when China resorted to stockpiling to meet domestic demand and Southeast Asian importers chose India to meet their needs. Lower pricing had helped India to gain an advantage over the US and South America. Lower output in other major exporters also added to India's export chances in the previous year.

 

The US, Brazil and Argentina, the world's top corn exporters, are projected to have a bumper crop this year which could spoil the chances of an Indian export revival.

 

Analysts said the availability of large amount of poor quality corn may make it unfit for government purchase, ultimately leading to prices falling below intervention levels.

 

Analysts and traders said prices have fallen about a fifth in the past two months and may fall by another 10% to below Rs800 (US$17.2) levels in a month's time.

 

Analysts, however, said projection of a 9.3% drop in summer sown corn, and 1.7% lower plantings of the winter crop may help to check falling prices.