February 21, 2009

 

India corn exports hit by poor demand and low prices

India has exported about 300,000 tonnes of corn so far in 2008-09 marketing year that began in October, hit by slowing demand and lower price offerings from competitors like the US and Brazil, a trader said.

 

Indian shipments have reached 10 percent of last year's total exports which stood at 3 million tonnes, said Punam Chand Gupta, a large trader and exporter.

 

Low freight prices in the past few months have eroded India's advantage, and US corn delivery price in the far east is nearly the same or slightly lower than India, said a Mumbai-based grains trader.

 

India offers corn free-on-board at about US$200 per tonne, while the US offers at US$165 and Argentina at US$158, traders said.

 

India in the past had capitalised on its lower domestic price and a sharp increase in freight rates in 2007-08, making it competitive in the Southeast Asian market.

 

But freight rates have cooled down since and domestic prices have increased more than 30 percent after the government increased intervention price by 36 percent to Rs840 per 100kg.

 

Also, the financial crisis has knocked down demand for commodities.

 

Poor crop in Argentina and some other positive signs may support exports in the long run mostly after June, Gupta said.

 

Argentina, the world's No.2 corn exporter is currently facing its worst drought in 40 years, which may cut its corn output by 40 percent.

 

Argentina's drought may force up corn prices which could help India become competitive again, Gupta said.

 

Demand from traditional importers Sri Lanka and Bangladesh is also likely to provide support, he said.