May 3 2010

 

 

India's exporters may have to renegotiate or default on corn export contracts for May and June shipment due to high local prices, according to several traders.

 

"Local prices have moved much higher than the price at which exporters have sold corn to buyers in Southeast Asia. Nobody can afford to take a loss of around INR500 (US$11.3) a tonne," an executive at a global trading company said.

 

He said exporters are heavily short on corn and are frantically trying to make local purchases to meet earlier export commitments.

 

Indian corn prices have moved higher by around INR300/tonne (US$6.8) in the last few days to around INR9,350/tonne (US$211) on a delivered basis at Kakinada port and at INR9,650/tonne (US$218) at Chennai port.

 

Traders had earlier sold corn to exporters around US$215-US$218/tonne, free on board, for bulk shipment in May, but they are now able to procure corn at not less than US$225-US$226/tonne, FOB.

 

On delivered basis, bulk cargoes were sold last month for May shipment around US$240/tonne but offers are now at prices well above US$250/tonne, cost and freight.

 

The rise in corn prices have left exporters in both Argentina and India in a quandary, as many are yet to cover their requirements, said an analyst in Singapore.

 

India's summer corn harvest takes place in April and May. Anticipating a bumper harvest, and fall in prices, exporters sold corn to buyers in Malaysia, Vietnam and Indonesia for May and June shipment at low rates.

 

In 2008, as the harvest started in April, prices on delivered basis at Kakinada port were around INR8,600/tonne (US$194) but this year the season started at INR8,900/tonne (US$201) and due to strong demand from exporters, quickly moved upward.

 

Buyers in southeast Asia have also been snapping up Indian corn because of low voyage time compared with Argentina amid uncovered demand to meet immediate needs.

 

Uncertainty over shipments amid a port workers' strike in Argentina last month also forced some buyers in Vietnam and Malaysia to turn to India.

 

In recent weeks there has been demand for shipments in containers to Indonesia.

 

According to traders' estimates, India exported close to 57,000 tonnes of corn in March including both container and bulk shipments and more than 70,000 tonnes this month. Based on deals already contracted so far, exports are projected at more than 100,000 tonnes in May but some sales have slipped into uncertainty due to the rise in local prices.

 

Local suppliers are not prepared to scale down prices as exporters are making a beeline to cover their requirements, a trading executive said.