August 2, 2010

 

Indian corn rally expected to continue

 

 

A rally in Indian corn is likely to have an extended season for another 6-9 months on lower supplies, higher intervention prices and an expected export rebound next season.

 

India's corn prices have risen over 15% since the beginning of June. India's 2009/10 corn output is estimated at 16.68 million tonnes, down over three million tonnes from previous year.

 

In early June the government increased intervention price by about 5% to INR880 (US$19) per 100 kg.

 

Stockists are accumulating on hopes of a price rise in the offing because of the deficit when the new marketing year begins in October, traders said. "We expect massive rallies in the next 3-9 months," said Anand James, a senior analyst with Geojit Comtrade Ltd. Prices can rise up to INR1,500 (US$32.3) in the period, he added.

 

The major support is likely to come from an expected rebound in exports in the 2010/11 crop year.  "There could be a 100% rise in exports in the next season," said an official with a trade association.

 

USDA in a recent report has estimated India's corn exports at two million tonnes in 2010/11 from one million tonnes in 2009/10. India is the world's fifth biggest corn producer and a net exporter, though it ships only a small quantity ranging from 1-3 million tonnes each marketing year. Global trade is likely to increase to 89.65 million tonnes in 2010/11 from 85.91 million tonnes in 2009/10, USDA data showed.

 

"Indian exports may benefit from the rising demand globally," the trade official said.

 

The global demand is likely to increase on strong and continuous demand from China, which is seeking large consignments from the US.

 

Goldman Sachs has raised its price outlook for US corn attributing to demand increase.

 

India, which primarily supplies to Southeast Asia, Sri Lanka, Bangladesh and Nepal competes with the US on pricing parity.

 

In case of a demand rise, buyers seeking prompt supplies may turn to India, traders said. Southeast Asian imports are likely to increase to 6.03 million tonnes in 2010/11 from 4.73 million tonnes the previous season, according to USDA data.

 

"India's local demand is always increasing and this year, an increase is also expected," said M. Bansilal, a large trader in Nizamabad, the major Indian trading hub for the grain.

 

Indian domestic demand is likely to increase by 1.1 million tonnes to 17.5 million tonnes in 2010/11. Poultry feed makers and starch makers are major consumers of corn in domestic trade.