September 28, 2007

 

India's corn prices may fall on record production, supply

 

 

Corn prices in India are likely to see a decline in the next 15 days due to record production and higher arrivals of the monsoon crop in major trading centres, traders and analysts said.

 

But prices are expected to rise by late October when export and domestic demand picks up, they said.

 

According to Mohanlal Vedant, a large trader in Nizamabad a drop in spot prices-- which has been steady for a month-- is expected.

 

Traders and analysts said prices could fall to 600 rupees a quintal levels up to October 15. Prices could start falling next week onwards and reach 590 rupees levels, Vedant said.

 

Spot corn prices in Nizamabad, a major trading centre in Andhra Pradesh, were trading at 681.50 rupees on Thursday, traders said.

 

India expects a record summer-sown corn production of 13.07 million tonnes in 2007/08, up 14.3 percent from the previous year, according to the federal farm ministry's first production estimates.

 

Andhra Pradesh -- a major corn producer in India -- has got a good production this year, but arrivals are delayed due to rain, said another large trader.

 

Traders and analysts expect arrivals to pick up from next week in major trading centres in Andhra Pradesh, Karnataka, Maharashtra and Bihar. They expect it to rise to 100,000 bags of 100 kilograms each per day from the present 10,000 to 15,000 bags.

 

An analyst with Angel Commodities Broking Pvt Ltd said fundamentals indicate a fall in corn futures prices as analysts expect the October contract to fall up to 625 rupees, where it has strong support.

 

This could translate to a drop of around 13 percent from the present level, they said.

 

A. Rajalaxmi, analyst with Karvy Comtrade Ltd, said corn futures gained in the last few days on negligible carryover stock and export demand from Bangladesh, despite steady spot prices.  

 

The benchmark October contract has gained more than 7 percent in the month of September. A Mumbai-based analyst said speculators went long expecting low delivery on expiry as stocks were low.

 

India's total carryover stock at present may not exceed 100,000 bags of 100 kg each, traders said.

 

Vedant said after the short-term fall the prices should stabilize and even rise as demand from starch-makers and poultry industry will pick up. Vedant is also the president of the Nizamabad Chamber of Commerce and Industry.

 

There is low demand from the industry at present as they want the best prices before buying, said a starch maker based in Ahmedabad. India uses corn for the poultry, livestock and starch-maker sectors.