Due to an incremental rise in acreage as monsoon revived in certain parts of India, corn prices have been persistently on a downtrend since mid-September, however, scanty rainfall in the corn-growing pockets of Kar­nataka has weakened the prospects of a good crop, making prices to become volatile.

On Saturday (Oct.13), corn feed for October delivery closed at INR1,394 (US$26.4), down INR6 (US$0.11) or 0.43%, over its previous close of INR1,400 (US$26.5).

According to Vedika Narvekar, a senior research analyst for agricultural commodities at Angel Broking, "The cereal grain is likely to witness a drop in production after two consecutive years of record high output."

Apart from domestic markets, the corn production has also been hit badly in the US, which is the largest producer and exporter of the commodity. All these factors supported the upside in corn prices in July. But with the revival in monsoon in August, corn prices have witnessed a sharp fall, declining almost 15% from their highs.

"Nonetheless, estimates of lower output by the ministry of agriculture have led to a recovery in the domestic corn prices over the past couple of weeks," Narvekar added.

According to the first advance estimate for 2012-13, kharif corn production is pegged at 14.8 million tonnes, down 8% from the previous year. Corn is sown in both kharif and rabi seasons - with the kharif season yielding 75% of total production. Higher rabi output may, to some extent, offset the losses of kharif output.

India holds a miniscule share of around 2% of global production and 4% of global exports. The domestic production, which stands around 21.5 million tonnes, is sufficient to meet local consumption demand of around 17-18 million tonnes, leaving a little for exports. Thus, domestic prices are not highly correlated with the international corn prices.

However, worries over the US corn output in the 2012-13 season have heightened concerns over global corn supplies. This has pushed CBOT corn prices to record high this season. The US is a major player in the global corn market, accounting for over 35% of global production and 41% of global exports. Unlike India, where corn is used for food as well as industrial purposes, its uses are more diversified in the US. Out of its total corn consumption, almost 40% is diverted towards ethanol, 36% for feed, 11% for food, and industrial purposes and 13% for exports. According to USDA's monthly crop report, US corn production for 2012-13 is forecast at 273 million tonnes, lower than 313 million tonnes in 2011-12 and the lowest since 2006-07.

"Corn prices follow seasonality, wherein prices decline with the commencement of harvesting and bottom out when arrivals reach their peak. Harvesting of corn has commenced across India and, thus, prices may trade with a downward bias in the near term. However, sharp downside may not be seen as global markets are ruling firm. Indian exporters have an opportunity to export more this season," says Narvekar.

"On a broader perspective, prices could rule firm for a while. Technically, National Commodity and Derivatives Exchange (NCDEX) November prices have bounced from the key support level of INR1,200-1,213 (US$22.7-22.9) and are heading towards NR1,350 (US$25.5), which is the prior breakout level. From now on, the downside looks limited at INR1,195-1,200 (US$22.6-22.7), which has been a historically strong turnaround level," says Venkat­eswaran Karikar, a commodity analyst at IIFL.

According to Sumeet Bagadia, head of currencies and commodities research at Destimoney, "Corn has resistance at INR1,450 (US$27) and support at INR1,310 (US$25), and a breakout will give fresh momentum on either side. In the short term such as over the next one month, we are expecting the commodity to move in a range, so any rise in prices till INR1,420 (US$27) or INR1,430 (US$27.03) should be used as a selling opportunity. On the other side, a dip in prices till INR1,320-1,330 (US$24.9-25) should be used as a buying opportunity."