January 25, 2024

Rallying prices weaken export potential of India's corn in December

India's corn exports have almost ground to a halt since December due to a rally in local prices as a result of strong demand from the poultry and ethanol industry —making shipments from the country more expensive than those from rivals, four exporters told Reuters.

India usually exports around 250,000-300,000 metric tonnes of corn every month but in December, its exports fell to around 30,000 tonnes, dealers said.

Usualbuyers from India such as Bangladesh, Vietnam, Malaysia, Nepal and Sri Lanka have preferred purchases from South American countries that are offering the grain at a steep discount to Indian prices.

"India's corn exports have nearly stopped," said Nitin Gupta, senior vice president of Olam Agri India. "In the local market, demand is robust for corn from poultry and ethanol makers, which is keeping corn prices firm."

Indian corn is offered around US$300 per metric tonne on a free-on-board (FOB) basis, while competing South American corn is being offered around US$230, dealers said.

"A very small amount is currently going to neighbouring Nepal, Bhutan and Bangladesh," said a Mumbai-based dealer with a global trade house. "The Southeast Asian countries have completely stopped buying from India."

India's 2023 corn exports fell to around 2.3 million tonnes from 3.5 million tonnes in 2022, dealers estimated.

Domestic demand for corn suddenly rose after India earlier this month hiked the procurement price of ethanol made from corn by 8.8% to ₹71.86 (US$0.86)a litre and capped ethanol production by diverting sugar.

The Indian government has forecast summer season corn production in 2023/24 at 22.5 million tonnes, but traders estimated production was much lower than the forecast due tothe drought.

"Corn production, even from the winter crop, is not promising. It seems corn prices will remain elevated until September when the next season's summer crop supplies are expected to start," said a New-Delhi-based trader.

Elevated corn prices even prompted India'spoultry industry, the biggest corn consumer, to request the government to allow duty-free imports of the grain.

But Trade Minister Piyush Goyal said there were no immediate plans to allow duty-free imports.

- Reuters