March 3, 2006

India to allow duty-free corn imports due to shortage

India may consider allowing duty-free corn imports for the first time in six years as a sharp rise in domestic demand pushed prices up nearly 10 percent, a senior industry official said on Thursday.

India's announcement comes about a month after it allowed imports of duty-free wheat for southern India, also for the first time in six years. India last imported corn in 2000, buying about 337,000 tonnes of feed grain.

In what could be an indication of tougher times ahead for feed makers, Amit Sachdev, India representative of the US Grains Council, said corn prices have risen sharply in recent months, due to the lack of corn in the market.

The industry is worried about supplies between April and September, he added. Prices in the local market would normally start to come down from February onwards because it's close to the harvesting of the summer crop. However, this year has seen prices sharply up instead.

India imposes 15 percent duty on corn imports, making it economically unviable for importers under normal conditions. The country normally has a deficit of 500,000 tonnes a year, which is supplements by local feed alternatives such as sorghum, a lower priced grain than corn. However, this year, even the prices of such substitutes are about 10 percent higher and to make things worse, the 500, 000 tonne shortfall shortfall in corn is expected to double because of strong demand, Sachdev said.

India's corn output in 2006 crop year ending in March would likely remain unchanged at 12.2 million tonnes. Grain trade officials had hoped for a larger corn crop but unfavourable weather had wiped out all hopes of that. Although government officials say corn acreage would be around 7 million hectares in 2006, industry officials say it would probably be about 6 million.

In fact, the recent outbreak of bird flu in India did not bring corn prices down, which indicated that demand from the poultry sector was not dampened by the virus. India's poultry demand has been steadily growing at a rate of 6 percent, but the 10-year average of corn output growth had been less than 4 percent.

Sachev added that corn prices in domestic markets was at US$157 a tonne, about 8 to 10 percent higher than the same time last year and could rise further as feed makers stock up.