July 11, 2008


India's corn price drop caused by export ban to be limited


India's corn export ban, coming at a time of record production, may trigger a price fall in the short-term,  analysts and traders said.


The Indian government on July 3 banned all exports of corn to cap local prices and rein in inflation even as overseas sales in the current marketing year rose sixfold to 2.5 million tonnes.


Even if prices fall due to assured supply within the country, growing domestic demand may limit losses, traders said.


The benchmark August futures has lost about 8 percent since the ban on exports last week, while spot prices in Nizamabad, a major trading centre, have fallen 4 percent.


Futures prices rose about by a third during May and June on strong exports, which was matched by spot prices.


Both futures and spot prices could see a further drop of 10 percent in the next one month on higher planting and supply in the domestic market after the export ban, analysts said.


India's summer-sown corn crop area was 23 percent higher to 2.64 million hectares as on July 4, farm ministry data showed.


In 2007/08 India saw a bumper output of 19.31 million tonnes, up 28 percent on year.


Southeast Asian countries are Indian corn's biggest buyers.


Some weakness is seen in the local short-term prices, as domestic players, assured of supply after the export ban, may delay buying till a further fall, said Amand Rajalaxmi, analyst with Karvy Comtrade.


However, the growing poultry and starch-making industry, the major domestic consumers of the commodity, would limit any major drops in prices, traders and officials said.


India's corn demand has risen by about 7 percent to 15 million tonnes this year, industry officials said.


As exports have exhausted stocks, supply should be tight and significant price drops are unlikely, a trader said.


Prices could surge after October 15, when the current ban on corn exports expires.

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