August 19, 2004

 

 

Corn Prices Stronger On Rising Demand In India

 

Although the area under corn (maize) during the kharif season has increased marginally in India, its prices are likely to rule firm in the near future. This situation is likely since the options for the user industries, particularly the poultry sector, to find cheaper alternatives such as coarse cereals and oilmeals are expected to be difficult.

 

"Prices of alternatives for the poultry sector such as soyameal and bajra are ruling higher. With kharif production of these crops yet to be determined, they would be finding the going tough," industry sources said.

 

Corn prices are currently ruling at Rs 7,200 a ton, up from Rs 6,000 a ton at the beginning of the year. Prices are seen stabilising a little lower around current levels on the better coverage of the crop during kharif sowing.

 

As on August 4, coverage of corn was 64.7 lakh hectares (lh), up from 64.1 lh during the same period a year ago. Although the area under the crop is down in Andhra Pradesh, Gujarat and Madhya Pradesh due to deficient rainfall, it has been made good by an increase in Karnataka, where rainfall has been excess this monsoon.

 

According to sources, the demand for corn this year is seen at around 14 million tons (mt), including 6.75 mt for the poultry sector. Against this, kharif production is currently expected to be around last year's level of 12.44 mt, while a section of the trade says it could only be around 11 mt.

 

"Corn can be imported to meet the gap, but the Government allows import of only five lakh tons under a concessional customs duty of 15 per cent. Anything above it attracts a 50 per cent duty," the sources said.

 

Furthermore, with the US Department of Agriculture projecting a lower-than-expected soyabean crop of 78.3 mt, oilmeal prices are seen ruling firm. This is despite hopes that the domestic soyabean crop could be higher on increased coverage and better agricultural management practices. Area under soyabean this year is up nearly nine per cent 75.5 lh.

 

Soyabean prices are currently quoted at Rs 15,500 a ton in Indore.

 

"Moreover, availability of products such as feed wheat will be a problem due to low carryover stocks. And ordinary wheat prices too are ruling around Rs 7,500 a ton. Therefore, user industries will have lesser options," the sources said.

 

In turn, this could lead to hardening of prices of live chicken, currently quoted at Rs 32 a kg.

 

"Poultry sector, in particular, could face a tough time with rising input prices and resistance to hike in product prices," the sources added.