September 10, 2024

 

India transitions to net corn importer amid ethanol push, impacting poultry industry

India's push to increase corn-based ethanol production has turned the country, previously Asia's top corn exporter, into a net importer for the first time in decades, placing pressure on local poultry producers and affecting global supply chains, Reuters reported.

 

In January, the Indian government raised the procurement price of ethanol made from corn, encouraging a move away from sugarcane-based ethanol for blending in gasoline. With the government promoting ethanol to reduce carbon emissions and ensuring an ample supply of sugar in the domestic market, India is expected to remain a permanent net importer of corn.

 

This growing demand for imports is likely to support global corn prices, which are currently trading near four-year lows. Indian poultry producers, facing skyrocketing feed costs as local corn prices surge above global levels, are urging the government to lift duties on imports and to remove the ban on genetically modified (GM) corn, which limits their purchasing options.

 

India typically exports 2 to 4 million metric tonnes of corn annually, but in 2024, exports are expected to drop to 450,000 tonnes, while imports are set to reach a record 1 million tonnes. Most of these imports will come from Myanmar and Ukraine, both of which grow non-GM corn, according to trader estimates.

 

Historically, India's poultry and starch industries consumed the bulk of the country's annual corn production, which totals around 36 million tonnes. However, in 2023, ethanol distilleries began to use corn, with demand increasing this year after the government reduced the use of sugarcane for fuel following a drought. This shift resulted in a 5 million tonne shortfall, according to an official from the All India Poultry Breeders Association.

 

"The poultry and starch industries are now competing with distilleries for supplies, and this competition is keeping prices high," said Nitin Gupta, senior vice president of Olam Agri India. Olam estimates that ethanol distilleries will require 6 to 7 million tonnes of corn annually, a demand that Gupta believes can only be met through imports.

 

Traditional buyers of Indian corn, such as Vietnam, Bangladesh, Nepal, and Malaysia, are now turning to South America and the United States for supplies. "Vietnam has reduced its imports of Indian corn recently due to the high prices," commented a trader based in Ho Chi Minh City.

 

The rising cost of corn has put poultry producers in a difficult position, with feed now accounting for 75% of production costs. Uddhav Ahire, chairman of Anand Agro Group in Nashik, said the farm gate price of a broiler chicken is about INR 75 (US$0.89), while production costs have soared to INR 90 (US$1.07). "The poultry industry cannot sustain such losses for a prolonged period," he warned.

 

The All India Poultry Breeders Association, along with the Compound Livestock Feed Manufacturers Association, has called for the government to allow 5 million tonnes of duty-free corn imports. A government spokesperson did not respond to these requests. Ahire added, "Given the current shortage, more corn imports should be allowed at zero duty, and GM corn should be permitted for feed purposes."

 

At present, corn imports attract a 50% duty, although the government has permitted around 500,000 tonnes to be imported at a reduced rate of 15%. Farmers, lured by the higher corn prices, have responded by expanding corn planting. Data from the farm ministry shows that the area under summer-sown corn has increased by 7% from last year to 8.7 million hectares.

 

"Corn is providing good returns due to the higher prices," said Krishna Shedge, a farmer in Jalna district. However, until new season supplies bring prices down, smaller poultry farmers like Vijay Patil are having to cut production and reduce the proportion of corn in their feed. "I'm replacing some of the corn with broken rice and wheat stalk waste to lower feed costs," Patil noted.

 

The surge in Indian demand has pushed corn prices in Myanmar up to US$270 per metric tonne, free on board (FOB), from US$220, encouraging local farmers to plant more corn. "Exporters, farmers, and other stakeholders in the supply chain have benefited from the price rally," said Murali Chakravarthy, country head for Singapore-based trading company Agrocorp in Yangon. Imports from Myanmar are not subject to taxes as India classifies it as a least developed country.

 

Starch manufacturers are also importing duty-free corn from Ukraine through India's Advance License Scheme, which requires an equivalent amount of finished goods to be exported. Ukraine's corn exports to India have surged since January, with totals reaching around 400,000 tonnes by the end of August, according to ASAP agricultural consultancy.

 

Trade ministry data shows that India's corn imports jumped to 531,703 tonnes in the first half of 2024, compared to just 4,981 tonnes in the same period last year. Meanwhile, exports fell sharply by 87%, from 1.8 million tonnes to 241,889 tonnes.

 

"Every year, we will need to import corn, as production cannot be increased fast enough to keep up with the rising demand," said Hemant Jain, a corn exporter based in Indore.

 

-      Reuters