India may lift its ban on corn exports next month if floods in the country's east have not hurt crop prospects, according to the farm minister Sharad Pawar on Friday (September 12, 2008).
Indian corn October futures, which had fallen 4.5 percent in the past six sessions, increased nearly 1.5 percent after the minister's announcement.
Floods in key corn-producing state of Bihar have destroyed 100,000 hectares of farmland.
Pawar said they are looking at the crop in Bihar and a meeting would be held to assess crop damage.
Lifting the ban would not be easy as the troubled poultry industry - a major corn consumer - would strongly object the move, which would push up domestic corn prices, according to analysts.
An analyst at Karvy Comtrade Ltd, Amand Rajalaxmi, said harvest may be lower than last year. Government data said corn sowing so far this year had dropped 4 percent.
The ban has cost Indian corn exporters some global market share and they would be further hit by the fall in international prices if restrictions are lifted, according to some analysts.
Amol Sheth, president of the All India Starch Manufacturers Association, said international prices would determine export levels.
"Last year, exports rose because international prices were very high and freights were also high," he said.
India was a key corn supplier to Asian countries such as Malaysia, Vietnam and Indonesia. Shipments were banned in July in order to protect domestic consumers from high corn prices. The prospect of India's return to the international corn market on October 15, when the export ban is due to end, could further pressurise global corn prices, which fell to a new low as crude oil prices decreased.
Pawar said the government seeks to protect the interests of farmers and they are not interested in extending the ban on corn exports.
Officials said the government would try to balance the interests of farmers and consumers and take measures to avoid corn supply shortages.