September 27, 2010

Indian corn exports climb with global grain prices

India's corn exports are set to climb as Asian feed producers scramble to lock in cheaper cargoes in the face of strengthening global grain prices and a lack of feed wheat from the drought-hit Black Sea region.

The country could sell more than three million tonnes of corn in the year to September 2011, a two-fold jump from a year ago, which will give buyers some respite from US prices that are near two-year highs.

"Buyers are certainly going to be looking at getting supplies from the cheapest source which can deliver reliably. And if that turns out to be India, then it's certainly something buyers are going to be looking towards," said Luke Mathews, commodity strategist at Commonwealth Bank of Australia.

Asian millers have started snapping up Indian corn cargoes in the past few weeks, buying around 100,000 to 150,000 tonnes between US$240 and US$250 a tonne, including cost and freight (C&F). This compares with US$260 to US$270 a tonne offered for Argentine corn.

The Philippines is the biggest feed wheat importer in Asia, buying more than one million tonnes a year, with strong interest also seen in Malaysia, Thailand and Vietnam earlier this year to replace expensive corn.

But prices of wheat <Wc1> have risen 65% on the benchmark CBOT since June after one of the worst droughts in history devastated crops in the Black Sea region.

In the physical market, the cheapest wheat is available for US$300 a tonne, C&F, compared with some deals for Ukrainian feed wheat signed below US$200 a tonne in June.

"Over the last few years feed wheat has been the cheapest feed input. Going forward over the next 12 months the availability of feed wheat into that region is going to be very low and corn is going to take up that place," said Doug Whitehead, a commodities analyst at Rabobank in London.

"Attractive global prices have opened a window of opportunity for exports which will be much higher than last year. This year's crop size will reflect the saying that rain makes grain," said Atul Chaturvedi, chief executive of Adani Group.

India's main monsoon was normal this year after the driest season in nearly 40 years last year. The harvesting season will pick up from next month in the main producing areas of western and southern India, where the monsoon rains were evenly distributed, aiding crop growth.

"The crop condition is healthy and free from any major pest or insect attack. If the Chinese start buying, then the sky is the limit for Indian exports," said Sanjeev Garg, a director of LMJ International, a New Delhi-based exporter of farm goods.

With domestic demand around 15-16 million tonnes, the country could export even more if China starts looking at Indian corn. If China, which could become a regular importer after making its biggest purchases in 15 years, eyes Indian corn, exports could jump to four million tonnes, the highest ever, analysts say.