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TREND: At record high, maize prices seen rising more in coming mos

Monday, Jul 29

 

By Sampad Nandy

 

NEW DELHI – Poultry feed makers and starch manufacturers may not get a breather anytime soon as maize prices, currently at a record high, are seen rising further in the next few months due to scarce supply.

 

In Nizamabad, wholesale maize was sold at 2,450 rupees per 100 kg last week and market participants expect prices to rise by another 200-300 rupees until the fresh crop arrives in October.  

 

Prices skyrocketed due to an acute shortage in the domestic market due to a smaller crop in 2018-19 (Jul-Jun).

 

Poultry feed and starch manufacturers peg maize output in 2018-19 at 18-20 mln tn, compared with 28.75 mln tn produced the previous year. The government, however, has raised its output estimate to 27.82 from 27.80 pegged earlier.

 

"Most stockists have cleared out their entire stocks at higher prices. Supplies from Bihar and Uttar Pradesh are now negligible," Patna-based trader Avinash Kumar said.

 

The recent rise in maize prices has hit the poultry industry severely, forcing the sector to look for cheaper alternative feed meals such as wheat, said Pravin Khare, the owner of a Nashik-based poultry firm.

 

The supply crunch has forced Indian feed and starch manufactures to import maize after a gap of over two years.

 

Since February, domestic feed and starch manufactures have imported about 130,000 tn of maize under the advanced authorisation scheme. However, this wasn't sufficient to make up for the decline in supply, said a person close to the developments.

 

The government allows duty-free import under advanced authorisation scheme, provided the product is exported within a specified period after value addition. Maize imports usually attract 60% import duty.

 

To address the shortage, the government has also allowed 500,000 tn of maize to be imported in 2019-20 (Apr-Mar) under the tariff rate quota at 15% import duty. The deadline to submit applications to state-trading agencies is Aug 31.

 

"It will take some more time for the government to initiate the procedure. Hence, imports may be delayed further," an official with a multinational trading firm said.

 

Of the half-a-million tn maize imports allowed, 100,000 tn was approved in April. However, imports are yet to happen due to delay in allocating import quotas to state-trading firms.    

 

National Agricultural Cooperative Marketing Federation of India has awarded a tender to AgroCorp to import 50,000 tn of maize and the shipments are likely to reach next month.

 

New deals for imports are unlikely at this time of the year because of the lack of non-genetically modified maize in the global market, the official with the multinational firm said. India allows import of certified non-genetically modified maize.  

 

Even after the import arrives, prices may not ease as the quantum allowed for imports is too small to address the supply scarcity, trade sources said.

 

Maize prices are unlikely to fall below 2,000 rupees per 100 kg, even after the fresh crop arrives due to poor carryover stock and anticipation of smaller-than-usual kharif crop for a second straight year, traders said.

 

Anticipated lower yields in traditional growing areas due to infestation and an erratic monsoon may hit output, traders said.

 

"Fall armyworm infestation in traditional growing areas like Karnataka, Telangana, and Andhra Pradesh may hit production this year (2019-20)," an official with another multinational trading company said.

 

However, some market participants expect maize acreage to rise in states such as Madhya Pradesh, Bihar, and Uttar Pradesh due to better returns from the crop. According to trade participants, maize acreage this kharif season is seen rising to 8.2-8.3 mln ha. Last year, farmers had planted maize across 7.9 mln ha during the kharif season.

 

So far, farmers have sown maize over 6.39 mln ha so far, compared with 6.25 mln ha a year ago.  

 

"Despite the likely rise in acreage, output may not rise in line, due to the weak monsoon rains," an official with a domestic trading firm said.   

 

With maize prices not expected to ease anytime soon, the distress for the feed manufacturers may prolong. End

 

Edited by Maheswaran Parameswaran

 

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This copy was first published on the Cogencis WorkStation

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