Mumbai: A bumper maize output in India coupled with a ban on exports may trigger a price fall in the short term, although growing domestic demand may limit losses, analysts and traders said.
The government on 3 July banned all exports of maize till 15 October to cap local prices and rein in inflation even as overseas sales in the current marketing year rose sixfold to 2.5 million tonnes (mt) till June from 0.4 mt in the last full year. Maize marketing year runs through October to September. “An immediate downside is possible but all depends on how demand and supply situation plays,” said Amit Sachdev, India representative of the US Grains Council.
Healthy yield: A farmer reaps corn in a field on the outskirts of Karnal, Haryana. Overseas sales rose sixfold to 2.5 million tonnes this year
The benchmark August futures has lost about 8% since the ban on exports last week, while spot prices in Nizamabad, a major trading centre , have fallen 4%. Futures prices rose about by a third during May and June on strong exports, which was matched by spot prices.
Both futures and spot prices could see a further drop of 10% in the next one month on higher planting and supply in the domestic market after the export ban, analysts said.
India’s summer-sown maize crop area was 23% higher to 2.64 million ha as on 4 July, indicating another year of good output, farm ministry data showed. In 2007-08, India saw a bumper output of 19.31mt, up 28% on year, pushing up export demand. India exported maize, mostly to South-East Asia, at a landed cost of $300 (Rs12,960) a tonne or less, while exports from US, by far the world’s biggest supplier, cost about $320 a tonne.
Besides freight advantage, an export curb from China, another major player, also helped Indian exports. Some weakness is seen in short term, as domestic players, assured of supply after the export ban, may delay buying till a further fall, said Amand Rajalaxmi, an analyst with Karvy Comtrade.
However, improving demand from poultry and starch-making industry, the major domestic consumers of maize, will stop a major fall in prices, traders and officials said. India’s maize demand has risen by about 7% to 15mt this year, industry officials said.