Singapore: India has opened the doors for duty-free maize imports after seven years, but importers may not rush into deals until the new South American crop hits the market. Delaying too long, however, could prove costly.
With Chinese offers slowing to a trickle because of demand at home and US prices hitting 10-year highs in recent months, given the healthy appetite of ethanol makers, Indian buyers are likely to drag their feet until late March, when arrivals from the new Argentine crop starts, before signing deals.
Although prospects for a sharp jump in the US maize production this year limited a rally in maize futures in recent trading sessions, industry officials said Indian buyers should not wait too long as prices could still spike because of the booming biofuels trade.
“There are queries from importers, but no deals,” said Amit Sachdev, India representative of the US Grains Council. “Deals will happen, but they will takesome time.”
Strong economic growth is fuelling a rise in commodity prices in India, which recently prompted New Delhi to trim customs duties on vegetable oils, metals, cement and other commodities.
And after months of lobbying by industry, late last month, India said it would also allow maize imports at zero duty until the end of this year because of a shortage of feedstock and to help fight inflation.
India previously had an import duty of 15% on maize, with a ceiling of 5,00,000 tonnes.Above that, importers had to pay a duty of 50%.
India needs about 14 million tonnes of maize annually, with demand growing at around 10% a year. But output in the year to September 2007 is likely to be 12.75 million tonnes, down 8% from the previous year.
“The Western and Central Indian regions might look around for imported maize from April onwards once local supplies dry up completely,” said a Singapore trader. “I am personally of the opinion that imports will happen, but only after April.”
The shortfall is expected to be more than 1 million tonnes this year, but industry officials estimate that India might end up importing only 6,00,000-7,00,000 tonnes of maize in 2007 as it might be difficult to find competitively priced cargoes on world markets. India did not import any maize in 2006. “Domestic starch makers and feed makers will struggle a bit this year as their margins are going to get hurt,” said an industry official.
Maize in Northern Indian markets was around Rs8,150 a tonne, or about $185. Prices in Western and Central Indian markets were slightly higher. In contrast, the landed cost ofUS maize works out to above $225.