Corn seen below govt support level on export dip

Corn seen below govt support level on export dip

Mumbai: India’s corn prices may fall below the government support level as domestic stocks swell on a sharp drop in exports due to poor quality and rising global supplies, industry players said.

“There is almost no exports this year due to quality there is enough stocks and new crop harvest is expected soon ...prices may fall further sharply," said Poonam Chand Gupta, a large trader in Nizamabad.

India’s corn exports could drop by 60% in the year to September due to poor quality of the domestic crop, lower global prices and good crop prospects overseas, traders and industry officials said.

In 2008-09 India shipped about 2.5 million tonnes. Physical market prices at Nizamabad, the major trading centre, are now ruling in the range of Rs850-870 per 100 kg, just above the government intervention price of Rs840, three traders said. In Madhya Pradesh prices have already fallen below Rs840, traders said.

The fall in exports is swelling domestic stockpiles as domestic poultry and starch industries have already done most of their shopping at higher prices two months ago, traders said.

“Most of the local buyers (poultry and starch industry) have already stocked up their requirement at prices in the range of Rs915-950 two months ago on fears prices would rise once exports pick up," said Gupta, who procures corn for exporters.

But exports couldn’t pick up due to quality issues. More than 100,000 tonnes of Indian corn set to be exported to Southeast Asian countries were rejected at local ports a month ago due to poor quality, sources said.

India’s corn quality deteriorated due to late rains.

India became one of Asia’s major corn exporters two years ago when China resorted to stock-piling to meet domestic demand and Southeast Asian importers chose India to meet their needs.

Lower pricing had also helped India to score over the US and South American players. Lower output in other major exporters added to India’s export chances in the previous year.

“This year there is little chance of the exports catching up due to the prices will crash because suddenly more than one million tonnes of the commodity is available," said a trader with a multinational grains corporation.

The US, Brazil and Argentina, the world’s top corn exporters, are projected to have a bumper crop this year which could spoil the chances of an Indian export revival.

Analysts said the availability of large amount of poor quality corn may make it unfit for government procurement ultimately leading to prices falling below intervention levels.

“The prices will fall below the MSP (minimum support price) ...there will be enough stocks now and very few takers...," said Chowda Reddy, a grain analyst with JRG Wealth Management.

Analysts and traders said prices have fallen about a fifth in the past two months and may fall by another 10% to below Rs800 levels in a month’s time.

Analysts, however, said projection of a 9.3% drop in summer sown corn, and 1.7% lower plantings of the winter crop may just about help to check falling prices.