Corn prices in India move up, supply becoming tight; Pressure on Ethanol – more corn production in US

Corn prices in India move up, supply becoming tight

Corn prices in almost all consumption areas went up and average corn prices are close to Rs.6200 ($135) per MT at the market yards. Delivered prices are close to Rs.6800 – Rs.7200 ($149 - $157) per MT depending on the destination. The prices are higher than last year during the same period by about 4% (at the market yard).

Till date no concrete information on release of corn stocks from Food Corporation of India in Karnataka and Andhra Pradesh is available. Unless that happens or GOI allows imports, it will be difficult for the end users (poultry and starch) sector to meet their requirements.

While prices of Sorghum are higher than last week by about Rs.150 per ton, ruling at Rs.7670 per MT, they are still lower than last year by Rs.740 per ton at the market yard.

Pearl Millet (Bajra) prices are also higher by Rs.115 per MT over last week, ruling at Rs.6640 per MT but lower than last year by about Rs.120 per MT at the market yard.

Barley prices are at the market yard is higher than last week by about Rs.60 per MT (a very small increase) and ruling at over Rs.7000 per MT, which to almost all malt manufacturers is a higher price. The price is also higher than last year by Rs.190 per MT.

In the US, CBOT closed lower than last week. Sept delivery was $93.36 Per MT while Dec delivery was $99.73 per MT. The FOB values (US Gulf) were $112.30 for July and August and $116.65 for Sept 2006. USDA expects the production of corn for 2006 to be 266.7 MMT, while the Informa Ecomonics estimate the corn crop to be 277 MMT.

Pressure on Ethanol – more corn production in US

Increase in the industrial usage of corn, especially ethanol is going to put pressure on corn and will eventually lead to more corn acres being planted in the US at the expense of wheat and soy.

International Grains Council has forecast a jump of 38.1 MMT in industrial grain usage from 2005-06 estimates to 2006-07, the major change coming through ethanol production. The estimate for 2005-06 was ethanol, 41 MMT; Starch 68.2 MMT; Brewing 29.7 MMT; and others 9.1 MMT, making a total of 147.9 MMT in industrial usage. The provisional numbers for 2005-06 are 50.2 MMT for ethanol; 72.6 MMT for Starch; 30.7 MMT for brewing and 10.1 MMT for others. For the 2006-07 forecast, the numbers are 65.3 MMT for ethanol; 79 MMT for Starch; 31.3 MMT for Brewing and 10.3 MMT for other usage.

This increased demand for ethanol production is also likely to push the pries higher. In 2005 the average corn price was $1.98 per bushel ($77.93 per MT). For the current crop is is estimated at $2.33 per bushel ($91.71 per MT). By 2010 the average price will be $2.69 per bushel ($105.88 per MT).

A research conducted by University of Missouri indicates than over a long term, ethanol will have a major impact on corn acres. Five US states, Missouri, Iowa, Illinois, Indiana and Ohio plant 36 Million acres of corn and a similar amount of land is on Soy. By 2010, the five states will grow corn on 39 Million acres and soy crop will be grown on 33 million acres.

Amit Sachdev
Representative
U S Grains Council, India
bluecross303@gmail.com

Jul 22, 2006