Maize Prices are stable, but availability an issue; Animal feeding takes a hit with high grain prices

Maize Prices are stable, but availability an issue

Maize prices at the Market yard are slightly down over last week, at Rs.6700 per MT, a mere 2.7% drop over last week market yard prices. The average delivery prices remain in the range of Rs.8200 – 8300 per MT. The price drop is mostly in North India due to winter and drop in placement of chicks in the area. Maize prices at this time of the year are running at 22% higher that last year. At this time last year, the average delivered prices were Rs.6750 per MT.

Pearl Millet (Bajra) prices also cam down by about 6% this week, reaching a leven of Rs.7150 per MT, which are still higher than maize prices by 6.5%.

Sorghum (Jowar) prices also crashed at the market yard by 11% over last week, reaching a level of Rs.7400 per MT at the market yard, which is still higher than the maize price by 10%.

Barley prices remained stable at the Rs.8100 per MT at the market yard, which is similar to last year prices. The demand of barley as raw material for malt is going up. Malt is used to manufacture beverages and also beer. The two products are extreme in the middle income group, with malt beverages aimed at children for health and wellness, while beer is aimed at the younger generation as a fun drink.

The drop in prices is merely a correction and the prices are likely to go up again as the demand of maize in west, south and east increases, In addition the demand will pickup in January in North India as the placements of chicks for Holi (festival of colors) are likely to increase.

On the international front, China may not be able to fulfil its export obligations on maize. Reports indicate that the exporters had permits/contracts for 4.18 MMT, which was supposed to be completed by end of the year or early 2007. The total exports from China are 2.37 MMT and the domestic prices have steadily risen, due to increase in demand. China has also imported 60,000 tons on maize this year and has a quota of 7.2 MMT tons as per WTO rules.

The prices in US are up this week again. At CBOT corn for March 07 delivery was 145.2 per MT.

Animal feeding takes a hit with high grain prices

High grain prices -- particularly for wheat and corn – due to poor crop production in major production areas are likely to have an impact on the animal feeding in some parts of the world. The latest report from Food and Agriculture Organization (FAO), indicates that as the use of grain take precedence for biofuels against food or animal feeding, countries may witness higher consumer prices of red meat and poultry and possible meat shortages.

Higher grain prices will also affect the overall economy of some of the developing countries, translate into lower purchases of meats in certain countries, not necessarily due to improved domestic supply, but due to higher international prices. FAO report estimates that the import costs for developing countries might rise almost five percent from 2005, mainly as a result of price increases rather than an increase in the actual volume of food imports. In 2006 the global expenditures on imported food in 2006 could reach a historic high of US$374 billion – two percent more than the previous year’s level as per FAO report.

World production of coarse grains in 2006 stands at 981 million metric tons, down by 2.1 percent from 2005 but above the average of the past five years. There is also belief that the current higher prices are likely to encourage higher plantings and larger production in 2007, but if industrial use, mainly for ethanol, continues to grow at the current pace, it may take more than one good crop season for prices to retreat significantly from their current highs.

It is a catch 22 situation, as there was expectation of a rebound in the meat consumption due to renewed consumer confidence as a result of reduced animal disease outbreaks, the high feed costs may postpone the recovery in the livestock market.

While corn and soybean availability in the global market place is low and prices high, in Brazil the supplies are good and prices low, which is helping companies and farmers to expand feeding operations to feed the growing meat demand. The feedlot capacities have grown by over 20% within one year. The lower prices of grains will also help in feeding the rapidly expanding poultry sector in Brazil, which is more oriented towards exports.

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

Dec 16, 2006