What a year 2006 was and expectations from 2007?; Maize prices move up

May the setting sun of 2006 take along with it all sorrows and displeasures and may the bright New Year dawn bring into your life endless happiness and prosperity.

Have a great year ahead!!

What a year 2006 was and expectations from 2007 ?

As the maize users usher in a new year, there are many who would keep their fingers crossed and hope that the year 2006 does not repeat itself in any manner. Poultry sector would like to forget the year 2006, specially after what happened in Feb 2006 (Avian Influenza), direct losses and indirect losses amounted to over 10,000 crores ($2.2 billion). It was a major setback for the poultry sector. As the sector started on the comeback trail, demand of chicken and eggs was normal, chicken placements were back to normal, high maize prices affected the profitability of the farmers yet again. Though the price of end products (chicken and eggs) was up, but so was the cost of production.

In the year 2007, at least in the first 10 months, it is likely that the maize availability would be poor, prices high, until the new crop arrives in October 2007. A higher production may not grant solace as 2007 would be the year of Al Nino, which would also mean a lower monsoon.

In addition, the demand from the starch sector will increase due to the boom in retail sector. It would be the food sector, which many believe will give a boost to the starch sector and the PULL EFFECT from the retail sector for packaged, processed foods.

The PULL EFFECT from the retail sector will also help the poultry sector and processed poultry will gain much wider acceptance and audience. The recoveries to the integrators would be higher and in all likelihood India would see major investments to set up processing plans and supply chain systems.

Maize prices move up

Maize prices are slightly up from last week by Rs.100 per MT, averaging Rs.6800 – 6900 per MT at the market yard. The prices are higher over last year by almost 14%. Reports from the market also indicate that the prices are likely to remain higher in the coming months, until the new rabi crop arrives in the market in Feb/March 2007 in some markets (Bihar, Andhra Pradesh, Maharsahtra). The prices are likely to soften, but for a short period only. Rabi crop provides about 15-17% of the total maize production of India and even a small increase in land coverage will not be able to fulfil the deficit already in the market.

Pearl Millet prices are up over last week by Rs.100 per MT, reaching a level of Rs.7400 – 7500 per MT. As against maize, the prices are higher by about 9%.

Sorghum (Jowar) prices remained stable at Rs.7600 per MT at the market yard, but are higher than the maize prices by almost 12%.

Barley prices moved up by almost Rs.700 per MT at the market yard, to reach Rs.7700 per MT (average), an increase of almost 9% over last week. The prices of barley are also lower than last year by 11.2%.

In the world market maize prices are likely to remain high, especially due to the ethanol boom in US. There are about 111 ethanol plants in the US producing almost 19.5 billion litres ethanol in 2006. There are another 70 plants that will be online in 2007. Currently 20% of the maize crop is converted to ethanol, which is likely to rise to 25% in 2007. The ending stocks of maize in the US in 2006 were 25 MMT, and are likely to be 20.3 MMT in 2007, which will further fuel the prices. This is despite a higher production of 306 MMT estimated by many analysts. The average maize price at the farm in 2006 was $120 per MT as against $78.72 in 2005. The average farm gate maize price in 2007 is expected to be $128 per MT.

Prices at CBOT moved a bit higher and March 2007 delivery closed at $153.6 per MT, May 2007 delivery $156.81 per MT.

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

Dec 30, 2006