Maize prices move up at the start of year; What is happening on ethanol?

Maize prices move up at the start of year

At the start of the New Year, the maize prices all across the country notched up a bit, reaching Rs. 6900 – 7000 per MT at the market yard on an average. The prices are about 2.3% higher than last week of Dec 2006. The prices at the market yard were higher than last year prices in the first week of Jan 2007 by 19%. Delivered prices averaged Rs.8700 – 9000 per MT. It is unlikely that the prices would come down for the next one month.

Pearl Millet (Bajra) prices did come down by about 5% over last week to Rs.7000 per MT at the market yard, but are still higher than last year by 5.5%. Ag against maize, the prices are higher by just 1.4%, making substitution in poultry rations just possible, but only in few states where the commodity is available. In the long run, prices of Pearl Millet are also expected to rise, if demand from poultry sector shoots up and its use at human food in Rajasthan, Madhya Pradesh also goes up.

Sorghum (Jowar) prices moved up over last week by 15%, highest increase so far, reaching a level of Rs.8700 – 8900 per MT at the market yard. The prices are higher over last year by 28%. As against maize, the prices of sorghum were higher by 26%, making substation impossible.

Barley prices in the market yard have also moved up over last week by 4.5% to Rs.8000 – 8200 per MT range. Delivered prices were close to Rs.9000 – 10000 levels. The prices are the market yard are though 3.5% lover than last year, during the same time.

The prices of maize in US at CBOT this week closed at $144.95 per MT, down by $8.65 per MT, approximately 5.6% over last week of Dec 2006. The FOB values (US Gulf) for the next few months are Jan $158; Feb $161.5; Mar $163.5, April $166.45 per MT.

The detailed market perspectives for January 5 from US Grains Council can be found at the following link.

http://www.grains.org/galleries/market_perspectives/mp_%201_5_07.pdf

What is happening on ethanol?

It is fight for food against energy, as some would say. But in both cases, it is a fight for survival for the people. While China plans to limit the use of corn to be converted to ethanol, new capacities in US are coming online in 2007 – 2008.

The current capacity of ethanol production in US is 20 billion liters and it would add would add another 22 billion liters by 2008, overshooting the mandated 28 billion liters by 2012. It would also increase the demand of corn in US by 25.4 MMT every year. The Renewable Fuels Association (RFA) believes that US ethanol plants would use 60 MMT of corn by 2008. If one goes by the figures put out by Earth Policy Institute (EPI), the figure would be 139 million, which may be exaggerated.

But whatever may be the case, the demand is on the rise, for both livestock feed, food and fuel and its will be the fight for survival for all businesses. Some reports also indicate that if the demand and supply is to be balanced about 6 – 7 million acres will need to be added every year in US. In such a situation price is not the criterion, but availability of the commodity would be the biggest concern.

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

Jan 06, 2007