Year end: Maize prices end on a high note

For the financial year 2006-07, ending Mar 31, 2007, corn prices were up over last year by almost 23%. Just talking numbers the prices have increased considerably over last 2 years. Prices in March 2005 ended at Rs.5580 per Mt at market yard, which in Mar 2006 they ended at Rs.5890 per MT, an increase of 5.27%. In Mar 2007 the prices ended at Rs.7258, an increase of 18.75% over March 2006.

As one analyses the prices over the year, one can see the changes in Aug and Sept 06, when prices were higher than Aug and Sept 05 by 9% and 7% respectively. In Oct 06, the prices were higher than Oct 05 by just 5%, showing that new crop did have an impact, but the prices opening higher at the start of the marketing year for corn. Come Nov 06, and the prices went up and difference was 13.16% over Nov 05; Dec 06 +19.11%; Jan +18.81%; Feb +24.55% and Mar +23.8%. And if one goes by the trend-line, the prices will move up.

Demand of maize from 2000/01 to 2006/07 rose by an average 5.35% per year, while the production of maize rose by an average 3.97% per year as per the reports from GOI. The growth in does not take into consideration any exports, though India does export maize to Nepal, Bangladesh and Sri Lanka and sporadically to South East Asia. In the next six years until 2012/13 the demand of maize on a very conservative estimate will increase by 5.53%, and if the production also increases by 4% on the average, the gap in demand is going to remain and grow. This, assuming that growth in demand by poultry sector is 6.32% (2000 – 2013) and other sectors growing at 5%. Even at this pace of growth in supply as estimated above, the gap between supply and demand will fuel the prices and two things will need to happen on a continuous basis, technology adoption and imports to fulfil the gap between the demand and supply. If poultry and the starch sector grew faster than the above estimates, it just might be difficult to match demand and the supply.

Looking at the futures market, the prices were similar to last week, but spot prices moved much higher. Davangere Rs.7328 per MT against Rs.7200 per MT last week; Nizamabad Rs.7525 per MT, up from Rs.7307; Nimbaheda Rs.8575 up from Rs.8425 per MT; Ratlam Rs.8450 per MT, up from Rs..8350 per MT and Karimnagar Rs.7399 per MT, up from Rs.7342 per MT.

Reports indicate arrivals in Andhra Pradesh, which is keeping a check on the prices, but increase in demand from the poultry sector is making matters worse.

Barley prices were up down by almost 11% this week, but prices in the future markets were up. Apr Rs.8410 per MT; May Rs.8580 per MT; Jun Rs.8660; Jul Rs.8800 per MT & Aug Rs.8920 per MT.

Corn prices in US fell this week on CBOT on report of higher plantings. Corn for May traded at $141.39 per MT; July $151.72 per MT; Sept $150 per MT; Dec $150.9 per MT.

Corn production world wide

USDA came out with the prospective planting report on Mar 30, 2007, which has created a stir in the market. As per the survey, farmers in US intend to plant 90.5 million acres (36.605 million ha) of land on corn, up 15% over 2006. This would mean a production estimate of 317.5 MMT, which an average production of 3.5 tons/acre (8.64 tons/ha), less than 2006 estimate of 3.78 tons/acre (9.36 tons/ha). The reason for this move is being attributed to high corn prices in US.

It is also expected that Soya will be 67.1 million acres (27.16 million hac), about 11% lower than 2006, while Wheat area is expected to be up by 5% to 60.3 million acres (24.41 million ha). Cotton area is expected to be down by 20% as per the survey to 12.1 million acres (4.9 million ha).

Reports from South Africa indicate a short crop of 6.26 MMT, of which 4.14 MMT is estimated to be while corn and 2.12 MMT yellow corn. It seems there won’t is any exportable surplus in South Africa this year as the country is likely to be a net importer of corn.

The International Grain Council has estimated corn production for the year 2007/08 at 733 MMT, up 6% over last year. The major increase is coming from increase in production in US, but the demand is also likely to rise in the world.

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

Mar 31, 2007

Commodity prices move up; China’s Corn requirement to go up

Commodity prices move up

Maize prices moved up slightly (0.7%) over last week to Rs.7200 – 7300 per MT range. The prices though are higher by about 25% over last year. Deliveries are being seen in major markets like Andhra Pradesh, pulling down the prices, but slightly, but no major change is anticipated by the traders.

Maize futures and spot prices rose this week, due to higher demand. April Rs.7680 per MT; May Rs.8040 per MT; Jun Rs.8200 per MT; Jul Rs.8380 per MT. Spot Prices at various centres also were up, with Davangere Rs.7200 per MT; Nizamabad Rs.7307 per MT; Nimbahera Rs.8425 per MT; Ratlam Rs.8350 per MT; Karimnagar Rs.7342 per MT.

Sorghum (Jowar) prices moved up by 5%, reaching Rs.8900 levels. The prices are higher than last year by 12%. Against maize, the prices are higher by 23%.

Barley prices were up by almost 6.2% in the market yard, reaching Rs.8700 – 8800 range. Barley futures also rose Apr Rs.7928 per MT; May Rs.8100 per MT; Jun Rs.8210; Jul Rs.8302 per Mt & Aug Rs.8450 per MT.

More freak weather, rains, hailstorm occurred in the bread basket of India, namely Punjab and Haryana and is likely to effect the wheat crop. While GOI has already announced its intention to import 3.0 MMT of wheat, the figure is expected to go up, if GOI is not able to procure the wheat from the farmers as per the requirements. In addition reports from Madhya Pradesh and Uttar Pradesh indicate that the farmers are not willing to sell wheat to GOI and would sell to traders as the prices being offered are higher than those offered by GOI.

Higher wheat prices in the market, will deter many of the rural families from consuming wheat and pressure will be on Sorghum and maize for human consumption. Areas in Madhya Pradesh, Uttar Pradesh and Bihar where corn in grown in tribal, will be consumed in-house and will not be available in the market.

Corn prices in US rose slightly over last week on CBOT. Corn for May traded at $158.73 per MT; July $163.45 per MT; Sept $161.41 per MT; Dec $161.25 per MT.

China’s Corn requirement to go up

China could face a deficit of 0.5 MMT of corn in 2007/08 if reports from China National Grain & Oil Information Centre are to be believed. As per the reports despite a higher production estimates of almost 144.5 MMT of corn, deficit is projected. This is only due to the increasing demand by the domestic processing sector and farmers are planting more corn than soya and other crops.

For the past 11 years, China has been a net exporter of corn and a sudden change during the time when world ending stocks will be at the lowest will certainly add fuel to the fire of the price. For the year 2007/08, the corn exports from China are expected to fall to 2.5 MMT as against 4.5 MMT expected for 2006/07.

The big question will remain as to from where India will fulfill its needs of maize (corn) if and when imports are required.

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

Mar 24, 2007

Commodity prices remain stable; Indian end users team in US; Higher Corn crop estimated in US

Commodity prices remain stable

The commodity prices remained stable this week, with maize prices slightly lower than last week. Maize prices were down to Rs.7200 – 7300 per MT, lower by 2% over last week. The prices were still higher than last year by 23.8%. There are reports of some arrivals in Bihar, Karnataka and Andhra Pradesh. Prices decreased in the markets in Jharkhand, Karnataka, Maharashtra, Rajasthan and Tamil nadu and increased in Gujarat and Uttar Pradesh.

Pearl Millet (Bajra) prices came down about 3.7% over last week and settled at Rs.6900 7000 per MT range. The prices were higher than last year by 9.3%. As against maize the prices were lower by 3.3%, and there are signs of increased usage of the commodity in North India, specially in the layer rations in Punjab & Haryana. The prices dipped in Andhra Pradesh and Maharashtra, but due to high demand increased in Haryana & Punjab.

Grain Sorghum (Jowar) prices increased by 4.6% over last week at Rs.8450 – 8500 per MT range. The prices were higher than last year by 10.7% and against maize the prices were higher than 18%. The prices increased in Andhra Pradesh, Gujarat and Tamil nadu.

Barley prices increased by almost 17% over last week to Rs.8200 – 8300 per MT range. Reports of a bad crop due to untimely rains may have fuelled the market.

This week saw freak weather in parts of North India and reports of wheat crop being affected due to this weather situation. With GOI intending to buy 13 – 15 MMT of wheat from the farmers at a price of Rs.8500 per ton, including a bonus of Rs.1000 per MT and market prices prevailing higher, it is highly unlikely that the farmers will sell wheat at the prices lower than the market prices. Reports also indicate that GOI will now shy from importing 3 – 4 MMT of wheat in 2007/08 to cover the deficit. There is still speculation on what the final production of wheat will be, but a higher wheat price will surely mean higher maize prices.

The prices in US were down due to anticipated higher crop in 2007/08. May futures closed at $157.23 per MT as against $165.73 per MT of last week, while July futures $161.44 from $169.12 per MT. Sept futures closed ar $158.88 per MT while dec futures closed at $158.65 per MT.

Indian end users team in US

An 8 member team from India consisting of the Poultry and Starch end users was in USA this week (Mar 12 – 17, 2007) at the International Grains Program to understand the US Production and distribution system & trading on commodities. The team also met with the traders to get an insight into the grain trading business, prices of US corn in coming years and the ocean freight etc for Indian ports.

The team also traveled to sites to see how corn is handled, stored and makes its way to the designated markets (domestic or export). The team visited the Federal Grain Inspection Services Laboratory at Kansas City to understand the inspection process for the commodities exported. The team also visited Kansas City Board of Trade to see the futures market and understand its working.

Higher Corn crop estimated in US

A private US analyst company, Informa Economics has estimated a highest ever corn acreages this week. The company estimates the corn acreage to be 87.8 million acres in 2007/08 as against 78.327 million acres in 2006/07 as per USDA estimate. This is an increase of 9.47 million acres. The company also believes that the Soya acres will be down from 75.552 millin acres in 2006/07 as per USDA estimate to 70.384 million acres, a loss of 5.184 million acres. All increase in corn acreages would be at the cost of soybean, cotton and other crops.

The company has estimated that if the average yield on corn is about 3.78 tons/acres the production is estimated at 332.75 million tons for the year 2007/08. USDA will come out with its estimates only on Mar 30, 2007 and the market is awaiting the report eagerly.

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

Mar 17, 2007

Commodity prices stable; GM Food labeling in India

Commodity prices stable

This week GOI canalized maize exports. Till recently maize exports were open and traders were exporting maize to various locations, including South East Asian markets. With the new policy, all exports of maize will be though State Trading Corporation (STC), Project Engg. Company (PEC), NAFED or MMTC. The details can be found at the following link.

http://dgftcom.nic.in/exim/2000/not/not06/not5006.htm

This canalizing will sure be a deterrent to export and will work as a DEFACTO ban on maize exports from India.

New arrivals have of maize crop have started in Jharkhand, Orissa and a sentiment of a bumper crop in Andhra Pradesh, Bihar, rumours of expected ban on maize futures (similar to wheat and rice), is putting a pressure on the prices, which are stable.

The maize prices this week were just about 0.7% higher than last week, reaching Rs.7300 – 7400 per MT level. The prices though are about 24% higher than last year.

The future prices on maize were Mar Rs.7530; Apr Rs.7610, May Rs.7720, Jun Rs.7880. While the spot prices at various locations were Davangere Rs.7439, Nizamabad Rs.7413, Ratlam Rs.8400, Karimnagar Rs.7499 (All prices on per ton basis at the respective sites).

Pearl Millet (Bajra) prices were up by 3% over last week at Rs.7200 – 7300 per MT and just about 1.5% lower than Maize. Layer farmers in North India are using Pearl Millet at 10% levels in feeds, which has helped keeping the feed cost stagnant for almost one month. Pearl Millet prices were about 13.8% higher than last year.

Sorghum prices were 10.6% lower than last week at 8100 – 8150 per MT on the average, but the prices are higher than last year by 10.6% and also higher than maize by 10.5%.

Barley prices were 15% lower than last week at Rs.7000 – 7100 per MT at the market yard.

GM Food labeling in India

Based on the information available from the Ministry of Health, the ministry is keen to amend the Prevention of Food Adulteration Rules, 1955 to introduce the provision of mandatory labeling of genetically modified (GM) foods. The implantation of the law was deferred last year after the Foreihn policy was announced.

The new provision under the Foreign Trade (Development & Regulation) Act, 1992, defines the GM foods as those composed of or containing genetically organisms obtained through modern biotechnology. Even the GM processed food imported or produced domestically would be labeled, under the new law.

Big questions – would it mean all imported soy oil is labeled, also all vegetable oil which uses cotton seed oil will need to be labeled as well.

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

Mar 12, 2007

Commodity prices move up again; More grain production estimated, but what is in store for you?

Commodity prices move up again

The budget was announced this week in India, though there was speculation about what the budget might do, it was a damp affair as far as the industry was concerned. Agriculture got a fair bit, a higher allocation for Research and Development of seeds, specially for oilseeds and pulses, and also for Fertilizer Subsidy. The food processing sector also got a small relief as the duty on the food processing machinery was cut from 7.5% to 5%.

But the day also saw a blood bath on the financial markets across Asia including India. Ban on future trade in Wheat and Rice announced the same day though temporary, also led on the rumours that Maize futures will also be banned, though no such move was announced.

Maize prices averaged at Rs.7250 – 7350 per MT at the market yard, up 1% over last week and about 24% over last year’s prices. A ban on future trade on wheat and rice did result in prices falling for Maize futures as well (March Rs.7740; April Rs.7830, May Rs.7980, June Rs.8130) at Davangere, but the spot prices at different markets were reported high, with Andra Pradesh averages up from Rs.6345 last week to Rs.6705 per MT, Madhya Pradesh up from Rs.7020 last week to Rs.8280 per MT this week and Tamil Nadu up from Rs.7020 last week to Rs.7290 per MT this week. Reports filtering in from Bihar suggest that the grain setting has not taken place as yet, this could be due to fall in temperature in February and this could affect the production in Bihar, on which most of the grain end users and banking upon. New maize crop stocks have started to come through in Karnataka as well, but the average prices have remained stable at Rs.6900 – 7000 per MT at the market yard, which is much higher than last year price of Rs.5220 per MT in Karnataka.

Bajra (Pearl Millet) prices also moved up by about 4.7% over last week to Rs.7000 – 7100 per MT range this week. The prices are also 6.6% higher than last year. As against maize the prices are lower by about 3.8% only.

Jowar (Grain Sorghum) prices also move up by 7% this week to Rs.9000 – 9100 per MT range at the market yard. The prices are about 8.8% higher than last year and against maize, the prices are 24.4% higher.

Barley prices on an average dipped by 1.8% over last week to Rs.8300 – 8400 per MT.

The week also saw some heavy rains in the Northern wheat belts, especially in Punjab and UP and the chill returned. This could affect the wheat crop in the region, which is looking for a big bounty this Rabi season.

Prices of Maize (Corn) in US on CBOT came down this week. Futures prices were as under March down from last week’s $169.35 to $161.79 per MT this week, May down from last week’s $174.14 to $165.73 per MT this week, July down from $177.93 to $169.12 per MT this week and Sept down from $171.4 to $164.24 this week.

More grain production estimated, but what is in store for you?

As the world moves forward, increased pressure from population and need for luxury would certainly lead to higher requirement of food as well as fuel. It will be up the scientists and farmers to find ways and means to fulfil these needs. But till the time no other product is found the pressure will remain on grains specially corn to feed the livestock and fill in the tank as well.

The latest numbers from USDA estimate a 87 Million acres of land under corn in US in 2007-08 to produce 309.75 MMT of corn. The usage for ethanol is expected to be 81.25 MMT, up from 54.61 MMT in 2006-07, an increase of 48.78%. The ending stocks are also expected to be lower at 16.17 MMT in 2007-08, down from 19 MMT estimated in 2006-07.

In US this is surely going to drive the food prices higher. Corn is not consumed by humans directly, but its use in livestock (Pork, poultry and beef, Milk) production, food processing (Starch, high fructose corn syrup) will be costly, leading to higher food prices eventually.

In China though the grain production is up this year by 2.8% to 497.46 MMT as per reports from the Chinese agency, the country will be facing a deficit of about 4.8 MMT of grain in 2010. The arable land in China has shrunk from 131 million ha to 123 mill ha, a drop of 6%.

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

Mar 03, 2007