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