Lower commodity prices in India; World prices and demand

Lower Commodity prices in India, Higher in other parts of the world

Maize prices slipped a bit (1.3%) over last week to settle at Rs.6750 per MT. The prices are however higher by 4.1% over last year at the same time. For the month of Sept 07, the average prices are Rs.6870 per MT at market yard and are higher than Sept 06 average by 2.16%. The prices though are lower than Aug 07 prices by 7.3%.

Pearl Millet (Bajra) prices have also slumped this week by 7%, settling at Rs.6500 per MT. The prices are higher by 4.2% over last week. Against maize the prices are lower by 4.7%. For the month of Sept 07, the average price was Rs.6520 per MT. Prices are higher by 0.76% over Sept 06 prices, however prices are down by 3% over Aug 07 prices.

Sorghum (Jowar) prices are down by 5.7% over last week, settling at Rs.9367 per MT. The prices are however higher than last year by 31.3%. In the last week of Sept, the prices are higher than maize by approximately 42%. Average prices in Sept 07 were Rs.9322 per MT at the market yard, and the prices are higher than Sept 06 prices by about 20%. Prices are also lower than Aug 07 prices by 0.67%.

Barley prices have moved up over the last week by 2.6% to Rs.9965 per MT. Oct future prices on NCDEX were being quoted at Rs.12060 per MT. The prices are higher than last year 36.7%. Average prices in Sept 07 was Rs.9330 per MT, which is higher than Aug 07 prices by 19.4%. In addition the prices are also higher than Sept 06 by 27.8%.

It may be noted that the new crop will be available only in March/April 2008 and with world supplies dwindling fast, the prices in the world market are also likely to stay higher.

On CBOT, corn was trading at $146.84 and $153.21 for Dec 07 and Mar 08 delivery respectively, which is little lower than last week’s Dec delivery prices.

World prices and demand

The U.S. Department of Agriculture (USDA) reported on Sept. 28 that maize stocks in the United States, as of Sept. 1, totalled 33.02 MMT, down 34% compared to a year ago. The USDA’s quarterly grain stocks report also showed soybean stocks up 27% and wheat stocks down 2% from a year ago.

Due to increase in demand, the commodity prices are much higher than last year. As per a report, in 2007, the prices of Illinois corn and soybeans are up 40% and 75%, respectively, from a year ago (2006). Kansas wheat is up 70% or more. Some analysts also believe that next year probably there will be less corn as more farmers will grow wheat and the prices are historically highest.

New estimates also indicate that the crop is China could be lower by over 8 MMT. With increased demand within China and possibly imports in China and negligible exports from China, prices in the region can also be higher .

In India, the corn is grown in Khariff (same time as in US, harvest in Oct), but the competitive crop will be Rice in irrigated areas. There is speculation that the Minimum Support Price (MSP) will be increased by another Rs.1,000 per MT, there is likely hood that there will be a shift. For Rabi (harvest in Feb/mar), there is all likely hood that farmers in Bihar and Uttar Pradesh will sow wheat as the MSP has already much higher than maize at Rs.10000 per MT.

Amit Sachdev

India Representative

U S Grains Council

bluecross303@gmail.com

Commodity prices rise; China Corn Market; Biotech and food security

Commodity prices rise

Maize prices are similar to last week at Rs.6800 per MT at market yard, but the prices are higher than last year by 5.2%. Prices in Karnataka have declined considerably at Rs.6300 per MT, lower than last week's Rs.7100 per MT, due to arrivals of the new crop in certain markets. The first estimates for the 2007-08 khariff crop have been declared by GOI and the estimates project a production of maize at 13.07 MMT from 7.617 million Hac, with an average productivity of 1.71 tons/hac. This would be a new record after 2006 khariff's dismal production of 11.43 MMT. Now that maize export are also not canalized (Notification was until Sept 5, 2007), there are reports of export commitments to neighbouring countries, primarily on the freight advantage. In the US about 14% of the corn crop has been harvested and the prices and on CBOT, corn closed at $148.22 for December delivery, higher by about $10 per MT over last week. FOB (US Gulf) rates were quoted at $ 176 - 177 per MT for Oct - Dec deliveries.

Pearl Millet (Bajra) prices have gained 10% over last week reaching Rs.6900 - 7000 per MT levels. The prices are about 7% higher than last year and against maize the prices are higher by 1%. The first estimates project a production of 7.97 MMT against a target of 8.5 MMT. The production estimates are lower than last years estimate of 8.63 MMT.

Sorghum (Jowar) prices gained about 22% over last week reaching Rs.10,200 per MT on the average. The prices are about 29% higher than last year. Against maize the prices are higher by 48%. The first estimates project the production of sorghum at 3.60 MMT in Khariff against the target of 4.20 MMT, The estimated production is lower than 2006 khariff estimates of 3.68 MMT. There are export queries for sorghum as well as there is interest from Europe and Africa to purchase the crop. US sorghum is being exported to Europe and Italy and also by Japan and Mexico. Sorghum is being quoted at $226.95 for Oct-Dec delivery (FOB US Gulf).

Barley prices have shot up by another 4.5% this week, reaching record levels of Rs.9700 per MT at the market yards. Delivered prices are about Rs.11,500- 12,000 per MT at the malting plants. Prices are higher than last year by 56%, which is a record. Reports indicate that about 100 - 150 TMT of barley has been exported to Saudi Arabia. Barley is a Rabi crop and will be planted in Nov 2007 to be harvested in Feb/Mar 2008 to be used in 2008-09 year. GOI has fixed the target for Barley at 2.0 MMT, up from last year's (2006-07) production on 1.31 MMT, against a target of 1.65 MMT. This is an increase of about 52% in the target over last year's production. In US the barley harvest is over and export commitments as per a report are about 115% higher than the estimate. Prices are quoted at $365 per MT (FOB PNW) for feed barley.

China corn market

China's feed demand is likely to rise by over 10% in 2008/09 as per a report from China Feed Industry Association. basically due to higher consumption by hog (Pork) sector and also the poultry sector. This increased demand is likely to keep the commodity prices higher in China. With China’s major soybean and corn growing regions currently hit by serious droughts, lower Chinese production means the country has to import more to meet rising demand, industry players have said.

In a move to keep the demand of corn down and prices stable, China has decided to suspend all approvals for the industrial corn processing units for the next 3 years. As per a report from National Development and Reform Commission (NDRC), the next approvals will start only after 2010. The ban on “deep processing” of corn - involving the transformation of corn into industrial products like ethanol - comes amid concerns in China about the security of the food supply and the inflationary impact of bio-fuels which use grains as feedstock.

In the 10th Five-year between 2001-2005, annual growth of corn consumption by the industrial sector was 14 %, against an annual growth of 4.2 % in corn supply. Over the next three years, consumption of corn by industrial sector will be limited to to only 26 % of China's total corn consumption. China corn output in 2010 is expected to be 150 MMT, up 3.5% from the 2006 levels of 145 MMT, while the demand is likely to exceed 150 MMT.

Biotech and food security

An International Biotechnology Conference was organized by Federation of Indian Chamber of Commerce and Industries (FICCI) in collaboration with US Department of Agriculture (USDA) and Indian Council of Agricultural Research in New Delhi, this week (Sept 17-18, 2007) and deliberations from scientists, industry and regulators gave one message - Biotech is important for food security, products being developed are nothing new, but there needs to be a science based regulation.

Current biotechnology can increase crop yields and reduce production costs and increase farmer incomes even for small-scale farmers in developing countries, like in India, who make up a large part of the world’s poor and hungry population. More important for such farmers, many of whom struggle to make a living on marginal land, is ongoing research into drought-resistant and salt-tolerant crops. Biotechnology can help even the landless poor by enriching staple foods, such as through the addition of essential vitamins.

As on date there is no case of disease linked to the genetic modification of crops or animals, nor has there been any disease occurrence. Any linkage to disease or evidence to that effect would be targeted in the risk assessment process that is part of regulatory approval.

Reports by respected international expert bodies like the United Nations Food and Agriculture Organization states “Thus far, in those countries where transgenic crops have been grown, there have been no verifiable reports of them causing any significant health or environmental harm,”. UN FAO, 2004.

We now know fore sure that the use of biotech crops in India has helped the farmers increase the income, by way of saving on pesticides and increased production, getting a better value of the produce. In addition, the farmers has used less number of sprays, thus reducing the exposure to himself, his family members and also the environment.

Amit Sachdev,

India Representative

U S Grains Council

bluecross303@gmail.com

Coarse grain prices remain low in India; Corn production and prices

Coarse grains prices remain low in India

Maize prices in the market yard, tumbled this week as well by another 3% to settle at Rs.6850 per MT. The prices were higher than last year by 5%. Last year during this time the prices were close to Rs.6500 per MT.

Pearl Millet (Bajra) prices were also down to Rs.6300 per MT at the markey yard about 2% lower than last week's prices. Prices werea lso lower than last yearby 2%. Against maize the prices were lower by 7.8%.

Sorghum prices were down by about 10% this week as against last week, to Rs.8300 - 8350 per MT. This is the maximum drop sww by the commodity over the last several months when sorghum prices were climbing. Prices were reported at 7.1% higher than last year. As against maize the prices are higher by 22%.

Barley prices have shot up by almost 11% this week to Rs.9300 on reports of exports. The prices are higher than last year by 18%. Prices are also higher as Ukraine is out of the export market due to a poor crop. The Ukraine previously accounted for 16 percent of world exports, but due to the poor crop this year export restrictions were imposed to ensure that there are sufficient domestic supplies to soften internal prices. In addition, Australia, which normally supplies one-third of world exports, is facing lower crop prospects and depleted old crop exportable supplies, according to USDA statistics.

The prices in US are higher by about $80 per MT, which is a 25% increase. Prices have reached $350 per MT.

Corn prices on CBOT were up marginally for Sept and Dec deliveries to $132.43 and $ 137.39 per MT respectovely

Corn production and prices

Reports from China indicate that the corn prices are likley t o stay higher in the comming years, as the production has stagnated and domestic demand for corn is rising. Though there is a restriction on use of corn for ethanol productoon, demand for feed is rising.

Corn acreage in China is about 28 million hac, which is the maximum and it will be difficult to expand the land under corn. There are reports that farmers would like to move to Soybean or wheat as the prices of these commodities are high.

As per the last report from Minsitry of Agriculture, GOI, Corn has been planted in 7.617 million hac in 2007 as against 7.174 mill hac in 2006 an increase of 6.1% over 2006. (Five year average for area under corn in India has been 6.370 mill hac).

In India, there is pressure on the government to relook the Minimum Support Price (MSP) for Wheat and increase the same to Rs.9500 ($231) per MT from the current Rs.8500 ($207) per MT, an increase of 11.6%, so as more farmers can grow wheat and India should be self sufficient in wheat production. The question though will be that the increase in wheat acerage will be at the cost of some other grain. What happens if due to the increase in MSP farmers in Rabi season shift to wheat planting in Bihar and UP in the corn belt? MSP of corn is Rs.6200 ($151) per MT.

Amit Sachdev

India Representative

U S Grains Council

bluecross303@gmail.com

Commodity prices tumble in India; Growth of Poultry in Sri Lanka and Bangladesh

Commodity prices tumble in India

On high production estimates in the Khariff season (Oct harvest) and fewer buyers, coarse grain prices across the board declined sharply. Maize prices were down by about 4.3% over last week settling at Rs.7000 per Mt at the market yard. Prices were down by 4.3% over last year as well. Buying of maize is for current usage only and all buyers are waiting for the new crop which will be harvested in Oct 2007.

Pearl Millet (Bajra) prices were also down by 4.3% over last week, settling at Rs.6400-6450 per MT at the market yard. Prices are down by 6% over last year. As against maize the prices are down by 9%.

Sorghum prices are also down by 1.4% over last week to Rs.9250 per MT at the market yard. The prices are up over last year by 12.7%. As against maize, the prices are higher by 31%.

Barley is probably the only coarse grain, whose prices are up. Barley prices have shown an upward trend of 4% over last week, settling at Rs.8300 per MT. Prices are higher than last year by 6.6%. The increase is prices is being attributed to higher demand for exports and some consolidation by exporters.

Corn prices on CBOT, came down for Sept and Dec deliveries. Prices were $130.38 and $134.40 per MT for Sept and Dec deliveries respectively, lower than last week by about $4 for nSept and $7 for Dec delivery.

Trade reports indicate a higher corn production in US at 333.32 MMT as against the USDA production estimate of 331.57 MMT. Trade also estimates a higher ending stocks at 39.16 MMT as against USDA estimate of 38.5 MMT. Due the increase in prices the average price of Corn may fall to $126 per MT as against 149.60 MT, a drop, not a huge drop. The reason for the small drop is the strong demand for corn from U.S. ethanol plants.

Growth of Poultry in Sri Lanka and Bangladesh

Sri Lankan poultry has been growing steadily for the last 10 years. The latest reports indicate that the placement of broiler is about 7 million/month, 84 million per year. This is a 35% increase from 62 million placed in 1996. The average growth of the industry is about 3.5% per year. The average weight of the birds is 2 kg live, the per capita consumption is at about 6.0 kg per person per annum. Corn production in Sri Lanka is estimated at 40-50 TMT and the requirement is about 200 - 220 TMT. The gap in the supply is fullfilled from the neigbouring countries whenever required and mostly from India.

New processing plants are coming up in Sri Lanka and the current slaughter capacities are about 20,000 birds / hr at standard plants and there are many smaller plants that have also come up in the last couple of years. Food safety is a primary issue in Sri Lanka and almost 80% of the chicken is sold as processed and value added. All plants have to be necessarily HACCP certified.
Major poultry producers in Sri Lanka include Bairaha, Chrisbro, Maxies, Nelna, Prima, Pussella farms. As per the Govt. of Sri Lanka reports the constant value added of the poultry sector increased by 2.3% for 2005. Producer prices of all the livestock items have also increased by around 5% to 29%. This has affected the current value added to grew by 19.3% in 2005.

In Bangladesh the broiler growth is about 10%. In 2007, 320 million broilers are expected to be placed along with about 33 million layers. The overall requirement of maize in the country is estimated at 1.4 MMT. Due to the increase in demand, many farmers in Bangladesh have started cultivating maize instead of Rice. Maize production has touched about 0.4 MMT, which is a 100% increase over last 10 years, when the country was not producing any maize. Of the gap in demand, almost 60% is fulfilled by India, which is a major supplier of maize to Bangladesh.

Amit Sachdev

India Representative

U S Grains Council

bluecross303@gmail.com

Commodity Prices Stable; Advantage Biotech; Corn harvest in US

Commodity prices stable

Corn prices were down by about 1% over last week reaching Rs.7150 per MT at the Market yard. The prices were higher than last year by just 2.6%. For the month of August 2007 though the prices were 11% higher than August 2006 prices. GOI has increased the Minimum Support Prices (MSP for corn in the month of August to Rs.6200 per MT and prices at most of the production areas are higher than the MSP.

Pearl Millet (Bajra) prices were down by 0.7% over last week to Rs.6700-6750 per MT at the Market yard. The prices are also lower than last year by 3.7%. The MSP for Pearl Millet has also been hiked to Rs.6000 per MT. The price of Pearl Millet is lower than maize by 6% this week.

Sorghum prices remained stagnant as last week, but the prices are higher than last year by 24%. The MSP for Sorghum has been hiked to Rs.6000 – 6200 per MT for different varieties. The price of Sorghum was running 29% higher than maize this week.

Barley prices were similar to last week prices at Rs.8000 – 8050 per MT, but the prices are about 15% higher than last year. One of the reasons attributed for the higher prices is continued exports to Kingdom of Saudi Arabia.

Prices of corn in US on CBOT closed lower than last week for Sept and Dec deliveries. The prices stood at $127.55 and $133.85 per MT, lower than last week’s $134.4 and $141.17 respectively.

Advantage Biotech

A report from Agro-Economic Research Centre of Andhra Pradesh University on Biotech advantage has provided an insight about the true value of the technology and how farmers have benefited from the technology. The report indicates that in Guntur District of Andhra Pradesh, which uses the maximum pesticide on Cotton, the average number of sprays per hectare has come down to 4.67 in Bt Cotton fields against 11.38 in Non Bt cotton fields, almost a 60% drop. Even the quantity of spray is lower for Bt Cotton area at 4.8 litres/hac against 7.45 litres/hac for Non Bt Cotton area.

Even though the farmer invested more on seeds (Rs.2922 per hac) on Bt Seeds against Non Bt Seeds (Rs1,224 per hectare), the total cost per hectare for Bt Cotton is lower than Non Bt Cotton. One of the major differences is the cost of Pesticide which is Rs.7,380 and Rs.11,410 per Hectare for Bt and Non Bt fields respectively.

The gross income is higher for Bt Cotton is higher by about Rs.16,959, over Non Bt Cotton. The Net income for Bt Cotton on per hectare was reported at Rs.26,406 against Rs.9,059 per hectare for Non Bt Cotton area, which is 1/3rd of the Bt Cotton Net Income.

Corn harvest in US

The U.S. corn harvest is proceeding at a fast pace this year. Reports available indicate that the harvest is early in states of Illinois, Arkansas, Tennessee and the production may exceed pre-harvest expectation in many states. In Illinois the reports indicate a yield of 4.31 tons/acre. It is reported that almost 3-4% of the countries expected production is already harvested. The moisture level at this time is about 16-22% depending on the states. The areas were the corn is being shelled / harvested had hot and dry climate.

As per reports, Louisiana, had planted 0.75 million acres of land and already 75% is harvested. In 2001 the yield was 3.75 tons/acre, which this year is expected to be 4.57 – 5.7 tons/acre. USDA has estimated the corn crop to be 2.78 MMT.

In Arkansas too, the yields are touching 5.08 tons/acre and already 33% of the crop has been harvested. In Texas also the harvest is about 34% complete, as per the information from Texas A&M University Agriculture Program.

Corn harvest is also estimated at 39% in South Carolina, 37% in Georgia. In Alabama though 19% of the harvest is complete, there has been damage reported due to drought in the state.

US farmers are harvesting the biggest land area planted in decades and the production is estimated at 331.58 MMT, which is a record on its own. Of the total world production of 777.15 MMT, US is projected to provide 42.6% of corn. The second highest contributor would be China with 148 MMT (19%) of corn production. India with 15.6 MMT is expected to contribute 2% to the world kitty.

Of the total production (777.10 MMT) for the year 2007/08 and begging stocks (100.20 MMT), the total use of corn in the world is projected at 769.48 MMT, up from last 2006/07 use of 724.87 MMT, which is a growth of 6.15%, which is much higher than the 2.96% growth in use in 2005/06.

Amit Sachdev

India Representative

U S Grains Council

bluecross303@gmail.com