Higher production estimates, lower prices of commodities; IGC predicts a lower corn and higher barley crop

Higher production estimates, lower prices of commodities

As per the third advance estimates released recently, maize production has been estimated at 18.54 MMT against last year’s production of 15.1 MMT, a growth of 22.6%. The increased production is attributed to more crop area and also good monsoon. The second estimate projected the maize production at 16.78 MMT.

Production of Sorghum has also been revised to 7.73 MMT, 8.1% increase over 2006/07 Production of Pearl Millet has been estimated at 9.65 MMT, 14.6% more than 2006/07. The coarse cereal basket is expect to yield 39.67 MMT in 2007/08 against 33.92 MMT, a growth of 17%.

In wake of the high production numbers estimated by GOI in the third advance estimates of agricultural production, prices of all coarse cereals except barley tumbled this week, with maize down by 2.3% to Rs.7060 per MT, Pearl Millet (Bajra) down by 0.4% to Rs.7280 per MT and Sorghum down by 2.7% to Rs.9860 per MT. The prices of barley though went up by 4.2% this week to Rs.9550 per MT.

Maize prices were also lower than last year by 2.8%, while prices of pearl millet and Sorghum were up by 4% and 12% respectively. Barley prices were up by 24% over last year.

While the prices at the market yard may be higher, the delivered prices to end users have shown an upward trend over last year, due to increased cost of mandi Tax (levied on value of produce), cost of labour, jute bags and also transport cost.

Prices in US have shown a declining trend and may and July delivery prices are down by approximately 3.7% to $227.23 per MT and $232.50 per MT respectively.

IGC predicts a lower corn and higher barley crop

International Grains Council in its April 24, 2008 update has predicted a lower corn and a higher barley crop for the year 2008/09.

While corn production is predicted at 762 MMT in 2008/09, down from 775 MMT of 2007/09, the trade is also expected to be down to 89 MMT in 2008/09 from 99 MMT of 2007/08. The consumption though is expected to go up from 774 MMT in 2007/08 to 784 MMT in 2008/09, thus reducing the world ending stocks to 93 MMT in 2008/09 from 114 MMT in 2007/09.

Barley production on the other hand is predicted to increase from 136 MMT to 149 MMT in 2008/09. The trade is also expected to increase by 1 MMTto reach 16 MMT in 2008/09 and the consumption is expected to increase by 4.2% to reach 146 MMT in 2008/09. The ending stocks are also likely to increase to 23 MMT in 2008/09.

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

Commodity prices move up slightly; Demand of corn grows all over the world

Commodity prices move up slightly

Maize prices were up this week, by about 2% to Rs.7230 per MT at the market yard. The prices though were lower than last year by about 4% at this time of the year, only because of higher production and better deliveries in the market.

Pearl Millet (Bajra) prices also went up this week by 4.6% to Rs.7300 per MT at the market yard and were also up over last year prices by about 2%. Against maize the prices were up by 1%.

Sorghum (Jowar) prices were also up by 1% over last week to Rs.10,140 per MT at the market yard. The prices were about 10% against last year prices. The average prices were 28.7% higher than maize at the market yard.

Probably the only commodity that was on the downtrend was barley, whose prices tumbled this week as well on higher deliveries. Prices were down by 6.2% over last week to reach Rs.9160 per MT. The prices were though higher than last year by 22.4%.

Corn prices on CBOT remained close to $6 per bushel for May, converting to $235.97 per MT. For July delivery the prices were close to $241.32 per MT.

In the Indian market the maize prices have been stable for quite some time now and are likely to remain so for the next couple of weeks. The deliveries in Andhra Pradesh, Karnataka are good and buying by end users is on, which will keep the stable. Once the supplies dwindle, the prices may move up in the next one month.

Exports of maize from India have been good and this have provided the farmers with good returns. Prices on an average have been Rs.1000 - 1100 per MT over the Minimum Support Price (MSP) set by GOI.

Demand of corn grows all over the world

Based on the recent USDA, the world produced 772.17 MMT of corn in 2007/08 against 705.34 MMT in 2006/07, an increase of 9.47%. Of the total 43% was produced by US. The production in US alone was up to 332.17 MMT, up from 267 MMT in 2006/07 an increase of almost 24%. The total usage also went up from 722.26 MMT in 2006/07 to 777.39 MMT in 2007/08, an increase of 7.63%. The ending stocks of corn will be at 102.97 MMT.

Apart from US, which produced more and used more corn, +16.77% over 2006/07, there has been a significant increase in usage of corn in almost countries/regions, from 2006/07 to 2007/08. Some of note include;

1. South East Asia +4.94% up from 20.25 MMT to 21.25 MMT
2. Egypt +4.67% up from 10.7 MMT to 11.2 MMT
3. South Africa +4.6% up from 8.7 MMT to 9.1 MMT
4. Brazil +3.66% up from 41 MMT to 42.5 MMT
5. China +3.5% up from 143 MMT to 148 MMT
6. India +7.26% up from 14.18 MMT to 15.21 MMT

In 2008/09, India is expected to use 16.05 MMT of corn and increase of another 5.54% over 2007/08.

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

Coarse grain prices tumble; Poultry sector growth – linked to contract farming and processing

Coarse grain prices tumble

Prices of all coarse grains tumbled this week, admist speculation that GOI will ban exports of maize and arrivals for the Rabi grain also started with much vigor. Inflation touched a 40 month high of 7.41% for the week ending Mar 29, 2008.

Corn prices were down by about 1.6% over last week, reaching Rs.7090 per MT (loose) at the market yard. Prices were lower than last year by 2.1%. One of the reasons attributed to the lower prices is good arrivals at the mandis.

Pearl Millet (bajra) prices were down by 9.3% over last week, to level at Rs.7000 per MT at the market yard. Prices though were higher than last year by 1.4%, but lower than maize by 1.5%.
Sorghum (Jowar) prices were down by 1.2% over last week, eachimg Rs.10050 per Mt at the market. Prics remained higher than last year by 14.6% and agains maize, Sorghum prices were higher by 30%.

Barley prices were down by only 1% over last week to level at Rs.950 per Mt at the market yard.. Pries were higher than 25% over last year. Arrival have started, but reports indicate some damage in Punjab and Haryana due to untimely rains. There is export demand as well and stocks are reported to be consolidated at ports. Future pries have shown a jump, specially sept / oct, when prices are over Rs.12,200 per MT.

Corn on CBOT closed at $229.98 for May delivery, while July delivery was $235.18 per MT, slightly lower than last week’s close.

Poultry sector growth – linked to contract farming and processing

While there is an apparent slow down, due to inflation and affordability is low, the growth of poultry sector in likely to be much more. Even though the Minimum Support Prices (MSP) have been hiked for rabi crops, lower productively is a major factor which lowers the take home for the farmer. In such a scenario, livestock farming specially dairy and poultry provide additional income to the farmer families.

A case in point is Tamil nadu, where farmers with even 5 acres of land have been unable to grow any agriculture crops due to low water table and have survived and made money from poultry farming, under the contract farming system.

Reports indicate farmers in the area having over 5000 birds, have been able to make Rs.100,000 per year (after deducting all costs). This one farm does not employ labor and the family takes care of the birds. Currently only about 60% of the broiler birds across the country are under integration and this figure is expected to reach 85% by 2010.

As we move up the value chain, companies and institutions will need to move to the next step, processing, which will benefit both the companies as well as the consumers, providing a consistent safe product year round. Infusion on money and technology is the next step, which will help in increasing the profitability, value addition will be the key, which will help in growth of the poultry sector from the current 12% to 15-20% level in coming years.

This downtrend is not going to last long and there is bound to be a turnaround. Poultry meat is and will be the cheapest meat available and as incomes grow, people will be eating more on chicken and eggs and there will be those who will need more of value added convenience foods made from chicken.

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

High prices worry end users; DDG's consignment in Bangladesh

High prices worry end users

Rate of inflation reached 7% for the week ending March 22, 2008. Prices of almost all commodities including food and edible oils shot up and GOI took emergency measures to stem the price rise by reducing import duties of many food products. The duty on maize imports on Mar 31, 2008 was reduced to 0% from the earlier 15% for the first 0.5 MMT of imports.

Maize prices moved up slightly over last week to Rs.7200 per MT (loose) at market yard. The prices are similar to last year’s prices at this time of the year. Prices in SPOT and future markets were not affected much at remained stable, SPOT pries are various mandis (markets) was Davangere Rs.7160 per MT; Nizamabad Rs.7530 per MT; Nimbaheda Rs.8375 per MT; Ratlam Rs.8300 per MT; and Karimnagar Rs.7390 per MT. Prices in futures ranged fro Rs.7700 per Mt for April to Rs.8510 per MT for July delivery.

Reports indicate that rains in parts on Indian peninsula may have damaged maize crop in Andhra Pradesh, parts of Bihar and also in Tamil Nadu. The quality may be deteriorated and the commodity may not be suitable for use in starch or poultry sector.

Rains have also affected standing crop of wheat in parts of Rajasthan due to untimely showers in North India.

Pearl Millet (Bajra) prices this week rose by 5.2% over last week to Rs.7700 per MT. The prices are about 5.8% higher than last year and also about 6.5% higher than maize. This high prices is primarily being attributed to rainfall in parts of north India where Pearl Millet is grown.

Sorghum (Jowar) prices were lower by 3.2% over last week at Rs.1017 per MT and 12% higher than last year. The prices are about 29% higher than maize.

Barley prices moved down by 1.3% this week to reach Rs.9850 per MT. The prices are still about 20% higher than last year at the mandi (market yard level).

Corn prices in US on CBOT rallied and for July delivery cross the $6 per bushel value ($236 per MT). Corn for May delivery closed at $235.42 per MT while July corn reached $240.62 per MT.
One of the major factors for the increased prices could be attributed to the planting intentions set by US farmers for corn. It is indicated by USDA survey that the and under corn will be down by 8% from last year’s record acreage of 93.6 mill acres. Sorghum acreage is also expected to be down by 3% to 7.42 mill acres, while barley acreage is expected to be up by 4% to 4.2 mill acres.

The high prices of corn have also prompted a Japanese starch manufacturing company to buy
GM corn from US rather than Identity preserved non-GM corn, which is prices much higher and could hold a premium of over $50 per MT as per Dr.Simla Tokgoz.

DDG’s consignment in Bangladesh

RIA International, a Bangladesh based trading company received the first consignment of 500 MT of Dried Distillers Grains with Solubles (DDG’s) from US. The stock will be used in poultry rations, mostly broilers.

US is the largest supplier of DDG’s which is a co-product of the ethanol sector and is used extensively in broiler, layer, dairy and fish rations across many countries including Mexico, Japan, Korea, Malaysia, Vietnam, Taiwan, Egypt, Morocco just to name a few.

The product has a high energy value due to 10 -12% oil and also a protein value of over 27-28% which makes it an excellent source of energy & protein.

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