Coarse grain prices tumble - good times for end users; India's Budget Highlights

Coarse grain prices tumble - good times for end users

Maize prices were up a tad this week on pan India bases. An increase of 0.5% to Rs.8994 per MT. Prices were however higher than last year by 9.2%. Prices were down in Andhra Pradesh by 0.6% t Rs.8565; Maharashtra to Rs.8150; Rajasthan by 0.3% Rs.9682; and Uttar Pradesh by 4% to Rs.9516 per MT. Prices were up in Gujarat by 8.5% to Rs.10075 per MT and Tamil Nadu by 2.5% to Rs.8670 per MT.

The average price for Feb 2010 was Rs.9100 per MT, 10.90% higher than last year, but 1.89% lower than Jan 2010. One reason attributed to lower prices is increased availability as Rabi crop is available in the market.

In the futures market (NCDEX), prices of maize have slumped by 2.36% for Mar 2010 to Rs.8670 per MT. Apr down by 1.49% to Rs.8880 per MT; May down by 2.70% to Rs.8980 per MT and June down by 2.09% to Rs.9250 per MT. In the spot markets as well prices are down, Nizamabad 2.46% to Rs.8569 per MT; Karimnagar to Rs.8737 per MT and Davangere down by 1.13% to Rs.8799 per MT.

Pearl Millet prices are also down by 3% to Rs.9593 per MT, but remain higher than last year by 11.7%. Prices are higher than maize by 6.2%. The average price in Feb 2010 was Rs.9759 per MT, 19.57% higher than last year (feb 2009). The average price is however lower than Jan 2010 by 2.5%.

Sorghum prices were down by 10.4% to Rs.11113 per MT, remained higher than last year by 10.1%. Prices are also higher than maize by 19.1%. Average price in Feb 2010 was Rs.11260 per MT, 12.05% higher than Feb 2009 price and only a tad (0.2%) higher than Jan 2010 price.

Barley prices moved lower by 3.2% to Rs.9245 per MT. but remained higher than last year by 8.81%. Average price for Feb 2010 was Rs.9367 per MT, 9.3% higher than Feb 2009 prices and 0.72% higher than Jan 2010 price.

On the NCDEX, barley prices were down for Apr by 0.3% to Rs.9270 per MT; May by 0.13% to Rs.9300 per MT and Jun by 1.54% to Rs.9698 per Mt. Prices were stable at Rs.10256 for Aug 2010, but moved lower in the spot market Jaipur by 0.33% to Rs.9208 per MT.

In the International market, corn prices surged and reached a six week high. Mar contract was up 5.2% to $149.20 per MT, May up 5% to $153.53 per MT and Jul up by 4.33% $157.07 per MT. The increase is prices was reflected in FOB prices. Prices on FOB basis for US Gulf were indicated at $170/177 per MT for Mar - Jun period, while FOB (PNW) were indicated at $204/207 per MT. Sorghum prices on FOB basis (US Gulf) were indicated at $182/184 per MT for May-Mar period. 

Demand for DDGS is increasing the domestic as well as the international markets. US exported about 787 TMT of DDGS in 2004 and in five years (2009) export is close to 5.52 MMT. from 2008 to 2009, exports have increased by 1.11 MMT, showing without doubt that the product is good and has been accepted in the world market as a feed ingredient of choice for making available protein and energy in the livestock rations. DDGS price on FOB basis (US Gulf) was indicated at $155 per Mt for Mar; $152 for Apr; and $146 for May. CNF prices in SEA region was indicated at $245/250 per MT.

Chinese new year has ended and the freight markets are showing a reversal and rates have increased slightly. Gulf-Japan benchmark was indicated at $65 per MT while PNW - Japan was indicated at $38 per MT.

India's Budget Highlights 

As the finance minister has put out the budget and increased the fuel prices, there are indications that it will fuel WPI based inflation marginally by 0.41% and it will also have cascading effect on other products including food products as well. Foods grains transport is exempted from payment of service tax and may help little, but not much. 

To give a boost to agriculture a four pronged strategy is suggested, which includes a second green revolution and increasing agricultural production, increasing assistance to food processing,  reducing wastage and higher credit to farmers. But as the subsidy on fertilizers have been reduced and a new nutrient based subsidy (NSB) system put in place, the price of fertilizers is likely to increase. UREA prices are expected to go up by 10%   

The budget is also expected to spur demand as income tax payers will be able to save more money and this would in turn help the economy. 

Though much has been done about agriculture, it is important to realize that the share of Agriculture in India's GDP is declining and will further decline. Share of Agriculture in India's GDP was 19% in 2005 and is close to 16% in 2009 and may be down to 12.5% by 2014 as per a report.

Amit Sachdev

India Representative

U S Grains Council

E Mail: usgcindia@gmail.com