The Hindu Business Line : Corn may rule firm on rising demand — User industries face difficulty in finding alternatives

THOUGH the area under corn (maize) during the kharif season has increased marginally, its prices are likely to rule firm in the near future. This is since the options for the user industries, particularly the poultry sector, to find cheaper alternatives such as coarse cereals and oilmeals are expected to be difficult.

"Prices of alternatives for the poultry sector such as soyameal and bajra are ruling higher. With kharif production of these crops yet to be determined, they would be finding the going tough," industry sources said.

Corn prices are currently ruling at Rs 7,200 a tonne, up from Rs 6,000 a tonne at the beginning of the year. Prices are seen stabilising a little lower around current levels on the better coverage of the crop during kharif sowing.

As on August 4, coverage of corn was 64.7 lakh hectares (lh), up from 64.1 lh during the same period a year ago. Though the area under the crop is down in Andhra Pradesh, Gujarat and Madhya Pradesh due to deficient rainfall, it has been made good by an increase in Karnataka, where rainfall has been excess this monsoon.

According to sources, the demand for corn this year is seen at around 14 million tonnes (mt), including 6.75 mt for the poultry sector. Against this, kharif production is currently expected to be around last year's level of 12.44 mt, though a section of the trade says it could be around 11 mt only.

"Corn can be imported to meet the gap but the Government allows import of only five lakh tonnes under a concessional customs duty of 15 per cent. Anything above it attracts 50 per cent duty," the sources said.

In this situation, the user industries will have to look for alternatives. But in view of delayed rains in central and northwest parts of the country, fears of lower production of alternatives such as bajra exist.

According to the Agriculture Ministry, area under bajra this kharif has declined by over 30 per cent to 51.7 lh. Even jowar is down seven per cent at 32.3 lh. At the same time, prices of bajra and jowar are also ruling firm at Rs 6,800 and Rs 8,000 respectively a tonne.

Also, with the US Department of Agriculture projecting a lower-than-expected soyabean crop of 78.3 mt, oilmeal prices are seen ruling firm. This is despite hopes that the domestic soyabean crop could be higher on increased coverage and better agricultural management practices. Area under soyabean this year is up nearly nine per cent 75.5 lh.

Soyabean prices are currently quoted at Rs 15,500 a tonne in Indore.

"Moreover, availability of products such as feed wheat will be a problem due to low carryover stocks. And ordinary wheat prices too are ruling around Rs 7,500 a tonne. Therefore, user industries will have lesser options," the sources said.

In turn, this could lead to hardening of prices of live chicken, currently quoted at Rs 32 a kg.

"Poultry sector, in particular, could face a tough time with rising input prices and resistance to hike in product prices," the sources added.