The Hindu Business Line : Domestic maize prices rule firm

Maize (corn) prices have begun to decline in the global market but the rates in the domestic market are ruling firm. In fact, they are higher than the rates which prevailed before the Centre banned exports of maize in the first week of July.

According to Mr Amit Sachdev, India representative of the US Grains Council, maize prices in the market yards are ruling above Rs 9,000 a tonne. In some areas of Karnataka, Tamil Nadu, delivered prices are close to Rs 12,200-12,500 a tonne.

Prices in Davanagere market have hit Rs 11,000 a tonne, he said in his blog.

Though prices dropped last week, they are still higher than the rates that prevailed during the same period a year ago.

Valid letter of credits

The Centre had banned export of maize until October 15 as its prices began to soar and the user industries mounted pressure to check them.

“One of the reasons for the prices to rule firm is that farmers are holding no stocks at all,” he said.

Exporters, on the other hand, say prices are ruling firm since the Centre has allowed those who have valid letters of credit (LCs) till December 31 to ship the grain. “In fact, exporters who have LCs until January 18 can export. However, only multinationals seem to be exporting maize,” said Mr A. Rajkumar of Alagendran Group of Companies.

Panic buying

“In fact, the decision of the Centre to allow exporters having LCs to ship maize has resulted in sort of panic buying,” says Mr P.S. Nathan of Apoorva Agencies.

“Even the user industries such as the poultry sector are also buying,” says Mr Rajkumar.

Industry sources say the firm prices of the maize are surprising since according to the Agriculture Ministry, the country had harvested a record 19.45 million tonnes maize crop last year.

“We fail to understand why prices are ruling so high if there was a record crop,” they say.

The suspicion is that the Ministry may have been misled with higher figures to play on the market sentiment and bring down the prices. “It is an aspect that has to be probed,” they say.

US corn

With the US corn being used for producing ethanol in view of soaring crude prices and also freight charges being high, India has made rapid headway in corn exports in the last 12 months. Countries, particularly in the Far-East and South-East, have turned to India to meet their demand for the feed sector.

Also, availability of corn in smaller lots from India against supply of corn only in large size vessels has also helped increase exports.

Global prices

However, in the global market corn prices have declined to $230 a tonne on good weather in the US corn belt and reports that Argentina may cut export tax.

“Prices of US corn to South-East have come down to around $330 a tonne c&f. As a result, Indian prices have also declined. Indian exporters are now offering corn at $290-300 a tonne,” exporters said.

“Prices could come down when the new crop arrives in October. But right now, they could be ruling firm as stocks are either low or nil and the user industries need to struggle for another 6-8 weeks before they can find some relief,” industry sources said.