Agri Business

S-E Asia turns to India for maize on Myanmar unrest, surging freight rates

Subramani Ra Mancombu Chennai | Updated on April 19, 2021

Malaysia, Thailand and Vietnam purchase Indian produce for poultry feed

Unrest in Myanmar and high shipping charges have resulted in South-East Asian countries and Bangladesh turning to India to meet their maize (corn) demand for feed purposes.

“Vietnam, Malaysia, Bangladesh and Sri Lanka are buying maize from India,” said Bimal Bengani, Managing Director of Kolkata-based trading house Bengani Food Products Pvt Ltd.

“Malaysia, Vietnam and Thailand are buying Indian maize to meet the demand of the chicken and poultry sectors. One reason for these countries to turn towards India is the unrest in Myanmar arising out of the Army taking over the administration there,” said Delhi-based trade analyst S Chandrasekaran.

These orders have come to India over the last one-and-a-half to two months.

“We are getting orders from countries such as Malaysia and Vietnam as our prices are competitive,” said Bimal Bengani.

Cereals lift farm exports to $17.5 billion in April-Feb

Competitive prices

Currently, maize is being offered at $250 a tonne (₹18,600) free-on-board (f.o.b). On the other hand, the cereal is offered at $275-277 (₹20,450-20,600) cost and freight (CNF) to these countries.

On the Chicago Board of Trade, corn futures are currently ruling at $5.89 a bushel (₹17,250 a tonne). According to the International Grains Council, maize is currently exported at $252 (₹18,750) a tonne from Argentina, $260 (₹19,350) from Brazil and $266 (₹19,800) from the US Gulf (all f.o.b).

Corn prices have gained nearly 22 per cent since the beginning of the year, while the IGC maize sub-index has gained 60 per cent year-on-year.

“Indian maize exports are competitive since exporters here settle for a low 1-2 per cent margin,” said Chandrasekharan.

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M Madan Prakash, President of Agri Commodities Exporters Association, said that exporters were currently getting maize delivered in Chennai from Andhra Pradesh at ₹17,000 a tonne until last week-end.

At various domestic agricultural market terminals, maize is ruling between ₹1,500-1,700 a quintal depending on the quality. This is against the minimum support price of ₹1,850 fixed for this season to September.

“We are also getting maize to some extent from Karnataka. We were getting cargo from Tamil Nadu also but the crop arrivals have come to an end,” said Prakash, whose Rajathi Group exports agri-products.

High freight cost

Another reason for Indian maize finding its way into the South-East Asian countries is surging freight rates. Traders say that China is currently collecting as many containers as possible for all destinations, including the European Union and United States.

China wants these containers to either import all its requirements or export its products. Beijing is even paying $500 for ferrying an empty container to its ports from places such as Colombo in Sri Lanka.

“The result of China mopping up all the containers has left India with the advantage of meeting immediate demand in the South-East Asian region,” said trade analyst Chandrasekaran.

“Malaysia and Vietnam had been sourcing maize from countries such as Brazil, Argentina and Ukraine besides Myanmar earlier. The container problem has forced them to turn to India,” he said.

The problem for these countries is that the freight rates for getting maize from these countries is currently $55-65 (₹4,100-4,800) a tonne. Charges for a container are $500 (₹37,200).

“In contrast, freight rates from India are $20 (₹1,500) a tonne. The rates give these nations an arbitrage of $30-35 (₹2,250-2,600),” said Chandasekaran.

Prakash concurred with Chandrasekharan’s view on the freight charges.

The current maize demand from these destinations are temporary and could continue for another six months, he said.

Bimal Bengani said maize exports to the South-East Asian region would continue in view of the competitive rates offered in India.

Chandrasekharan said maize exports were taking place from the east coast ports of Kolkata and Chennai.

“Maize from Andhra Pradesh and Karnataka’s Ballari and Raichur regions is being shipped from Chennai. From Kolkata, maize from Bihar is sent to South-East Asia,” he said.

Besides, the current currency exchange rate with the rupee depreciating against the dollar would also favour maize exports from India.

The Indian rupee hit a nine-month low of 75.4 to the dollar earlier this week. It has dropped over four per cent in the last couple of weeks. However, it has managed to climb back above 75 to the dollar. On Friday, the rupee was quoted at 74.70 to the dollar, up 23 paise from Thursday.

Exports & Production

According to data from the Agricultural and Processed Food Products Export Development Authority, an arm of the Commerce Ministry, India’s maize exports surged to a six-year high last fiscal.

During April-January period of the fiscal, 22.03 lakh tonnes (lt) of maize were exported with Bangladesh accounting for 14.75 lt. Nepal was the second biggest importer, buying 5.13 lt, while Vietnam bought 1.11 lakh tonnes. Malaysia imported nearly 50,000 tonnes.

Maize exports from India dropped since record shipments of 47.88 lakh tonnes in 2012-13. Since then, they have been on a downswing before the turnaround last fiscal.

The coarse cereal’s exports slipped to below 10 lakh tonnes since 2014-15, when 28.25 lakh tonnes were shipped out.

According to the Agriculture Ministry’s second advance estimate of production of foodgrains for this crop year to June, maize production is likely to be a record 30.16 million tonnes (mt) against 28.77 mt last crop year.

The export scenario is in sharp contrast to 2019 when India had to import 3.18 lt, 10 times the shipments into the country the previous year.

Maize imports are allowed by the Union government under the tariff rate quota (TRQ) regime at a lower Customs duty of 15 per cent. Under TRQ, five lt can be annually.

Beyond this, maize imports attract 50 per cent Customs duty and an additional five per cent Integrated Goods and Services Tax and 10 per cent social welfare surcharge.

Published on April 16, 2021

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