Cogencis, Tuesday, Apr 2

By Kavita Desai and Sampad Nandy

NEW DELHI – Wholesale prices of maize are likely to soon go through the roof, possibly even touch a record high of 2,500 rupees per 100 kg in the next couple of months due to tight supply on the back of a smaller carryover stock and lower output, experts said.

Maize prices had hit a record high of 2,300 rupees barely two months ago due to acute shortage amid lower kharif output and strong demand from the feed sector. Prices have since declined though, after the Telangana government decided to sell 400,000 tn of maize to the state poultry sector at 1,800 rupees per 100 kg.

Today, the May contract of rabi maize on the National Commodity and Derivatives Exchange was up 1.8% at 1,800 rupees per 100 kg.

Since harvesting of rabi maize started in Bihar last month, prices have corrected to 2,000-2,050 rupees per 100 kg. However, an even bigger spike in prices is expected once supply from Bihar starts to shrink.

"We see prices entering uncharted territory from May, when the new rabi crop gets absorbed by industrial consumers as kharif crop will be five-six months away then," said Deepak Chavan of the Pune-based Farm Features.

Chavan said the rabi maize crop would be lapped up expeditiously this year amid fears of the El Nino weather phenomenon impacting the kharif crop.

Concurring with the view, Niket Chheda, director of P.V. Sons Corn Milling Co, said, "Stockists will aggressively build inventories until the new crop kharif starts arriving in October. This may take prices to a record high."

Maize production in Bihar, the largest producer in the rabi season, is seen 5% lower at 2.6 mln tn in 2018-19. Arrivals from Bihar will start in a fortnight, followed by the crop from Uttar Pradesh and Punjab.

"Crop in Bihar is seen lower as farmers opted for wheat due to lucrative returns last year. Also, of the total Bihar production, 30-40% will be supplied to the south," said Yugal Mishra, National Bulk Handling Corp's head for Bihar.

Supplies from northern states are unlikely to offset an anticipated decline in overall production, and prices are seen rising due to strong demand from millers and feed manufacturers.

Though the government has projected a marginal rise in maize production, trade official say the final number will be much lower due to a sharp fall in yields of the rabi crop.

According to the second advance estimate by the farm ministry, India's maize output in 2018-19 (Jul-Jun) was pegged at 27.8 mln tn, around 2% higher on year. However, market participants expect output to be much lower, at 19-20 mln tn.

National Bulk Handling Corp, the leading provider of integrated commodity and collateral management services, has also projected a drop in production due to a highly erratic monsoon and drought in key growing states Karnataka and Maharashtra. The agency projected India's maize output in 2018-19 at around 25.0 mln tn.

Southwest monsoon rains were about 9% lower than normal in 2018, according to India Meteorological Department. Monsoon rains in Maharashtra were 8% below normal, while in Karnataka, they were 6% below normal.

"Prices are also likely to rise due to inadequate carryover stocks this year. Generally, during this period, Karnataka holds adequate stocks of the kharif crop, but this time, because of low output, stocks are not available," said an official with a multinational trading house.

Widespread attack of fall armyworm has also hit the maize crop in Karnataka, Maharashtra, Andhra Pradesh and parts of Telangana, said Krushi King-owner Naresh Shejawal, who is also engaged in research on socioeconomic issues related to agriculture. While Shejawal declined to give a number, media reports said shortfall of a few hundred thousand tn is possible from these four key states alone.

Negligible carryover stocks of 3-4 mln tn are also seen supporting prices in the long term.

DOWNSIDE

Prices may see some correction if the government allows import of duty-free maize, but a decision on this is unlikely anytime soon because of elections, trade officials said.

Cogencis had earlier reported that India may allow import of up to 500,000 tn of duty-free maize this year under the tariff rate quota. Maize currently attracts 60% import duty, but under the tariff rate quota, imports are allowed duty-free for a specified quantity.

With inventories at an all-time low and a smaller crop this year, only a "sizeable and timely import" of the grain may keep a lid on prices, said Chavan.

Arrivals from Bihar, Haryana and Punjab are unlikely to have any strong bearing on prices. On the contrary, panic buying in Jun-Jul may push prices even higher. Current fundamentals have the potential to break the 2,500-rupee level, and prices may even top 3,000 rupees per 100 kg in a few months, Chavan said.  End

Edited by Akshit Harsh