As domestic maize (corn) prices are trading higher by about 34% year-on-year at Rs 2,225 per quintal, the government is considering curbs on the export of maize due to higher prices.
The Ministry of Food Processing Industry has written to the Commerce Ministry proposing a ban after starch manufacturers raised the case of higher maize prices and non-availability. As maize is not included under the definition of an essential commodity, it is unlikely that the government would impose an export ban.
India is not a regular exporter of maize and comes into the picture whenever there are global shortages or supply chain crises across the world. India’s share of maize exports to global production was only about 10% in the previous two years. India exports maize mainly to South Asia and a few Southeast Asian nations; major export destinations are Bangladesh, Nepal, Vietnam, and Malaysia.
In the coming months, India’s maize export demand to Southeast Asian countries will wane as demand shifts to South American corn as Argentina and Brazil begin their new crop harvest.
India would be uncompetitive in the Southeast Asian market because Argentina’s FOB corn rate is $282.5 per metric tonne and Brazil’s is $287.25 per metric ton, while India is offering $305 per metric tonne and Vietnam’s CIF quote is $330.75 per metric ton. On the other hand, there are no severe maize crop supply shortages in India this year. The Kharif season maize crop was estimated at 21.31 million MT, 2% lower than the previous year’s 21.77 million MT.
Also, the Rabi season maize sowing is progressing well, and it remains 50% higher than last year at 10.48 lakh ha. This indicates the Rabi maize crop production will be higher and is likely to offset the drop in the Kharif crop. This would keep the supply side at ease. In the ongoing Kharif season, maize prices have bottomed out at Rs 2,100 per quintal. The strong demand for maize from stockists, traders, exporters, and feed manufacturers kept the prices firm despite the peak arrival season.
Also, the rail-raked movement of maize remains strong this year. Meanwhile, domestic maize demand is expected to improve this year. Domestic demand would increase by 2.3% year-on-year to 28.8 million MT due to an increase in feed demand of 2.5% year-on-year to 17 million MT, while food and industrial demand would increase by 2% year-on-year to 11.7 million MT.
As a result, strong growth in maize demand combined with firm prices for substitute feed grains would keep maize prices bullish. We believe maize prices will trade sideways in the coming days unless there is clarity on the export ban. Thereafter, maize prices would trade bullishly towards Rs. 2300 per quintal in the short term and Rs. 2500 in the medium term.