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Informist, Tuesday, Feb. 25, 2025

 

By J. Navya Sruthi

 

MUMBAI – Notwithstanding the higher maize output in the kharif season and the government's move to allow the diversion of sugarcane and rice, in addition to maize, for ethanol production, India may have to continue to import the commodity to control prices, according to market participants and experts. Although the demand for maize has eased in the domestic market, there is a looming weather risk to the ongoing rabi crop in Bihar and Uttar Pradesh, which may push up prices, they said.  

 

Bihar, a leading maize producer, has been facing serious moisture stress for the last several months, which can hurt the prospects for rabi maize, commodity expert G. Chandrashekhar said. He pegs all-India maize production during the rabi season at 9.8 million tonnes-10.0 million tonnes, against the government's target of 12 million tonnes. In the last rabi season, India's maize production was 12.03 million tonnes.  

 

The government had set a maize production target of 40 million tonnes in 2024-25 (Jul-Jun), with 26 million tonnes expected to come in the kharif season, 12 million tonnes in rabi, and 2 million tonnes in summer. However, in the first estimate, the government has estimated kharif maize production at 24.5 million tonnes, up 10.4% on year.

 

However, higher rabi maize acreage so far is likely to restrict the fall in production due to heat stress, experts said. Rabi maize was sown over 2.37 million hectares as of Jan. 31, up 8.8% on year, and higher than the normal area for the season of 2.21 million hectares. The area under summer maize was also up at 6,900 hectares as of Feb. 14 compared with 4,000 hectares a year ago.     

 

Taking cues from higher acreage, maize prices in local markets have corrected by INR 150 to INR 2,360 per 100 kg last week, traders said. With arrivals of the rabi maize due to start in the next 15 days, prices might fall further by INR 100 but will remain above the minimum support price of INR 2,225 per 100 kg, according to Rahul Chauhan, director of IGrain.

 

Along with higher acreage, the government also allowed ethanol plants to buy rice from the Food Corp. of India at INR 2,250 per 100 kg instead of INR 2,800 per 100 kg earlier. The government also removed the restrictions on sugarcane diversion for ethanol production. This has impacted maize prices negatively as the demand has declined, market participants said. 

 

"Farmers were expecting consistency in the ethanol policy. Indian farmers are suffering in soybeans, they are suffering in mustard and they are suffering in pulses. This government step (of allowing distilleries to buy rice from FCI) has even led farmers to suffer in maize. So right now a majority of the policies, the government is making is actually impacting farmers negatively," Sumit Gupta, chief executive officer of Asia business at McDonald Pelz Global Commodities, said.

 

Gupta, however, believes there will not be any need for India to import maize during 2024-25 (Oct-Sep) to control domestic prices due to higher acreage and better supply. The government has to put a cap on rice diversion towards ethanol as it will bring stability to the maize market, he said. "It will give hope to farmers to plant maize in the next season. And it will stabilise the market."

 

India's maize imports surged to 850,521 tonnes in 2023-24 (Oct-Sep) from 12,765 tonnes in the previous year, the data from the commerce ministry showed. India imported 6,827 tonnes in the first two months of the current maize season, compared with 2,299 tonnes during the corresponding period last year. Currently, maize attracts a basic import duty of 50%, and with other charges, the total duty comes to 60%. 

Due to the erratic monsoon during the kharif season in 2023-24, India's maize crop was damaged in key growing states, pushing prices to an all-time high of INR 2,700 per 100 kg in January 2024. Prices also rose because of firm demand from the ethanol sector as the government had restricted sugarcane diversion for ethanol production due to low output.

 

Furthermore, the government in January 2024 raised the procurement price of ethanol made from corn to INR 71.86 per litre from INR 66.16 per litre, encouraging a move away from sugarcane-based ethanol due to dwindling sugarcane surpluses as the output of the crop was seen to be lower. During the sugar season 2023-24 (Oct-Sept), sugarcane production fell by 7.6% to 453.2 million tonnes amid patchy rainfall.

 

As maize prices rose, the government allowed duty-free imports of 498,900 tonnes of maize under the tariff-rate quota in June. Under the tariff-rate quota, importers pay nil or lower duty.

 

In 2024-25 (Nov-Oct), the government said more ethanol will come from grain-based distilleries as they have received orders for the supply of over 4.3 billion litres of ethanol in the current supply year, for which they will need about 11.3 million tonnes of maize. India produces about 380 litres of ethanol per tonne of maize. 
 
To reduce dependence on crude oil, the government has set a target of achieving 18% blending in petrol in 2024-25 and 20% in 2025-26. To achieve the 20% blending aim, India needs about 10.16 billion litres of ethanol.

 

Market participants and experts said maize prices would rise after the completion of peak arrival season which is in July. This would compel the government to allow imports of maize to control prices, similar to last year. 

 

"In 2024-25, sugarcane output is actually lower than it was in 2023-24. This year, sugar production will fall by at least 1.0 million tonnes-1.5 million tonnes. This will impact sugar prices going forward and I will not be surprised if the government reviews this policy of diverting cane again," Chandrashekhar said.

 

As sugar prices continue to rise, demand from ethanol plants would shift to maize lifting prices higher, Gaurav Kochar, a local trader from Madhya Pradesh, said. He expects maize prices to rise from May onwards. Maize also has other uses like production of poultry feed and starch, because of which India would need to import maize, Kochar said. "We need imports to keep the market relaxed, keep availability more than consumption," IGrain's Chauhan said. 

 

Internationally, maize prices are high at present due to lower output in Brazil, Ukraine, and South Africa. The US Department of Agriculture has pegged 2024-25 global maize output at 1,212.5 million tonnes, down from 1,230.07 million tonnes in 2023-24.
 
According to UkrAgroConsult, a research firm based in Ukraine, maize prices as of Monday were $230.98 per tonne, up from $210.64 per tonne on Jan. 13. The rise in prices makes imports less likely for India, Kochar said. "This scenario suggests that India will rely on domestic production, thereby supporting higher prices in the coming months," he added.

 

According to the International Grains Council, the maize price index increased by 4% in January due to worries about weather conditions in South America. The USDA also increased its average price for 2024-25 to $4.35 per bushel (1 bushel = 27.2 kg) in February from $4.25 per bushel in January.  End
 

US$1 = INR 87.21

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Saji George Titus

 

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