Bloomberg News

Record India Corn Crop May Lift Sales, Capping Global Costs

June 14, 2011

(Adds farm secretary’s comments in 10th paragraph.)

June 14 (Bloomberg) -- Corn production in India, Asia’s biggest grower after China, may surge to a record for a second year as high prices and adequate rains spur farmers to increase planting, potentially boosting exports.

Output from the monsoon-sown crop may climb by as much as 7 percent from the all-time high of 15.9 million metric tons in the year ending June, Gagan Gulati, head of the grains business at Olam International Ltd.’s Indian unit, said. A bigger harvest may raise exports from about 2.4 million tons this season, Atul Chaturvedi, chief executive officer at Adani Wilmar Ltd., the nation’s biggest farm-goods trader, said without elaborating.

Increased Indian supplies may help cool a rally in corn, which has gained 86 percent in the past year on signs world inventories will drop, and cap global food costs that reached a record in February. Supplies before the 2012 harvest from the U.S., the largest producer, were estimated by the government at the lowest since 1996, boosting expenses for meat producers such as Tyson Foods Inc. and ethanol-makers including Poet LLC.

“Higher supplies from India will definitely cap global prices,” Vijay Iyengar, managing director of Agrocorp International, a Singapore-based commodity trading company, said by phone. “There is a lot of demand for Indian corn in some Asian countries.”

Livestock feed-makers in Malaysia, Thailand and Indonesia are among the buyers of Indian corn as they seek substitutes to supplies from the U.S. and Latin America. Stockpiles around the world will be 117.44 million tons before this year’s Northern Hemisphere harvests, the U.S. Department of Agriculture said last week. Those inventories will drop next year to 111.89 million tons, according to the U.S. agency.

Goldman’s Forecasts

That’s made Goldman Sachs Group Inc. see “upside risks” to its corn-price forecasts, the bank said on June 9. Goldman has a three-month forecast of $8 a bushel and a 12-month target of $7. Futures may drop to $6.80 on the Chicago Board of Trade in two to three months as a rebound in Russia’s wheat output increases supplies of grains, Ravi Chandra, vice president of research at TransGraph Consulting Pvt, said on June 9.

Corn for December delivery dropped as much as 1.1 percent to $6.9675 a bushel in Chicago at 11:38 a.m. in New Delhi. The commodity is used in cattle feed and industrial starch.

Food-price inflation and high unemployment helped spur unrest in northern Africa and the Middle East this year. Energy costs have surged amid fighting in Libya, a member of the Organization of Petroleum Exporting Countries. Staple foods including corn will more than double in two decades unless action is taken, according to Oxfam International.

Alleviate Tightness

“Any confirmation that any part of the world has exportable surplus of feed grain, whether that be feed-wheat or feed-corn, is certainly going to help alleviate the current supply tightness,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said on June 9.

India’s monsoon-sown corn crop, which makes up more than 75 percent of the nation’s total output, is harvested in October. The area sown with the crop this season will be more than the 7.6 million hectares (18.7 million acres) planted in 2010-2011, Agriculture Secretary P.K. Basu said in an interview yesterday.

Total corn output may rise to 20.23 million tons in the year to June 30, the farm ministry said April 6. The nation’s agricultural year runs from July to June.

‘Better Prospects’

India raised the minimum purchase price of corn to 980 rupees per 100 kilograms (220 pounds), up from 880 rupees a year earlier, the government said this month. Corn-feed for immediate delivery has climbed 25 percent in the past year on the National Commodity & Derivatives Exchange in Mumbai, lagging behind the 86 percent surge in Chicago futures.

“Looking at the current international scenario, with the U.S. now looking at a lower acreage under corn, the Indian corn should be competitive in the international market,” Adani’s Chaturvedi said. “Prospects for exports are much better.”

Warmer, drier weather in most of the U.S. last week allowed farmers to complete about 99 percent of corn planting by June 12, matching the average pace in the past five years, the USDA said yesterday. About 69 percent of the corn was in good or excellent condition, compared with an estimated 77 percent a year earlier.

India may not restrict corn exports as it is not a staple, mainly used in making poultry feed and starch, he said. The nation banned shipments for about three months in 2008 after prices surged and inflation reached a 13-year high.

The government banned shipments of most grades of rice in April 2008 and wheat in early 2007 to bolster domestic supplies.

Poultry feed-makers use about 10 million tons, while starch-makers use as much as 2.5 million tons a year, Sain Dass, president of Indian Maize Development Association, said on June 9. About 4 million tons is used as food in the country, he said.

--With assistance from Luzi Ann Javier in Singapore and Prabhudatta Mishra in New Delhi. Editors: Thomas Kutty Abraham, Richard Dobson

To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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