Due to unrest in Myanmar and high shipping costs, South-East Asian countries and Bangladesh have turned to India to satisfy their maize (corn) feed demand. “India sells maize to Vietnam, Malaysia, Bangladesh, and Sri Lanka,” said Bimal Bengani, Managing Director of Kolkata-based trading firm Bengani Food Products Pvt Ltd.
“Indian maize is being purchased by Malaysia, Vietnam, and Thailand to satisfy demand in the chicken and poultry sectors. The instability in Myanmar resulting from the Army taking over the administration there is one cause for these countries to switch to India, according to Delhi-based trade analyst S Chandrasekaran. Over the last one and a half to two months, these orders have arrived in India. “Our rates are competitive, so we are getting orders from Malaysia and Vietnam,” Bimal Bengani said.
Maize is currently being sold for $250 a tonne (Rs 18,600) free-on-board (f.o.b). The cereal, on the other hand, is available for $275-277 (Rs 20,450-20,600) cost and freight (CNF) to these nations. Corn futures are reportedly trading at $5.89 per bushel (Rs 17,250 per tonne) on the Chicago Board of Trade. Maize is currently being shipped at $252 (Rs 18,750) a tonne from Argentina, $260 (Rs 19,350) from Brazil, and $266 (Rs 19,800) from the US Gulf, according to the International Grains Council (all f.o.b).
Corn prices have increased by nearly 22% since the start of the year, while the IGC maize sub-index has increased by 60%. “Indian maize exports are competitive because exporters here accept a low margin of 1-2 percent,” Chandrasekharan said.
M Madan Prakash, President of the Agri Commodities Exporters Association, said that before last week's weekend, exporters were having maize shipped in Chennai from Andhra Pradesh for $17,000 per tonne. Maize is currently selling for between $1,500 and $1,700 per quintal at different domestic agricultural market terminals, depending on pricing. This compares to the $1,850 minimum support price set for this season through September.
Freight costs are very high
Surging freight prices are another reason why Indian maize is making its way into Southeast Asian countries. China is currently gathering as many containers as possible for all destinations, including the European Union and the United States, according to traders. China continues to use these containers to either import or export all of its needs. Beijing is also paying $500 to transport an empty container from Colombo, Sri Lanka, to its ports.
“As a result of China securing all of the containers, India now has the benefit of satisfying immediate demand in the Southeast Asian region,” trade analyst Chandrasekaran said. “Previously, Malaysia and Vietnam sourced maize from countries such as Brazil, Argentina, and Ukraine, in addition to Myanmar. They had no choice but to turn to India because of the container shortage,” he said.
The issue for these countries is that freight prices for maize from these countries are currently $55-65 (Rs 4,000-4,800) per tonne. A container costs $500 (Rs 37,200) to rent. “Freight prices from India, on the other hand, are $20 (Rs 1,500) per tonne. The rates offer these countries a $30-35 (Rs 2,250-2,600) arbitrage, according to Chandasekaran.
On the freight charges, Prakash agreed with Chandrasekharan. The current maize demand from these destinations is only temporary, he said, and may last another six months. Because of the favorable rates provided in India, maize exports to the Southeast Asian region will continue, according to Bimal Bengani.
Maize is being exported from the east coast ports of Kolkata and Chennai, according to Chandrasekharan. “Maize is being exported from Chennai to Andhra Pradesh and the Ballari and Raichur regions of Karnataka. Maize from Bihar is shipped to Southeast Asia from Kolkata, he said.
Furthermore, the existing currency exchange rate favors maize exports from India, with the rupee depreciating against the dollar. This week, the Indian rupee fell to a nine-month low of 75.4 to the dollar. In the last few weeks, it has fallen by more than 4%. It has, though, climbed up to 75 cents to the dollar. The rupee was traded at 74.70 per dollar on Friday, up 23 paise from Thursday.
Production & Exports
India's maize exports hit a six-year high last fiscal, according to data from the Agricultural and Processed Food Products Export Development Authority, a department of the Commerce Ministry.
During the fiscal year, 22.03 lakh tonnes (lt) of maize were exported, with Bangladesh accounting for 14.75 lt of that total. Nepal was the second-largest importer, purchasing 5.13 million tonnes, while Vietnam purchased 1.11 million tonnes. Nearly 50,000 tonnes were shipped into Malaysia.
India's maize exports have decreased after reaching a high of 47.88 lakh tonnes in 2012-13. They've been on the decline since then, with the exception of the last fiscal year's reversal.
