A seasonal report on Maize - Karvy Commodities Broking

According to USDA, wheat production and consumption both in India are projected to increase by 5% butproduction is likely to remain higher than domestic consumption. The production is estimated to be thesecond highest ever. Moreover, the carryover stocks of last year are so high that there is insufficient spacefor storage thus necessitating exports to other countries. India being the world’s second largest wheatproducer is struggling hard to manage the huge stocks due to bumper harvests for the past five years. Sofar, three public sector trading companies viz. STC (State Trading Corporation), MMTC (Minerals andMetals Trading Corporation) have floated tenders and invited bids to export wheat.Due to record procurement this year, the ending stocks in 2011-12 are nearly three times the Government’sdesired stocks of 7 million tonnes as projected by USDA. Indian govt. is expected to take decision on newwheat export policy which might open new windows of wheat export from India.Price relationship of Maize and wheatBecause of bumper crop of record levels in the Indian markets and the second highest production ever, theprices are expected to be stable in domestic markets. Even though if India exports wheat then also Indiawill be having good buffer stocks. So, wheat prices would be stable in near term. However, prevailingunfavourable weather conditions are creating threat of crop losses in maize which might keep maize priceson firm note.Maize Prices OutlookGlobalGlobal maize (corn) prices are expected to move up in short to medium term. According to the tradeprojections supply concerns are likely to push maize (corn) prices on higher side. As per the latest monthly<strong>report</strong> by US Department of Agriculture, projections for world maize production has decline in July to 905million tons down by 5% against earlier projections of 949 million tons. United States are suffering fromdry weather, drought like conditions and Indian production also would be affected due to poor sowingwhich is creating concerns of crop damage and decline in overall production against the projected figures.Trade is forecast to exceed the 2007-08 record, with China, the EU and South Korea expected to be thebigger buyers. Most of the exports will be driven by China since the population, per capita meatconsumption, industrial consumption all are increasing at a faster rate compared to the rate of populationgrowth. Tightening supply situation in US due to threat of reduced output is resulting in lower exportofferings from US, which might support exports from other cheaper destinations like India and Ukraine.DomesticMaize prices are expected to remain firm as kharif sowing has been affected to a large extent due to thedelay in the arrivals of South-West monsoon apart from inadequate amount of rainfall. The acreage hasdeclined sharply in few of the major growing states like Andhra Pradesh, Karnataka and Bihar. The totalsown acreage of maize was <strong>report</strong>ed at 21.76 lakh hectares as on 13th July 2012 against 31.38 lakhhectares in the last year. The total acreage in Karnataka declined by almost 6.63 lakh hectares to 3.39 lakhhectares while total acreage in Rajasthan declined by 7.63 lakh hectares to reach 1.16 lakh hectares as ondate. Sowing is not even started in northern districts of Karnataka like Dharwad, Bijapur, Gadag andBagalkot and it is expected to resume as soon as active rainfall is received and the ground becomessufficiently wet. From past few weeks no arrivals are <strong>report</strong>ed in major spot market of Davangere. Butarrivals were normal in Nizamabad market.Moreover, strong export demand in the domestic market is likely to keep prices on firm note in comingdays. Government has estimated the domestic exports at around 36-37 lakh tonnes in 2012, which is moreby 4-5 lakh tonnes compared to last year.In the last one year, Indian Maize prices are found to have a correlation of 0.455 with the internationalMaize prices. Though the correlation between the prices of Indian and international Maize is not verymuch; however, this year dryer weather conditions prevailing in South American regions are coincidingwith Indian weather conditions resulting in threat of crop damage. In major producing regions like AndhraPradesh (only 51% sowing completed), Karnataka (sowing is not even started in few districts).Prices are expected to be bullish in the long term. The demand is very good and further expected toincrease due to rising demand from poultry and cattle feed sector. Also, the domestic consumption hasincreased due to increase in consumption of boiled maize and value added products.