India's corn exports are set to climb as Asian feed producers scramble to lock in cheaper cargoes in the face of strengthening global grain prices and a lack of feed wheat from the drought-parched Black Sea area. The country could sell more than 3 million tonnes of corn in the year to September 2011, a two-fold jump from a year ago, which will give buyers some respite from US prices that are near 2-year highs.
"Buyers are certainly going to be looking at getting supplies from the cheapest source which can deliver reliably," said Luke Mathews, commodity strategist at Commonwealth Bank of Australia. "And if that turns out to be India, then it's certainly something buyers are going to be looking towards."
A tight world corn balance and firming prices amid prospects of bumper production in India this year make a perfect case for buying corn from the nation, a challenge to pricey US and South American cargoes. Asian millers have started snapping up Indian corn cargoes in the past few weeks, buying around 100,000 to 150,000 tonnes between $240 and $250 a tonne, including cost and freight (C&F). This compares with $260 to $270 a tonne offered for Argentine corn.
"India is regularly selling, there is business happening in containers every day," said one trading manager at an international trading company, which sells feed grains into Asia. "In fact, very few deals of South American corn have taken place to Southeast Asia as India is active." India's share of world corn trade of around 90 million tonnes is small, but the nation is a significant supplier to buyers such as Malaysia, Vietnam and Indonesia that seek small parcels for prompt shipment.
TIGHT FEED WHEAT SUPPLY Asian millers have been trying to source alternative origins for grains after a ban in exports from drought-hit Russia and a squeeze in supplies from Ukraine - key origins for feed wheat - threatened to cut off supplies of feed grains.
The Philippines is the biggest feed wheat importer in Asia, buying more than one million tonnes a year, with strong interest also seen in Malaysia, Thailand and Vietnam earlier this year to replace expensive corn. But prices of wheat have risen 65 percent on the benchmark Chicago Board of Trade since June after one of the worst droughts in history devastated crops in the Black Sea region.
In the physical market, the cheapest wheat is available for $300 a tonne, C&F, compared with some deals for Ukrainian feed wheat signed below $200 a tonne in June. "Over the last few years feed wheat has been the cheapest feed input," said Doug Whitehead, a commodities analyst at Rabobank in London. "Going forward over the next 12 months the availability of feed wheat into that region is going to be very low and corn is going to take up that place."
With India on track to produce a record 20 million tonnes of corn this year, up around 18 percent from 2009 thanks to widespread monsoon rains, it can grab some of that business. "Attractive global prices have opened a window of opportunity for exports which will be much higher than last year," said Atul Chaturvedi, chief executive of Adani Group, India's leading exporter of agricultural commodities.
"This year's crop size will reflect the saying that rain makes grain." India's main monsoon was normal this year after the driest season in nearly 40 years last year. The harvesting season will pick up from next month in the main producing areas of western and southern India, where the monsoon rains were evenly distributed, aiding crop growth.
"The crop condition is healthy and free from any major pest or insect attack," said Sanjeev Garg, a director of LMJ International, a New Delhi-based exporter of farm goods, which recently won a global tender to sell wheat to Bangladesh. With domestic demand around 15-16 million tonnes, the country could export even more if China starts looking at Indian corn.
If China - which could become a regular importer after making its biggest purchases in 15 years - eyes Indian corn, exports could jump to 4 million tonnes, the highest ever, analysts say. "If the Chinese start buying, then the sky is the limit for Indian exports," LMJ's Garg said.