It has been a much-acclaimed wonder crop in recent times for India. In terms of utility, it’s a winner – from food, and feed to energy stock; today, corn has become the third most important cereal after rice and wheat. Until 2013, each year the crop contributed millions of dollars to India’s forex earnings. However, the last two years have seen maize exports drop. How soon will revival happen?
Shivani Kapoor | April 2016 Issue | The Dollar Business
Imagine watching the latest blockbuster without munching a bucket of buttery, salty puffed-up corns! Sometimes, the bucket gets emptied before we realise! Outside the air-conditioned multiplexes, on the fields of India too, the charm of this crop continues. India’s agricultural success in recent years is incomplete without the mention of maize or corn. From its human invention as teosinte plant (a wild grass) in Mexico some 10,000 years ago to a biologically remarkable cereal, corn has evolved as a versatile cereal extending its applications as food, feed and ferment.
The USP of this grain is its versatile nature. A rich source of vitamins, minerals and other quality nutrients, it is primarily consumed as food. Although historically it has been preferred as a staple, over the years, several commercial uses of the crop have been discovered. Maize, which provides the bulk of green fodder for cattle, is now being commercially used as a feed for poultry. “Poultry industry in the country is heavily dependent on maize. Such is the increasing demand for corn from the poultry industry that 70% of maize production is used for animal feed,” says Soumen Sarkar, Marketing Lead – South Asia, Advanta Seeds. In addition, the cereal is used as a raw material for starch production, in distilleries and is also feedstock for ethanol (biofuel). The versatility of the cereal coupled with its qualities like high fibre content are factors that make maize a much sought-after product.
Maize is cultivated throughout the year, one planted in June-July and harvested in October and the other planted in October-November and harvested in March-April. The major producers of corn in the world are the United States, China, Brazil, Ukraine and India. Interestingly, over the years, India has been among the top ten major producers of corn in the world. In fact, maize is today the third most important cereal in India after rice and wheat. Harvested in two seasons (kharif and rabi), the annual output of maize in India continues to gallop. What’s more? The production has grown at a CAGR of 5.5% between FY2005 and FY2014. This also explains the reason for India’s seventh position in the world as a maize (HS Code 100590) exporter, with US, Brazil and Argentina being the top three in this regard.
Having witnessed a jump in shipments from FY2008, India had got a strong foothold in the international markets. According to the International Trade Centre data, India’s maize exports between CY2005 and CY2013 bloated by 20x from $61.63 million to $1229.36 million, with shipments going mostly to South-east Asian countries. In fact, India’s maize exports in CY2013 was the highest. This surge in exports can be attributed to demand for maize from international markets, marketing channels and also availability of speciality corns. South-east Asian countries like Indonesia, Malaysia, Bangladesh and Vietnam are major destinations for India’s maize. India’s share in the growing world maize trade may be relatively small but it provides ample opportunity to exporters in the country.
However, all is not well with India’s maize exports. Amid fluctuating world maize trade figures, India’s exports of the cereal has been on the fall in the past two years. Indian maize exports in value terms, which was highest in 2013, fell to $808 million in 2014 and nosedived to $191.89 million in 2015. “The trade has halved in two years leaving us with no profits. The past few months have been worse. We have not shipped even a single consignment outside country in past three months. That itself explains how bad the situation is,” says Dattatray S. Chavan, Proprietor of Awadhut Vegitable Suppliers.
The reason for this steep fall in maize exports is not one. If those in the maize trade are to be believed, higher prices of Indian maize has been the prime factor for the collapse in exports. “Following the higher prices due to strong domestic demand for maize, there are hardly any takers for India’s cereal. Prices of maize are hovering at Rs.1,500 a quintal as against Rs.1,200 a quintal two years back,” rues Chavan.
Then, improved supplies from global competitors have also impacted India’s exports. However, as per Prabhakaran John, Managing Director of Jenirich Agro Products, “weak global prices have almost halted shipments. There is no demand for Indian maize as cheap supplies from countries like Brazil and Argentina have captured India’s export markets.”
Another major reason for falling exports is lowered production. “Back to back droughts in two years in India have resulted in poor production and thus low exports. Poor rains have affected the output and there is no flow of maize for domestic consumption, leave aside exports,” says Chavan. It is worth mentioning here that maize production in FY2014-15 remained almost stagnant at 24.17 MMT from the previous year and estimates are that it will fall to 21 MMT in FY2015-16 (lower than the set target of 23.75 MMT). According to industry sources, the rising domestic demand for maize, especially in the poultry industry, has also accounted for increased consumption and thus lesser exports. Low production coupled with high domestic demand has affected the maize flow to a great extent. As industry participants claim, in 2016, forced by circumstances, India imported maize for the first time in 16 years. (Imports of maize are only allowed through STCs.) [In contradiction though, both Ministry of Commerce (GoI) and ITC databases prove that India has been importing maize every year in the past 15 years!]
Amid falling exports, maize exporters are even concerned about the government’s role in handling the situation. “The production is down, there is a shortage of maize and to top that the government has stopped incentives under VKGUY which gave maize exporters benefits of 5% of FOB value of exports. There are no subsidies or incentives left for us. The profit margin has come down to mere 1-3%,” laments John.
Even as there has been thrust on maize farming wherein the government has fixed the minimum support price (MSP) of maize at Rs.1,310 per quintal and also included the cereal in government’s ambitious Rs.500 crore crop diversification strategy for Punjab, Haryana and Uttar Pradesh, the industry feels that more R&D is required to boost crop yield and that the government should provide incentives other than mere price support to encourage farmers and exporters.
Expectations are alive though as far as rise in domestic production is concerned. With the Indian government recently cancelling a tender to import 240,000 tonne of corn and farmers expecting a bumper harvest this summer, the forthcoming harvest season may result in some surplus for exports.
“Increased domestic demand is holding up overseas shipments of corn”
Soumen Sarkar, Marketing Lead – South Asia, Advanta SeedsTDB: India’s corn exports seem to have fallen off a cliff in CY2015. What do you think are the primary reasons for this plunge?
Soumen Sarkar (SS): Obviously, corn exports have gone down. In India, corn is generally grown in an area ranging between 8.5 million hectares and 9 million hectares. But this time, the area of production dropped drastically because of drought situation across the country. There was a fall of approximately 20-22% in the production area. The productivity of the crop was also affected as there was not enough rainfall. Thus, the production couldn’t meet domestic demand and exports got affected. In fact, it’s not just low production that has led to a fall in corn exports. The government is supporting corn production and thus boosting its prices. Maize prices have shot up by approximately 14% in last five years. Thus, the domestic purchase price is also impacting exports. Global corn prices sometimes tend to be weaker compared to that in India and thus there are no takers for Indian corn leading to a drop in exports. And also, domestic consumption of corn has increased. While production has fallen, increased domestic demand is holding up exports.
TDB: Advanta is engaged in the research & development (R&D) of hybrid seeds. How, according to you, can R&D help in boosting productivity and thus exports of corn?
SS: Advanta is one of the leading seed companies in South-East Asia and has specialised in tropical corn research. From a productivity point of view, India does not have an edge in this area. There is much potential in the country when it comes to producing corn in quantities at par with other developed countries. There are seeds available for farmers to produce corn in quantities at par with US. Though research is driving us towards that direction, the challenge is to convert that potential into reality. We are working on producing disease-resistant and drought-supportive corn hybrids which would help Indian farmers increase productivity. Drought-tolerance is one of the focus areas of our research. The future would be about addressing the concern of less rainfall and producing corn within 100-110 days (which otherwise takes 120-125 days). Once productivity increases, it will help in meeting the domestic demand and simultaneously boost exports.
TDB: Japan, Korea and Mexico are major corn importers. But despite being world’s top importers, they barely import from India. Why this anomaly?
SS: I think everyone values the quality of a product. Based on my interaction with international clients, I have understood that they can’t blindly trust Indian corns. Quality is one area where the Indian farming community and traders should focus on. We have had bitter experiences in international markets. Two years ago, Vietnam had refused to accept a consignment of Indian corn at its port and that impacted the whole industry. The corn importers in countries like Japan and Mexico demand top quality and thus Indian farmers and exporters need to focus on upgrading quality. That is when we can compete with countries like US and Brazil.
TDB: Of late, prices of Indian corn have been riding high, thus discouraging exports. What needs to be done? Do you think the government is doing enough to help farmers and exporters?
SS: The government is indeed supporting farmers when it comes to growing corn and getting best prices. The support price, which had been extended to corn farmers, is helping them make good profits. But then, there’s an issue. The issue is whether you export or sell in the domestic market, you are getting almost the same price. And India is a country which has a high domestic demand for corn and the situation is only discouraging exports. Once, prices in international market increase, we will see exports of corn picking up from India.
Certainly the government has given the right price of the produce to farmers and has been advocating the right way to grow corn. But if your domestic market is fetching better profits with lower risks and paperwork than international markets, it would obviously make sense to first look at the domestic market.
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