SINGAPORE/NEW DELHI, Aug 28 (Reuters) - India is unlikely to extend a ban on corn exports beyond mid-October given an upcoming bumper harvest and soft local prices, but New Delhi should relent even sooner to prevent rivals from grabbing market share.
Although traders see little hope of the government easing export curbs on rice and wheat as the fragile federal coalition faces polls next year at a time of double-digit inflation, they say corn is an entirely different story.
But unless the ban is lifted sooner than the current Oct. 15 expiry, Indian suppliers could lose business in the Southeast Asian markets they have worked hard to crack.
"Earlier Indian corn was not very acceptable in Southeast Asia. We shouldn't lose that market," ," said Atul Chaturvedi, head of the agricultural arm of Adani Enterprises Ltd (ADEL.BO: Quote, Profile, Research), a commodities player in India.
"And why should we deny our farmers the opportunity of getting better prices in the export market?"
Though India's corn exports make up just 3 percent of global trade of over 100 million tonnes, it has become an important supplier to countries such as Malaysia, Vietnam and Indonesia, offering last-minute supplies when there are wild swings in prices.
India has also benefited from China's absence from the market due to its own export curbs, and with corn stocks in the United States, the world biggest exporter, likely next year to dwindle to their lowest level in 13 years.
But with surging global food prices, New Delhi's recent ban on corn exports runs the risk of it losing market share to its more traditional rivals in Latin America and the United States.
Although traders see little hope of the government easing export curbs on rice and wheat as the fragile federal coalition faces polls next year at a time of double-digit inflation, they say corn is an entirely different story.
But unless the ban is lifted sooner than the current Oct. 15 expiry, Indian suppliers could lose business in the Southeast Asian markets they have worked hard to crack.
"Earlier Indian corn was not very acceptable in Southeast Asia. We shouldn't lose that market," ," said Atul Chaturvedi, head of the agricultural arm of Adani Enterprises Ltd (ADEL.BO: Quote, Profile, Research), a commodities player in India.
"And why should we deny our farmers the opportunity of getting better prices in the export market?"
Though India's corn exports make up just 3 percent of global trade of over 100 million tonnes, it has become an important supplier to countries such as Malaysia, Vietnam and Indonesia, offering last-minute supplies when there are wild swings in prices.
India has also benefited from China's absence from the market due to its own export curbs, and with corn stocks in the United States, the world biggest exporter, likely next year to dwindle to their lowest level in 13 years.
But with surging global food prices, New Delhi's recent ban on corn exports runs the risk of it losing market share to its more traditional rivals in Latin America and the United States.
On July 3, New Delhi stopped exports of corn until Oct. 15 after corn-consuming industries, such as food, starch and poultry, urged the government to curb exports to check prices and ensure stable local supplies.
"With elections coming closer, easing of exports curbs on essentials like rice and wheat are not likely to happen," said Amit Sachdev, a representative of the U.S. Grains Council in New Delhi.
But allowing domestic corn prices to slide further may be hard to justify to farmers already suffering from surging agriculture-input costs.
U.S. corn Cc1, the global benchmark, has lost around quarter of its value since hitting an historic high of $7.65 a bushel at the end of June.
In sympathy with global prices, Indian corn prices have fallen around 6 percent in past month to around 9,400 rupees ($215) per tonne -- but robust exports to Southeast Asia this year have cushioned losses.
For a chart of Indian corn versus global prices please click: here
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India's corn output from upcoming harvest that starts in September is estimated to be only marginally lower at 18.5 million tonnes, compared with last year's record 19.3 million tonnes, data from the International Grain Council (IGC) showed.
"With the production numbers that we are going to see, there is no reason why it should not be exported," said Nathan Kemp, an analyst with London-based IGC. "We are estimating exports of up to 2 million tonnes in the next marketing year."
"With elections coming closer, easing of exports curbs on essentials like rice and wheat are not likely to happen," said Amit Sachdev, a representative of the U.S. Grains Council in New Delhi.
But allowing domestic corn prices to slide further may be hard to justify to farmers already suffering from surging agriculture-input costs.
U.S. corn Cc1, the global benchmark, has lost around quarter of its value since hitting an historic high of $7.65 a bushel at the end of June.
In sympathy with global prices, Indian corn prices have fallen around 6 percent in past month to around 9,400 rupees ($215) per tonne -- but robust exports to Southeast Asia this year have cushioned losses.
For a chart of Indian corn versus global prices please click: here
NEED TO MOVE FAST
India's corn output from upcoming harvest that starts in September is estimated to be only marginally lower at 18.5 million tonnes, compared with last year's record 19.3 million tonnes, data from the International Grain Council (IGC) showed.
"With the production numbers that we are going to see, there is no reason why it should not be exported," said Nathan Kemp, an analyst with London-based IGC. "We are estimating exports of up to 2 million tonnes in the next marketing year."
India is expected to export 3 million tonnes of corn this year, a more-than-seven-fold increase on last year, with Southeast Asian nations snapping up cargoes to capitalise on lower freight costs compared with top suppliers, such as the United States and Latin America.
A slowdown in domestic feed consumption, coupled with a near-record harvest, is likely leave India with a surplus of at least 3 million tonnes in the coming year that it will have to clear.
Domestic feed prices have risen by 60 percent in past two years, forcing some poultry companies to shut, said B. Soundarajan, managing director of Suguna Poultry Farm Ltd.
Even though India's corn exports are still attractive to its Southeast Asian neighbours -- at a landed cost of $300 a tonne or less while U.S. exports cost about $330 due to higher freight -- India can ill afford to be complacent in pushing out exports.
India needs to move faster, traders say, as uncertainty over shipments after Oct. 15 has forced its key customers to target cargoes from rival suppliers in Latin American and Pakistan.
Already, Pakistan has sold around 50,000 tonnes of corn to Malaysia, one of India's top clients since the ban, while Thailand this week inked a deal to supply 30,000 tonnes of corn to Indonesia for prompt shipments, traders said.
"It becomes a much more difficult marketing effort when their (importers') bellies are half full or three-quarters full," said the head of grains trading at a Singapore-based trading company. "Certainty from the government's side would help farmers to get better prices." ($1=43.755 Indian rupees)
A slowdown in domestic feed consumption, coupled with a near-record harvest, is likely leave India with a surplus of at least 3 million tonnes in the coming year that it will have to clear.
Domestic feed prices have risen by 60 percent in past two years, forcing some poultry companies to shut, said B. Soundarajan, managing director of Suguna Poultry Farm Ltd.
Even though India's corn exports are still attractive to its Southeast Asian neighbours -- at a landed cost of $300 a tonne or less while U.S. exports cost about $330 due to higher freight -- India can ill afford to be complacent in pushing out exports.
India needs to move faster, traders say, as uncertainty over shipments after Oct. 15 has forced its key customers to target cargoes from rival suppliers in Latin American and Pakistan.
Already, Pakistan has sold around 50,000 tonnes of corn to Malaysia, one of India's top clients since the ban, while Thailand this week inked a deal to supply 30,000 tonnes of corn to Indonesia for prompt shipments, traders said.
"It becomes a much more difficult marketing effort when their (importers') bellies are half full or three-quarters full," said the head of grains trading at a Singapore-based trading company. "Certainty from the government's side would help farmers to get better prices." ($1=43.755 Indian rupees)
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