India is on track to become a major net importer of corn, driven by a significant jump in import demand following the government's decision in January to raise the procurement price of ethanol made from corn. This move aims to shift the focus away from sugarcane-based ethanol for gasoline blending, a strategy that aligns with the country’s goals to reduce carbon emissions and ensure a steady supply of affordable sugar in the world's largest sugar market.

The prospect of increased corn imports by India is expected to support global corn prices, which are currently trading near four-year lows. As local corn prices soar far above global benchmarks, India's poultry producers are urging the government to remove import duties and lift the ban on genetically modified (GM) corn, arguing that the prohibition severely restricts their purchasing options.

Traditionally, India has exported between 2 million to 4 million metric tons of corn annually. However, in 2024, exports are projected to plummet to just 450,000 tons, with imports set to reach a record 1 million tons, primarily from Myanmar and Ukraine, both of which produce non-GMO corn, according to trader estimates.

The ethanol industry has increasingly turned to corn, with demand surging this year after the government curtailed the use of sugarcane for fuel due to a drought. This shift has created a shortfall of 5 million tons, according to an official with the All India Poultry Breeders Association.

"Now, the poultry and starch industries are battling with distilleries to get their share of supplies, and this fight is keeping prices high," said Nitin Gupta, senior vice president of Olam Agri India. Gupta estimates that ethanol distilleries will require 6 million to 7 million tons of corn annually, a demand that can only be met through imports.

As a result, traditional export markets such as Vietnam, Bangladesh, Nepal, and Malaysia, which previously relied on Indian corn for its prompt availability, are now sourcing supplies from South America and the United States. "Vietnam has cut down its imports of corn from India recently because India's prices are too high," said a trader based in Ho Chi Minh City.

India's ethanol blending target is set to increase to 20% by 2025-26, up from the current 13%. To meet this goal, the country will need more than 10 billion litres of ethanol, double the volume produced in the marketing year ending October 2023. Government data shows that 3.5 million tons of corn have been used to produce 1.35 billion litres of ethanol this year, a fourfold increase from the previous year.

"Sugarcane can start contributing more from the next season, but it cannot contribute more than 5 billion litres. The government's priority is to fulfil domestic sugar consumption," said a senior government official, who noted that this would necessitate an increase in corn-based ethanol production to 3 billion litres, requiring nearly 8 million tons of corn.

The rising corn prices are severely impacting poultry growers, with feed accounting for three-fourths of production costs. Uddhav Ahire, chairman of Anand Agro Group in Nashik, said the farm gate price of a broiler is about 75 rupees, while production costs have risen to 90 rupees. "The poultry industry cannot sustain such losses for a prolonged period," he warned.

The All India Poultry Breeders Association and the Compound Livestock Feed Manufacturers Association are demanding 5 million tons of duty-free corn imports. "Since there is a shortage, more corn imports should be allowed at zero duty," Ahire urged, adding that the government should permit GM corn for feed purposes.

Currently, corn imports face a 50% import duty, though the government allowed imports of around 500,000 tons at a concessional duty of 15%. Farmers, attracted by higher prices, have increased the area under summer-sown corn by 7% from the previous year, according to farm ministry data.

Booming demand in India has also pushed corn prices in Myanmar to around $270 per metric ton, free on board (FOB), up from about $220, encouraging more planting. "Exporters, farmers, and other stakeholders in the supply chain have benefited from the rally in prices," said Murali Chakravarthy, country head for Singapore-based trading company Agrocorp in Yangon.

Meanwhile, starch makers are importing duty-free corn from Ukraine through India's Advance License Scheme, under which an equal amount of finished goods must be exported. Ukraine's exports to India have surged since January, reaching around 400,000 tons by the end of August, according to estimates from ASAP agricultural consultancy.

Trade ministry data shows that India's corn imports in the first half of 2024 skyrocketed to 531,703 tons from just 4,981 tons a year earlier, while exports fell by 87% to 241,889 tons.

"Every year, we will have to import corn, as production can't be increased as quickly as demand is rising," said Hemant Jain, an exporter in Indore.

Image source: The Economic Times