Starch prices may rise 12% on increasing maize rates

Starch prices may further increase by 12 per cent a bag (of 50 kg each) on the back of rising maize prices and absence of any concrete measures such as banning maize exports. The past one month has already seen a jump of 20 per cent or around Rs 100-150 a bag.

Food grade maize starch, which was selling at Rs 650-700 a bag, is currently quoted at Rs 800 a bag (basic rate). The prices of pharma grade starch are hovering around Rs 800-825 a bag.

"The pace at which maize prices are scaling new highs, starch at Rs 900 a bag is not inevitable," said Amol S Sheth, president, All India Starch Manufacturers' Association. "Availability of maize will also play an equally important role in deciding starch prices," he added.

Around 20 per cent of the total maize production goes into the manufacturing of starch and the rest is consumed by poultry and human.

One of the major reasons for the upmove in the maize prices is that its acreage declined significantly, to 1.73 lakh hectare on November 10 this year from 2.23 lakh hectare on November 10, 2005.

Capacity utilisation of maize-crushing plants too slumped 20-25 per cent in the past three months, resulting in lower output and, hence, higher prices of starch.

The association had made a representation to the Centre for stopping maize exports, expressing apprehensions that if the exports continued the country might have to import maize for its requirement.

While domestic maize consumption is 14 million tonne a year, this year, the production is pegged at 13 million tonne. And with the exports likely to touch one million tonne, there will be an overall shortage of two million tonne.

"It is a problematic phase for the starch industry. With supply of raw material not sufficient, we have no option other than cutting down production at any point of time," said a senior manager of a Mumbai-based leading starch manufacturing company.

According to market estimates, the country consumes 1,800-2,000 tonne starch a day, and the production, which earlier used to meet the demand, is showing a declining trend. Sources in the industry said the national production had come down to 1,700 tonne a day.

"Demand for starch is rising. At present, whatever quantity of starch is manufactured is readily sold in the markets," said Kaushik Khona, chief commercial officer, Gujarat Ambuja Exports.

Traders said there was still room for hiking the prices as exports of maize continued, and exporters were ready to buy maize at even higher rates.

Market sources said starch producers were now working in two shifts instead of three and, hence, production was falling. Because of inadequate supply of maize, most of the starch manufacturing plants were operating below their individual capacity.

"Plants are working at 70-80 per cent of their capacity. Usually, they operate at 95 per cent of the capacity," Sheth said.

Starch manufacturers have the option to go in for the tapioka variety, but it requires a change in the manufacturing process. Having scaled very high levels, the prices of tapioka starch are currently falling. Now, they are in the Rs 1,675-1,700 per 90 kg range compared with Rs 1,850 a month ago.