Bad weather makes maize bullish

Adverse weather conditions in Karnataka and Andhra Pradesh, the major maize growing states, have made the maize markets, both physical and futures, bullish. Traders and commodity analysts said that the rally might turn out to be a short-term phase on the back of higher expected output this kharif season.

Within a week, the futures market (October contract) rose 7.3 per cent or Rs 50 a quintal. Meanwhile, spot rates in mandis of Nizamabad (delivery centre) have surged by around Rs 90 to Rs 630 a quintal from last week's prevailing rates of Rs 540 a quintal.

The harvest season has begun with low arrivals in Andhra Pradesh markets. The recent spell of showers could prove detrimental to the crop. "Since, harvest is on the threshold, rains can disrupt the crop," said Akshita Bhatt, analyst, Kotak Commodity. The country is expecting around 12.5 million tonnes in Kharif season against last year's 11 million tonnes. By the mid of November, arrival will pick momentum.

Reports suggest that export enquiries, mainly from Bangladesh and Sri Lanka, are also contributing in lifting the market. "As output estimates are on the higher side, export enquiries are obvious," said Vishal J Majithia, managing director, Sahyadri Starch, a Mumbai-based starch manufacturer. He added that if exports take place, strong market is there to stay at least for next two months before arrivals gear up.

Kaushik Khona, chief financial officer, Gujarat Ambuja Exports, said, "Surge in prices is in short term. I think the market will come down." According to him, as maize-based industries (including starch makers) have started booking at least till November end, market is trading on the higher side.

Last year (2006-07), industry consumed around 1.25 million tonnes of maize. However, as the demand is increasing, Khona said 2007-08 could see industry consumption reaching 2 million tonnes. According to market sources, demand from poultry industry could go up as soybean rates are relatively higher this time.

It is raining in Nizamabad belt for the last three days. Marketmen said such weather may continue for another couple of days.

"Due to rains, crop is getting affected. Today (Tuesday), the arrival in Nizamabad mandi was to the tune of 8,000 bags (each of a quintal). But the moisture content is 16-18 per cent," said Jitendra Nagla, a Nizamabad trader. Though the rates in spot market has sharply moved up within a week, bullishness will not stay for long on the back of higher output, he added.

Navin Vij, general manager (marketing), Bharat Starch Industries, a Delhi-based starch firm said that there were chances of export this year. The entire domestic requirement for maize annually is around 14 - 14.5 million tonnes. Last year, due to less production and unviable imports, maize prices had gone up to as high as Rs 950 a quintal.

Bharat Starch, Sahyadri Starch and Gujarat Ambuja have started the procurement process from the market as starch makers are running short of stocks.

The other players including Riddhi Siddhi Gluco Biols and Tirupathi Starch and Chemicals are also believed to have ventured into the market for procurement.

On the National Commodity and Derivatives Exchange, the maize delivery for October contract closed the day at Rs 710 a quintal, down Rs 23 or 3.14 per cent, where as the near month September contract slipped to Rs 738 a quintal from the previous close of Rs 741.