High maize output to cool starch prices

Higher kharif output of maize will have a cooling effect on the starch market. So far this year, starch was seen to be bullish but the latest signals suggest that a slowdown is on the cards and the overall market is heading for stability.

A few months ago, market buzz had signalled that starch prices could jump to Rs 870-900 a bag (of 50 kg). But with better initial crop estimates indicating an increase of 12 per cent, starch players said that the market will stabilise at the current levels. The average starch price is prevailing at Rs 750 a bag. Marketmen did not even rule out the possibility of further decline in the days to come. "Once the new crop arrives in the market, rates should dip," said Vishal J Majithia, managing director, Sahyadri Starch, a Mumbai-based starch manufacturer. Market for starch is sluggish due to the monsoon season. From October onwards, demand is expected to pick up momentum.

Acknowledging the fact that there will be some cooling effect on starch, Amol S Sheth, president, All India Starch Manufacturers' Association, said, "Maize production is not the only factor to decide trends in starch market. Demand too has to be factored in. Though these three months (July-September) are facing low demand, market is expected to stabilise soon." According to him, starch prices will be range-bound between Rs 700 and Rs 800 a bag.

Kaushik Khona, chief financial officer of Gujarat Ambuja Exports, said, "We do not expect starch prices to fall. Though it is almost the end of the season, we need to wait and see the actual output once the new crop starts from September-end."

He cited freight charge of transporting maize as the reason. "On an average, freight charge per tonne of maize is Rs 1000, as majority of starch manufacturing units are not close to the maize production centers in the country."

According to market sources, demand for tapioca-starch is losing momentum. "Consumers prefer maize-based starch against tapioca-starch because of its whiteness and fineness," said Khona. Moreover, with declining rates of maize, need won't arise for opting tapioca. Domestic starch industry consumes around 10 per cent of the total maize production every year. Paper, pharma, textiles and confectionery are the major sectors which starch makers cater to.