Maize stabilises on high output cues

Maize prices are on the decline owing to a rise in rabi output of the crop from Bihar, bringing relief to starch makers.

According to the third advance estimates for 2006-07, the overall crop size is 13.85 million tonnes compared with the earlier estimates of 12.8 million tonnes, mainly due to the rise in rabi crop at 2.85 million tonnes against the estimate of 2.3 million tonnes.

Consequently, spot prices in the physical markets of Andhra Pradesh and Karnataka have been slipping in the last fortnight. In Karnataka, the spot dropped 5 per cent to Rs 710-720 from Rs 750-760 a quintal. Similarly, in AP mandis, rates have come down to Rs 680 a quintal.

However, the rabi crop from Bihar is poor in quality due to the high moisture content. Kaushik Khona, chief financial officer, Gujarat Ambuja Exports, said, "Although moisture levels are at 15-16 per cent in Bihar, it will come down as the season is coming to an end." The standard moisture content should not be more than 12 per cent.

Meanwhile, there are reports that buyers from Gujarat have shifted to Bihar. Market reports suggest that spot prices in Gujarat are ruling at Rs 580-590 a quintal level. Buyers from Uttar Pradesh and northern states are the main beneficiaries as freight costs due to close proximity are low, added Khona.

According to market sources, maize prices should either be steady at the present level or witness a slight uptrend later. Ruling out the earlier possibilities of prices touching Rs 1000 a quintal level, they said even reaching levels of Rs 800-850 a quintal were not on the cards.

"The current prices are already at their lowest levels. Even if price rises in the coming months, it will not be as steep as was seen earlier this year," said Vishal J Majithia, managing director, Sahyadri Starch, a Mumbai-based starch manufacturer.

Khona added, "Maize prices are under pressure for quite some time now and bullish trend is gone as fear emanating from supply-demand mismatch is less now. There could be a further fall of 2-3 per cent but prices are expected to be steady as demand is not much."

However, Venkateshwar Hatcheries Managing Director O P Singh does not see the maize market to remain subdued too long.

"We are still short of 1.3 million tonnes and I do not think prices will not go up. The bearish phase is only for the time being and market will shoot up."

Till the kharif crop arrives four months later, demand from small mills is not expected to shoot up as they do not operate on low capacity utilisation.

Bigger players including Sahyadri Starch, Gujarat Ambuja Exports and Riddhi-Siddhi Gluco Biols have piled up stocks for the coming period. "As we are in the long-term business, we have stored ample stocks of maize," said Majithia.

Starch rates, too, have come down over the last couple of months. Prices, which were ruling at Rs 850-875 a bag (each of 50 kg) is now at Rs 775-800 a bag. Market players said that in June there could be rise in demand for starch and ruled out possibility of any further cuts.

The Maize contract for June delivery on the National Commodity and Derivatives Exchange (Ncdex) has dropped by 5.7 per cent to Rs 745 a quintal from Rs 790 a quintal a month ago.

According to commodity analysts, the maize futures market has a strong support at Rs 730 a quintal and resistance level at Rs 790 a quintal.