An effort by India to produce more ethanol from corn has turned Asia’s biggest corn exporter into a net importer for the first time in decades, squeezing local poultry producers and disrupting global supply chains.
The surge in import demand comes after India in January raised the purchase price of corn-based ethanol to promote a shift away from sugarcane-based ethanol to blend with gasoline.
With the government also promoting ethanol in gasoline to reduce carbon emissions and trying to secure ample supplies of cheap sugar in the world's biggest market for the sweetener, India therefore looks set to become a permanent net importer of corn.
A likely surge in India's corn imports could support global prices, currently near four-year lows.
Crushed by high feed costs as local corn prices soar far above global benchmarks, Indian poultry farmers want the government to remove import duties and also lift its ban on genetically modified (GM) corn. The ban, however, severely limits their purchasing options.
Crisis in the corn market
India typically exports 2 million to 4 million metric tons of corn, but by 2024, exports are expected to fall to 450,000 tons, while the country is expected to import a record 1 million tons, mostly from Myanmar and Ukraine, which grow non-GMO corn, traders estimate.
Traditionally, the poultry and starch industries absorbed the bulk of India's corn production of around 36 million tonnes.
Last year, ethanol distilleries switched to corn as demand surged after restrictions on sugarcane use due to drought. That led to a shortfall of 5 million tonnes, an official at the All India Poultry Breeders Association said.
“Now, the poultry and starch industries are fighting with distilleries to get their share of supplies, and this fight is keeping prices high,” said Nitin Gupta, senior vice president at Olam Agri India.
Olam predicts that ethanol distilleries will need to import 6-7 million tonnes of corn annually to meet demand, according to Gupta.
Traditional export markets such as Vietnam, Bangladesh, Nepal and Malaysia, which used to buy corn from India because of its ready availability, are now forced to source supplies from South America and the United States.
“Vietnam has reduced corn imports from India due to high prices,” a trader in Ho Chi Minh City said.
Ethanol for climate change
Seeking to reduce carbon emissions, India aims to increase the share of ethanol in gasoline from 13% to 20% by 2025-26.
To meet its 20% blending target, India will need more than 10 billion liters of ethanol, according to government estimates. That is double the volume the country produced in the marketing year ending October 2023.
This year, 3.5 million tons of corn produced 1.35 billion liters of ethanol, quadrupling production compared to the previous year.
“Sugarcane can start contributing more from the next season, but it cannot contribute more than 5 billion liters. The government’s priority is to meet domestic sugar consumption,” said a senior government official.
That would mean increasing corn-based ethanol production to 3 billion liters, requiring nearly 8 million tons of corn, said the official, who declined to be identified because he was not authorized to speak to the media.
Poultry farms cry foul
Rising corn prices are pushing poultry producers into the red, with feed accounting for three-quarters of production costs.
Uddhav Ahire, chairman of Anand Agro Group in the western city of Nashik, said the farmgate price of a chicken is around Rs 75, but production costs have risen to Rs 90.
“The poultry industry cannot sustain such losses for a prolonged period,” he said.
The Poultry Breeders’ Association of India and the Feed Manufacturers’ Association are demanding 5 million tonnes of corn imported duty-free. A government spokesman did not respond to a request for comment.
Ahire said that due to shortages, more imports of corn should be allowed at zero duty. The government should allow GM corn for feed purposes.
Corn imports are levied at 50%, but India has allowed 500,000 tonnes at a reduced rate of 15%.
Lured by higher prices, farmers like Krishna Shedge in Jalna district have reduced soybean planting to expand corn acreage sown in summer, which rose 7% from last year to 8.7 million hectares, according to finance ministry data.
“Corn is giving good returns due to higher prices,” he said.
Until prices come down with the new season, small poultry farmers like Vijay Patil face limited options, such as reducing production and corn in feed. “I am replacing a small portion of corn with broken rice and wheat stalk waste to reduce feed costs,” Patil said.
Business reversal
Rising Indian demand has therefore pushed up maize prices in Myanmar to around US$$270 per metric tonne, freight on board (FOB), from around US$$220, thereby encouraging farmers to plant more.
“Exporters, farmers and other stakeholders in the supply chain have therefore benefited from the price hike,” Murali Chakravarthy, country head of Singapore-based trading firm Agrocorp, said in Yangon.
India classifies Myanmar as a least developed country, so imports from there are not subject to taxes.
Meanwhile, starch producers are importing duty-free corn from Ukraine through India's Advance Licensing Program, which requires the export of an equivalent quantity of finished products.
In addition, Ukraine's exports to India have increased since January, totaling about 400,000 tonnes through August, according to agricultural consultancy ASAP.
In the first half of this calendar year 2024, India's corn imports rose to 531,703 tonnes from just 4,981 tonnes a year earlier. While exports fell by 87% from 1.8 million tonnes to 241,889 tonnes, data from the commerce ministry showed.
Hemant Jain, an exporter from Indore, says corn production is not keeping pace with the growing demand, leading to the need for annual imports.
Source: Notícias Agrícolas
