Maize prices soar, put starch makers in a spot

Arrival of new crop in March-April period might lead to drop in prices

The unprecedented surge in maize prices has put starch manufacturers in a quandary. Bulk buyers are negotiating annual purchase contracts for starch and its by-products (glucose and dextrose) at Rs 22-24 a kg. Starch manufacturers say they are incurring heavy losses, as prices below Rs 26 a kg aren’t viable for them.

The failure of the maize crop in Maharashtra, Karnataka and Madhya Pradesh due to scanty rainfall has raised corn prices to Rs 1,500-1,600 a quintal (for different varieties). Last year, prices stood at Rs 1,000-1,100 a quintal. High prices of corn in the US market are also exerting pressure on domestic prices, as Indian exporters are finding it lucrative to export corn. Corn prices in the US stand at about Rs 1,900 a quintal, a viable proposition for exporters.

“A sudden jump of 40 per cent in maize prices has put starch manufacturers in a tight spot,” said Vishal Majithia, president of All India Starch Manufacturers’ Association and managing director of Sahyadri Starch & Industries. He added to save the domestic industry, the government should immediately put curbs on the export of maize. Those engaged in the poultry, liquor and feedstock businesses were hit severely, as maize accounted for substantial input costs in these industries, he said.

The arrival of the new crop in March/April might lead to a drop in maize prices, he said, adding, “We cannot run our factories on low capacities. So, a few of the factories have been shut.”

K K Sardana, joint managing director of Surjit Starch & Chemicals, says, “The industry is in a catch-22 situation. We cannot pass on the revised price to consumers, as the market is competitive. Despite the uncertainty in maize prices, starch manufacturers are signing annual contracts with buyers in the organised sector (pharmaceuticals, paper, liquor and food) that purchase the bulk of starch by-products. But we aren’t even able to recover our costs. The industry is bleeding. Only suitable weather for the next crop, which would result in higher productivity, can save the industry.”

In warm climate zones, maize may have three crop cycles. Also, the crop’s irrigation demands are low. Despite these factors, the unregulated market for procuring maize and the lack of motivation for farmers have created hurdles in cultivating maize in a more organised manner, said Sardana.