Starch industry worried over damaged maize crop in Bihar

The starch industry in India, that is already operating under razor thin margins, is likely to get a further jolt as the maize crop in Bihar (a major producer supplying 80 per cent of industrial demand) has been affected due to untimely rain.

K K Sardana, Managing Director, Sukhjit Starch and Chemicals Limited, said that an early monsoon has affected the crop and arrivals have dwindled.

He explained that due to lack of proper infrastructure in Bihar, the crop could not be protected. Farmers keep the harvested produce in the fields or on the roadside. When the fields get flooded with rain water, the crop gets damaged. It may not be fit for human consumption as well as for industrial use, he added.

This may result in price rise and deterioration of quality. If the price increases further, it will become uneconomical for consumers to buy maize for industrial purposes.

Maize prices in India, in recent weeks, have already risen sharply, triggered by the increased demand by exporters due to lucrative returns in the global market. This has, in turn, affected domestic starch manufacturers.

Talking to Business Standard, Vishal Majithia, President of All India Starch Manufacturers' Association informed that maize prices increased from about Rs 1,375 per quintal to Rs 1,475 per quintal in the last two weeks.

Such a phenomenal rise in a short span of time has never been observed by the industry earlier and it is difficult to absorb such a steep hike in a short period, he said.

"What worries more is the unscheduled rains in Bihar that may adversely effect the maize crop. Bihar grows the largest quantitity of maize for industrial use. This may harm the industry in two ways. The prices may shoot up further due to low yield and the quality of maize will be effected due to undesirable climatic conditions," he said.

Contemporary instruments like futures market cannot provide much cushion to the Indian industry as the delivery mechanism of the commodity exchanges in India is not conducive to the needs of buyers.

The commodity exchanges have limited number of warehouses and getting the delivery of maize at a distance from the manufacturing plant would add to the freight cost that is not viable.

Majithia said that there was no connection between the futures and real market. At times, the prices in the real market register a downward trend in contrast to the increase in the futures market. So, this is not suitable for the starch industry.

According to Sardana, in such a situation, the starch industry could indulge in buying in small quantities to run its units at minimum optimum levels.