India-US BTA negotiations throw up tricky farm trade riddles to solve

Any decision on granting access to maize from the US may send the ruling JD(U)-BJP-led coalition back to the drawing board in poll-bound Bihar, writes Sanjeeb Mukherjee

As the India-United States (US) Bilateral Trade Agreement (BTA) negotiations enter a crucial phase, the fate of three key agricultural commodities — maize, soybean, and soyoil — would be keenly watched. 

According to sources, the US boasts of huge surpluses of all three  commodities and is pushing to ease entry barriers as part of the deal. If the US has its way, it could have repercussions for farmers in Madhya Pradesh, Maharashtra, Telangana, and Andhra Pradesh. But, the most immediate impact could be in Bihar, which goes to polls later this year. 

Why maize is a big deal in Bihar 

As of 2024-25 (July to June crop year), maize was grown in around 12 million hectares and soybean in around 13 million hectares across India. Maize is largely cultivated in central and northeastern Bihar —Saharsa, Kishanganj, Khagaria, Araria, and Purnea districts — also known as the Seemanchal region. 

Chief Minister Nitish Kumar’s Janata Dal (United) and Tejashwi Yadav’s Rashtriya Janata Dal (RJD) have held sway over Seemanchal. The JD(U) won most of the seats in Seemanchal in the 2020 Assembly elections. Observers, however, attribute this to the entry of Asaduddin Owaisi-led All India Majlis-e-Ittehadul Muslimeen (AIMIM) that possibly dented RJD’s prospects. Any uncontrolled import of maize, in case the US gets access to the domestic market, could have political ramifications for the JD(U)-BJP-led ruling coalition, say experts. 

Key to ethanol blending  Maize, integral to Bihar’s agro-economy, is India’s third-most widely-produced cereal after wheat and rice. Assembly polls are due in Bihar in October-November. This almost coincides with the kharif maize harvesting period in the state as well.

Bihar accounted for around 9-11 per cent of the maize production in India in 2024-25 (July to June). According to the third advance estimates, the state’s maize production was around 5 million tonnes, while the all-India figure was around 42.2 million tonnes. More than its share in the total production, it is the stupendous growth in per hectare yield and total production of maize in Bihar that stands out. 

Between 2018-19 and 2024-25, maize yield in Bihar rose at a Compound Annual Growth Rate (CAGR) of almost 8 per cent, while at the national level it was around 2.02 per cent. In contrast, rice yields in the state rose by a CAGR of 4.45 per cent during the same period against the all-India number of 1.35 per cent. Wheat yields in the state rose at a CAGR of 0.45 per cent from 2018-19 to 2024-25. Nationally, the growth was 0.03. This spectacular turnaround of maize has revolutionised the whole grain-based ethanol sector in Bihar, say experts. As many as 17 grain-based ethanol units currently operate in the state with capacities ranging from 65 kilolitres (Kl) a day to above 250 Kl a day. These units use maize as their feedstock along with rice, which is also abundantly grown across the state. 

Most of these units have been set up in Bihar after 2021. The Centre had initiated a mechanism for differential pricing for ethanol to be procured by the oil marketing companies (OMCs) in 2018-19 Ethanol Supply Year. Concomitantly, the ambitious target of blending 20 per cent ethanol with petrol took shape. 

The rising demand from ethanol makers has pushed up the market price of maize in Bihar from around ₹1,600-1,700 per quintal in 2022 to around ₹2,500-2,600 per quintal in 2024 before it settled at around ₹2,200-2,250 per quintal since April this year. This was a CAGR of around 25 per cent in just two years in average realisations from maize, making it a key driver of rural transformation in the state. 

The all-India figure for minimum support price (MSP) of maize in 2024-25 was ₹2,225 per quintal, which was raised to ₹2,400 per quintal recently for the 2025-26 season. 

Experts highlight that the grain-based ethanol sector has emerged as a local employment-generator. An average 100 Kl per day grain-based distillery employs around 225-250 people. Of these, 100-125 are direct employees. The ethanol industry has also galvanised Bihar’s transport and tanker sector. These vehicles ferry the finished product from factories to depots. 

“Substantial rural transformation is happening in Bihar due to the grain-based ethanol players largely due to high price of maize and its impact on farmers and also the supplementary benefits that the industries bring with them,” Abinash Verma, co-promoter of Eastern India Biofuels Ltd and former director general of ISMA, now known as Indian Sugar and Bio-Energy Manufacturers Association told Business Standard.

  Verma, a veteran of the sugar and ethanol sectors, was among the first entrepreneurs who set up a grain-based ethanol plant in the maize belt of Bihar. 

The soybean tangle

  Like Bihar, farmers in soy-growing regions of Madhya Pradesh and Maharashtra are equally anxious. 

Soybean prices have been ruling below the MSP of ₹4,892 per quintal for much of the 2024-25 edible oil marketing year starting last November. Last kharif, the Centre had to purchase a record 2 million tonnes of beans to support farmers. 

This season, soybean prices are hovering in the range of ₹3,800-4,200 per quintal, well below the MSP. Just ahead of the 2025 kharif sowing season, the Centre reduced the import duties on edible oil to keep check on inflation in the segment. The move had elicited strong reactions from farmer groups in Madhya Pradesh and Maharashtra. 

A few weeks back, the Indore-based Soybean Processors Association of India (SOPA) issued a statement opposing the duty cut on edible oils calling it a step against farmers and local oil processors. SOPA expects a 5-6 per cent drop in soybean acreage in the ongoing kharif season due to falling realisations. Addressing a gathering at an event in Indore — the hub of India’s soybean trade — Union Minister of agriculture and farmers’ welfare, Shivraj Singh Chouhan assured that the Centre will pull out all stops to ensure soybean farmers get fair price for their produce. Some experts contend that falling soybean rates and farmer distress had helped Congress wrest power from the BJP in the state in 2018. 

Another blow to the falling soybean rates has been dealt by a sharp decline in soymeal rates. The distiller’s dried grains with soluble or DDGS is filling in as a cheaper alternative for the feed meal industry, replacing soymeal. DDGS is a nutrient-rich by-product of ethanol, primarily obtained from maize, used as a feed meal for livestock. 

According to sources, in the 2024-25 edible oil marketing year (November to October) against an estimated 7.3-7.4 million tonnes of soymeal demand, the actual consumption has been around 6.6 million tonnes. The drop has been attributed purely to the replacement of soymeal by DDGS.   

As part of the BTA, if soybean meal or DDGS from the US come to India, it will throw up another set of challenges for BJP-ruled governments in Madhya Pradesh and Maharashtra.