The decision to raise the minimum support price (MSP) of maize by 35 per cent has sent the grain-consuming industries into a frenzy as they battle to keep their input costs low.
Though there has been no official announcement of the price hike, sources said the Cabinet has decided to raise the MSP of maize to Rs 840 a quintal in 2008-09 from Rs 620 last year.
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The dependent industries, namely the poultry and starch industries representatives argue that the MSP hike should not have been more than 20 per cent.
The Rs 40,000-crore poultry industry, which consumes over 80 per cent of the total maize output of the country, foresees a tough situation. Similarly, the domestic starch industry feels it will have no alternative but to increase the prices of the finished products.
Anuradha Desai, chairperson of the National Egg Co-ordination Committee (NECC), said, “The entire industry has been badly hit by one bad news after the other. With the MSP revised, maize will not be available for less than Rs 1,000 a quintal in the open market. Since maize is the main ingredient for poultry feed, the production cost will go up. It will, thus, have an impact on the egg prices.”
O P Singh, former managing director of Venkateshwar Hatcheries, one of the country’s largest poultry firms, told Business Standard, “The production cost for the poultry industry will rise by at least 20 per cent as half of the feed contains maize. This will affect the prices of eggs and chicken.” It is not possible to sustain operations, if the products are selling below the production costs, he said.
Starch industry officials echo the same view. “We can’t keep up with such a steep rise in maize prices. Our input costs will go up,” said Amol S Sheth, president, All India Starch Manufacturers’ Association.
According to Mumbai-based starch-maker Vishal Majithia, managing director of Sahyadri Starch, the industry will lose out as margins will dip and raising the prices of finished products is not easy.
Navin Vij, general manager (marketing) of Delhi-based Bharat Starch, said, “We have only two options. Either increase prices of our products or shut down operations.”
According to Singh, the poultry industry is set to see a tough time. “Whatever respite players had with the main arrival season for procurement at a cheaper rate, will be snatched away due to the MSP hike,” he said. In the last arrival season in 2007, the average procurement price was Rs 700 a quintal, which this year, is slated to increase to Rs 1,000 a quintal, up 43 per cent.
Acreage above normal
After initial hiccups due to low rainfall, the acreage under maize has safely crossed the normal level as the southern part of the country witnessed good rains. Southern states such as Karnataka and Andhra Pradesh account for a majority of the country’s maize kharif crop.
According to the latest statistics from the Ministry of Agriculture, maize acreage, as on August 22, has touched 6.66 million hectares as against 7.18 million hectares in the same period last year. This has brought some relief to the poultry industry.
“Though the acreage is still lagging compared to last year, the gap has now been minimised in the past few weeks,” said Bhagaban Behera, commodity analyst at Agriwatch Commodities. Sowing has alreay crossed the normal kharif acreage level, which is 6.37 million hectares, he added.
Commodity experts had earlier anticipated that the crop output may touch 20 million tonnes this year against last year’s 15-16 million tonnes.
However, now, with delayed sowing, reports suggest that farmers in Andhra, Karnataka and Maharashtra have shifted to other crop such as sunflower and rice. “It is difficult to touch last year’s acreage,” said Behera.
The crop, which normally is expected by the end of September might shift to October. Commodity analysts said that crop size of maize could be one million tonne less than last year’s production.
On the National Commodity and Derivatives Exchange, the near-month contract of maize closed on Wednesday at Rs 964 a quintal against yesterday’s close of Rs 948 a quintal.
