Maize prices under pressure on better rabi crop prospects

Tags: Commodities

Bullish reports from global markets to support prices in the short term

Maize prices under pressure on better rabi crop prospects
Maize prices have remained under do­w­nward pressure ov­er the past one month due to inc­reasing supplies in spot markets. Also, subdued demand from poultry feed makers in the domestic markets has pushed the prices higher. Demand for Indian maize remained weak in the international markets due to good supplies from countries like Vietnam, Indonesia and Malaysia. Better prospects of rabi crop have also added to the pressure, leading to further decline in the prices, as this is expected to offset some of the crop losses of the kharif season earlier this year due to a weak monsoon.

The prices have corrected from a high of Rs 1,450 a quintal in mid-January and touched a low of Rs 1,264 per quintal late last week. Prices have recovered from lower levels over the past couple of days and are now trading at Rs 1,300 a quintal for the near-month contract. NCDEX recently made some modifications in the contract specification, whereby contracts expiring between April and September will be called maize rabi and their delivery base will be Gulabbagh, while contracts expiring between October and March will be called maize kharif, and their delivery base will be Nizamabad.

Better crop situation in Karnataka has been keeping the overall trend bearish for the commodity. Arrivals from Tamil Nadu and Andhra Pradesh are expected over the next one month. “However, bullish reports from international markets are likely to support the prices in the short to medium term,” said Ajitesh Mullick, assistant vice-president for retail research at Religare Commodities.

In India, maize is grown as both kharif as well as rabi crop. As per data released by the ministry of agriculture, maize crop area during the rabi season for 2012-13 is estimated to be 14.265 lakh hectares, higher by about 15.87 per cent from 12.31 lakh hectares last year. According the second advance estimates released by the ministry, maize production for the 2012-13 season is estimated to be 21.06 million tonnes compared with 21.76 million tonnes in the 2011-12 season.

According to the latest USDA monthly crop report, the 2012-13 global production of corn is projected at 854.38 million tonnes, which is lower compared with 882 million tonnes produced in 2011-12. Global ending stocks have been projected at 118.04 million tonnes against 131.01 million tonnes in 2011-12. According to the Buenos Aires Grains Exchange estimates, production in Argentina, the world’s third largest supplier of corn, is estimated at 25 million tonnes.

“Maize prices have declined significantly over the past one month, and thus, we expect domestic demand to emerge at the current low levels. However, demand-supply fundamentals are fairly stable in 2012-13, which may cap sharp upside in prices. Also, supplies from Argentina will increase in the coming weeks, which may keep international prices under check,” said Vedika Narvekar, a senior research analyst for agri commodities at Angel Broking.

Due to higher production estimates and lower consumption outlook, maize is likely to trade with a negative bias. However, initial pullbacks toward Rs 1,340-1,380 levels may be seen, but later prices may get dragged lower, said CP Krishnan, whole-time director at Geojit Comtrade.

According to Sumeet Bagadia, head of currencies and commodities research at Destimoney, maize looks strong on the charts. “We expect prices to move up and touch the Rs 1,400 level. One should initiate long position in maize at current market price or on dips till Rs 1,300 is a very good buy with a stop loss of Rs 1,260. We will continue to hold our bullish view in maize till the time prices do not break and close below Rs 1,260. On the higher side, it has major resistance at the 1,350 level, and further appreciation in the prices can be seen once the prices give a clear breakout signal above these levels. A breakout above Rs 1,350 will take the price to Rs 1.400 level over the next one to two months,” he said. zz

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