India lockdown: Corn prices drop as COVID-19 takes toll on domestic demand

New Delhi — Corn prices in India have dropped due to lower demand after the country implemented a 21-day lockdown until April 14, putting all its non-essential services at halt in order to contain the spread of COVID-19.

Prices of corn in India stood around Rupee 15,000 per mt ($197.32/mt) in one of the country's benchmark market in Telangana.

The prices have fallen nearly 20% over the last one month and are also below the government's decided minimum support price of Rupee 17,600 per mt.

Nearly 90% of the markets stand closed due to the lockdown, traders said. However, corn prices are unlikely to see any respite when the markets reopen, as the harvest of second corn crop is expected to arrive in the market later this month.

"The second crop harvest is looking really good and the arrivals will put pressure on corn prices in the country," said Prerna Desai, head of research at Edelweiss Agri Research.

India is among the top 10 producers of corn globally and is likely to produce 28.9 million mt in 2019-20, higher than last year's 27.23 million mt, according to Agriculture Ministry data.

The South Asian country is usually an exporter of corn, and exports to neighboring countries Nepal, Bangladesh, Vietnam, Philippines, among others.

LOW DEMAND

Prices of the coarse grains overall have taken a hit due to absence of buyers in the market, while demand from poultry, livestock and starch companies was almost negligible, offsetting the low arrivals, according to market participants.

Poultry, livestock, and starch companies together consume nearly 75%-80% of country's corn production.

"Poultry in India is dead right now," said Ramesh Chand Khatri, President of Poultry Federation of India.

Many poultry shops have been closed across the country since the lockdown began and demand has been poor ever since the virus emerged due to rumors about the disease spreading through birds, taking assumptions from an earlier bird-flu outbreak.

Businesses are running on only 30%-35% of their stocks, Khatri said, adding that they gave away the meat for free to get rid of the stocks.

Suggestively, demand for feed for poultry industries have also dropped to 30%-35% of the usual, Khatri said.

Even starch companies in the country have cut down on their production to about 20% of their usual capacity, sharply bringing down their requirement of corn, market participants said.

DISRUPTION IN TRADE CYCLE

Trade cycle is being disrupted, mostly due to lack of labour, said Amrutlal Kataria, a trader from Nizamabad, Telangana.

Though the government has allowed essential services to be carried out without exemptions, lack of labor and restrictions on truck movement has brought trading to a standstill.

Farmers are keeping stocks at their homes right now, as there is no demand from the buyers.

Poor prices and hopes of government buying the crops at minimum support prices are also encouraging farmers to hold on to the harvest.

The Telangana government recently announced that they will buy all the corn produced in the state at the minimum support price after prices crashed due to lack of demand.