India’s government plays chicken over surging domestic corn prices

India’s poultry industry is bearing the brunt of the country's high internal corn prices and has limited capacity to switch to other feeds, prompting the industry's leaders to continue pushing for up to 2 million mt of imports to be approved.

Expectations of lower domestic corn production and huge feed demand have supported prices, driving the poultry sector's production costs higher, local media has reported.

While the country’s high corn prices have pleased farmers, they have provided a headache for the feed sector and the government in an election year, with poultry producers particularly exposed.

Corn accounts for up to 70% of the cost of raising a live bird, with the rampant domestic price of corn forcing those costs up by 40% in recent months, according to reports in The Hindu newspaper.

The reluctance of the government to countenance a serious corn import programme for fear of alienating the country’s farmers has left the country in a parallel dynamic – domestic corn prices soaring on tight supply while global prices crash on huge production.

The opposite fundamental is apparent on wheat, as well-distributed rains during the sowing period have fostered ideas that India's wheat production could hit a record 100 million mt.

That has allowed some in the feed sector to find a solution, switching to other feed grains as their lower prices prove attractive.

“People are replacing maize with wheat,” one source told Agricensus.

The huge wheat crop has already spurred government action, with the announcement that the country’s wheat import tariff will increase from 30% to 40% in a bid to shield farmers from price falls as the crop comes to market.

But the solution is not something the poultry industry can easily exploit, and the industry is growing impatient at the government’s efforts to date.

“Wheat is not a good substitute for the Indian poultry industry; they can use only a small percentage,” a second source said.

The government has okayed a corn import tender for 100,000 mt, in a hard-won concession, but the volume is not enough to meet demand and has left some producers calling for further economic support, including tax breaks and improving demand.

According to sources, industry leaders have pushed for imports of between 1.5 to 2 million mt to be allowed, enabling producers to capitalise on weaker global prices.

That opens the door to the possibility of more imports being approved in the coming months, with market sources saying that it will probably happen after the elections that finish on May 19.

If those hurdles are cleared, Ukraine, as a producer of non-GMO corn, stands to capitalise on any further import tenders, with some cargoes already known to have recently made the journey from the Black Sea to the Indian Ocean.

However, with Brazil’s agriculture minister Tereza Cristina announcing on Monday that India has opened its markets to Brazilian chicken imports, India’s chicken producers may have a busy road to cross if they are to get to the other side.