India shakes up global maize market with ethanol drive

Mumbai — A push by India to make more maize-based ethanol has turned Asia’s top maize exporter into a net importer for the first time in decades, squeezing local poultry producers and scrambling global supply chains.

The jump in import demand comes after India in January hiked the procurement price of ethanol made from maize to drive a shift away from sugar cane-based ethanol for blending in petrol .

With the government promoting ethanol in petrol to reduce carbon emissions and trying to ensure ample supply of cheap sugar in the world’s biggest market for the sweetener, India appears set to become a permanent net importer of maize.

The prospect of India ramping up maize imports is likely to support global prices, which are trading near four-year lows.

Crushed by soaring feed costs as local maize prices rise far above global benchmarks, India’s poultry producers want the government to remove duties on imports and lift its ban on genetically modified (GM) maize. The prohibition severely limits their buying options.

India usually exports 2-million to 4-million tonnes of maize, but in 2024, exports are expected to drop to 450,000 tonnes while the country is set to import a record 1-million tonnes, mainly from Myanmar and Ukraine, which grow non-GM maize, traders estimate.

Traditionally, the poultry and starch industries absorbed most of India’s maize production of about 36-million tonnes.

Last year, however, ethanol distilleries started using maize and their demand grew this year after the government abruptly curbed the use of sugar cane for fuel after a drought. That led to a shortfall of 5-million tonnes, an official with the All India Poultry Breeders Association said.

“Now, the poultry and starch industries are battling with distilleries to get their share of supplies, and this fight is keeping prices high,” said Nitin Gupta, senior vice-president of Olam Agri India.

Olam estimates ethanol distilleries will need 6-million to 7-million tonnes of maize annually, demand that Gupta said can only be met with imports.

Traditional export markets such as Vietnam, Bangladesh, Nepal, and Malaysia, which bought maize from India because of its prompt availability, are now compelled to source supplies from South America and the US.

“Vietnam has cut down its imports of maize from India recently because India’s prices are too high,” said a Ho Chi Minh City-based trader.

Carbon emissions

Looking to curb carbon emissions, India aims to increase the share of ethanol in petrol to 20% by 2025-26, from 13% now.

To achieve its 20% blending target, India will need more than 10-billion litres of ethanol, government estimates show, which is double the volume the country produced in the marketing year ended October 2023.

This year, about 3.5-million tonnes of maize has been used to make 1.35-billion litres of ethanol, about four times more than a year earlier, government data shows.

“Sugar cane can start contributing more from the next season, but it cannot contribute more than 5-billion litres. The government’s priority is to fulfil domestic sugar consumption,” said a senior government official.

That would mean an increase in maize-based ethanol production to 3-billion litres, requiring nearly 8-million tonnes of maize, said the official, declining to be named as he was not authorised to speak with media.

Rising maize prices are pushing poultry growers into the red, with feed accounting for three-fourths of production costs.

Uddhav Ahire, chair of Anand Agro Group in the western city of Nashik, said the farm gate price of a broiler is about 75 rupees, but production costs have risen to 90 rupees.

“The poultry industry cannot sustain such losses for a prolonged period,” he said.

The All India Poultry Breeders Association and the Compound Livestock Feed Manufacturers Association demand 5-million tonnes of duty-free maize imports.

A government spokesperson did not respond to a request for comment.

“Since there is a shortage, more maize imports should be allowed at zero duty,” Ahire said. “The government should allow GM maize for feed purposes.”

Maize imports attract a 50% import duty, while India allowed imports of about 500,000 tonnes at a concessional duty of 15%.

Lured by higher prices, farmers such as Krishna Shedge in Jalna district reduced soya bean planting to expand the area under summer sowed maize, which has risen 7% from a year ago to 8.7-million hectares, farm ministry data showed.

“Maize is giving good returns due to higher prices,” he said.

But until prices decline with the arrival of new season supply, small poultry farmers such as Vijay Patil have limited options including scaling back production and trimming the proportion of maize in feed.

“I’m substituting a small portion of maize with broken rice and wheat stalk waste to reduce feed costs,” Patil said.

Trade reversal

Booming Indian demand has lifted maize prices in Myanmar to about $270/tonne, free on board, from about $220, encouraging farmers to plant more.

“Exporters, farmers and other stakeholders in the supply chain have benefited from the rally in prices,” said Murali Chakravarthy, country head for Singapore-based trading company Agrocorp in Yangon.

Imports from Myanmar are not subject to tax as it is categorised by India as a least developed country.

Meanwhile, starch makers are bringing in duty-free maize from Ukraine through India’s advance license scheme, under which an equal amount of finished goods must be exported.

Ukraine’s exports to India started rising from January and totalled about 400,000 tonnes by the end of August, estimates ASAP agricultural consultancy.

In the first half of 2024 India’s maize imports surged to 531,703 tonnes from just 4,981 tonnes a year earlier, while exports fell 87% from 1.8-million tonnes to 241,889 tonnes, trade ministry data showed.

“Every year, we will have to import maize, as production can’t be increased as quickly as demand is rising,” said Hemant Jain, an exporter in Indore.

Reuters