SINGAPORE/NEW DELHI: Indian corn and soymeal exporters are poised to reap the rewards from the drought withering the grainbelts of top producers Brazil and Argentina, luring Asian buyers with cheaper prices and speedier delivery.
Indian grain exports have recently been plagued by quality issues, with both China and Vietnam rejecting cargoes. Despite these setbacks, analysts said the situation in South America will ensure India boosts sales within Asia, which consumes at least 40 percent of corn traded in the world and a quarter of global soymeal, especially if prices remain low.
Any exports from India are likely to relieve global corn and soy prices, which have climbed for two straight weeks, largely due to the South American drought. "The South American crop is suffering whereas India has a clear advantage in terms of supplies and shorter voyage to destination markets in Asia," said analyst Ker Chung Yang at Phillip Futures in Singapore.
"We see higher exports of Indian soymeal and corn into Southeast Asia and other markets."
India accounts for just 8 percent of the global soymeal trade and annually sells some 2-3 million tonnes of corn, a fraction of the more than 90 million tonnes traded globally. The corn crop in Argentina and Brazil, which together account for nearly 30 percent of global exports, was scorched by weeks of hot, dry weather which now threatens to shrink the soybean crop in the world's biggest producing region.
The reduced supply comes as Russia is widely expected to curb exports of wheat, a move likely to boost demand for corn as wheat is used as a substitute in animal feed. "What we are hearing is that the situation in Argentina is potentially worse than what the market has priced in at this point of time," said Adam Davis, a senior commodity analyst at Merricks Capital in Melbourne.
US corn jumped almost 5 percent last week, while soymeal gained 3.3 percent on the week, on concerns over supplies from South America.
SCORCHED EARTH
Rains have fallen over some parts of Argentina and Brazil in the last few days but analysts and officials say it may be too little, too late, especially for the corn crop.
In its first estimate for the season, the Buenos Aries Grains Exchange last week forecast Argentina's soy production to fall 6 percent to 46.2 million tones in 2011/12. It also projected a corn harvest of up to 22 million tonnes, short of initial expectations for a record 26 million tonnes.
Brazil, which produced a record 75.3 million tonnes of soybeans last season, expects to harvest 71.5 million tonnes this year, according to the agriculture ministry.
The lower forecasts have boosted South American grain prices, and analysts said that is where Indian exporters have an advantage. A bumper harvest also means India will play a more important role for a longer time on the global market.
Source : economictimes.indiatimes.com