Corn-cerning Fluctuation of Maize’s demand as a commodity

Maize – also called corn – is a multi-faceted crop used as food, feed and industrial crop globally. It is the second most important cereal crop in the world in terms of acreage and is also called the ‘Queen of Cereals’. The multiple utilities of maize as a ‘food’, ‘fodder’ and ‘feed’ further make it more demand-friendly and insulates it against volatile demand situations. Regardless of this, recent global events, especially the Russian invasion of Ukraine, have rendered the global maize market tumultuous. For reference, it is worth noting that Ukraine is the world’s 5th largest producer and exporter of maize. This article explores the fluctuating demand for maize in global markets – (i) maize demand’s historical performance, (ii) the current volatility in the market and its causes, (iii) India’s performance, both historical and current and, (iv) what we can expect.

Corn-text?

First domesticated in Central America about 10,000 years ago, maize is now widely cultivated throughout the world. It has become a staple food in many parts of the world. As of March 2022, global production of maize crossed 1200 million metric tons (MMT).?Looking at the graph below, it can be corn-cluded that global demand and production of maize have been increasing over the past 30 years.

The United States is by far the biggest exporter of corn, followed by Argentina, Brazil and Ukraine. As of 2021, China was the biggest importer of corn, followed by Mexico. Historically, demand for maize has been driven by the poultry and starch industries in the form of feed & fodder, chemicals and biofuels. However, with changing food habits, the demand for food additives derived from maize is also growing – for example corn starch, corn syrup, grain alcohol etc.

Current Market Situation

The crisis between Ukraine and Russia has sent maize prices on a wild ride. Even though agriproducts are usually much less volatile compared to stocks and oil, they are now being subjected to spectacular spikes and drops. For instance, at the onset of the corn-flict, maize prices gained more than 3%. After a month of conflict, these prices are 18% above their prices this time last year. This is primarily because Ukraine ranks fourth among maize exporters and accounts for approximately 14% of trade. The ongoing military action in Ukraine has disrupted port operations and commercial activity in the Black Sea, increasing the level of uncertainty in the global corn market. One Singapore-based trader at an international grain trading company that supplies to Asia said “Corn supply disruption issues are getting serious from the Black Sea region. Ports in Ukraine have shut down and Russia is facing difficulties in exporting”. To emphasize the magnitude of this crisis’s effect, check out the graph below-showing corn prices over 20 years. This is the 1st time that corn price for a major exporter (here, the US) has reached $350/ton.

India’s Performance

Maize has a very prominent role to play in the Indian economy as roughly 15 million Indian farmers are engaged in Maize cultivation, and this coarse grain is cultivated in about 10.2 million hectares in India. Export demand for Indian corn has shot up after Russia launched a military operation against Ukraine, forcing the international trade of agricultural commodities to shift sourcing to India since supplies from the two nations have come to a grinding halt. The biggest increase in Indian maize exports was seen in neighbouring countries of Nepal and Bangladesh, followed by other Asian nations like Myanmar, Sri Lanka, Bhutan, Malaysia and Vietnam. According to a report by USDA, Indian exports of maize increased from 2,500,000 MT in 2020 to 2,800,000 MT in 2021. Growing export of Indian corn has led to an increase in prices. Balram Yadav, managing director, Godrej Agrovet, said, "The farm gate price of corn has increased from ?19.50-20 per kg to ?22 per kg. It may hover there or come down slightly by May."

Pro’s & Corn’s

The current volatility in the global corn market as a result of the ongoing crisis has presented veiled opportunities for India to increase its share of global maize production and exports. With Ukraine and Russia’s inability to contribute to the global maize supply, a gap in the market has risen between the demand and supply of maize. On a similar note, maize yields are also expected to suffer from a lack of rain in Argentina and Brazil. India should seek to capitalise on this and fill these gaps by stepping up the production and export of corn. At this time, immediate short-term market demand can be met by releasing part of the maize reserves held by the government of India for export purposes. For example, both Ukraine and Russia have been sizable suppliers to the Middle East and North Africa (MENA) region. According to the USDA, the demand forecast for 2022 for the MENA region remains high. Similarly, Turkey, a net importer of maize, has allowed zero-duty imports of corn and other grains since last September. This policy has been extended until the end of 2022. India should seek to step in and plug these demand-supply gaps. Furthermore, increased exports will result in an improved balance of payments.

?"Ukraine used to be a big exporter of non-GMO corn. Due to tensions in the Black Sea region and the high freight rates, now the demand for maize from South Asia will shift to India as no other origin can feed this demand," said the head of an international trade consulting body, requesting anonymity. "India's corn exports have been increasing for the past two years as supplies from Myanmar dwindled after the military coup in that country."

?In corn-clusion, the ongoing military conflict has resulted in an imbalanced global maize trade, with demand outstripping supply. It is too early to predict the final impact on trade levels for the year-end. However, with the existing knowledge, and a sense of proactiveness, India can corn-vert this market volatility to its benefit by ramping up corn production and releasing a part of its maize reserves for immediate need exports. With precise planning and inspiring execution, India can cement its spot as one of the leading producers and exporters of maize globally.?