Ethanol push turns India into corn importer, shaking up global market

(Source – The Hindu, International Edition – Page No. – 13)

 Ethanol Shift and Import Dynamics

• India’s increased focus on corn-based ethanol has turned it from Asia’s top corn exporter into a net importer for the first time in decades.
• The government raised the procurement price of corn-based ethanol in January to encourage a shift from sugarcane-based ethanol, aimed at reducing carbon emissions and ensuring a steady sugar supply.
• India is set to become a permanent net importer of corn, supporting global prices that are currently near four-year lows.

Impact on Local Industries

• Local poultry producers are struggling due to rising feed costs, with corn prices exceeding global benchmarks.
• They are advocating for the removal of import duties and lifting the ban on genetically modified (GM) corn, which limits their purchasing options.
• India’s corn exports are expected to drop to 450,000 tons in 2024, while imports are projected to reach a record 1 million tons, primarily from Myanmar and Ukraine.

Supply and Demand Imbalance

• The ethanol distilleries’ demand for corn has surged, following a government decision to curb sugarcane use due to a drought, creating a 5 million-ton shortfall.
• Ethanol distilleries are estimated to need 6 to 7 million tons of corn annually, a demand that will likely be met through imports.

Economic Impact and Adjustments

• The increase in corn prices has pushed poultry production costs higher, leading to financial strain for growers.
• Efforts to mitigate costs include substituting corn with cheaper alternatives in feed.
• Farmers are expanding corn cultivation due to higher prices, with a 7% increase in area under corn compared to last year.

Trade and Price Adjustments

• Indian demand has driven up corn prices in Myanmar, benefiting local farmers and exporters.
• Starch producers are importing duty-free corn from Ukraine through India’s Advance License Scheme.
• Overall, India’s corn imports surged significantly in early 2024, while exports plummeted, reflecting the shift in trade dynamics.