Maize production growing faster in India on higher demand

Siraj Chaudhry, Chairman of Cargill India, is betting big on maize. The Indian unit of global agribusiness giant Cargill Inc. is investing Rs 425 crore in setting up a maize milling facility in Davangere in Karnataka that will consume 300,000 tonnes of the commodity every year. "We will continue to grow in maize milling," says a confident Chaudhry.

The plant, likely to be operational in June 2015, will produce feed for poultry and cattle, and foods such as glucose and maltodextrin, a source of carbohydrates. Cargill India is also setting up a cattle feed plant in Bathinda, Punjab at an investment of Rs 70 crore that will consume another 10,000 tonnes of maize every year. "The government of Punjab wants to encourage maize cultivation. Our plant will give farmers the confidence to shift from paddy and grow more maize," says Chaudhry. (Maize and corn are two names for the same grain-crop.)

Indeed, the demand for maize is spiralling in India. Historically, demand for the grain has been driven by the poultry and starch industries. But with changing food habits, the demand for food additives derived from maize is also growing, says Chaudhry. Cargill India already handles one million tonnes of maize (nearly five per cent of domestic production). It exports around 500,000 tonnes and markets the remaining 500,000 tonnes locally.

The India maize story has not enthused Cargill alone. In 2006, French company Roquette, a global leader in starch, acquired 14.9 per cent stake in Ahmedabad-based Riddhi Siddhi Gluco Biols for an undisclosed amount. Riddhi was the market leader in the Indian starch industry. In 2012, Roquette acquired control of Riddhi's starch business for Rs 985 crore. The new company Roquette Riddhi Siddhi remains the biggest starch maker in the country. It is managed by Ganpatraj Chowdhary, the founder of Riddhi.

"The demand for starch is strong and is growing at 10 to 12 per cent every year due to rising consumption in the food and pharma industry. We process around 600,000 tonnes of maize every year into starch and are exploring expansion options," says Chowdhary. The domestic starch makers together consume about 2.6 million tonnes of maize every year. Maize starch, an excellent source of carbohydrate, is a highly versatile industrial raw material and finds extensive applications in the textile, food, pharmaceutical and paper industries.

Maize is preferred in poultry feed because of its easy availability. India has grown to be the fifthlargest egg producer globally and 18th-largest producer of broiler chicken. In the poultry feed industry maize constitutes about 60 per cent of the feed and therefore is a critical raw material. Suguna Poultry, the country's biggest broiler chicken producer, has a separate division to procure maize. It procures over 800,000 tonnes of maize annually for feed requirements. "Maize has greater calorific value, is rich in amino acids and has less toxins compared to grains like millet and broken rice," says a company official. Wheat is better than maize as a feed but it is costlier by over 20 per cent, he added.

An ICRA report last year projected an annual demand growth rate of eight to 10 per cent for the broiler and four to five per cent for the egg industry in the long run, implying a rising demand for maize as a feed. At an annual production of about 23 million tonnes, maize is the third most produced grain in India after wheat and rice. Over the past 10 years, maize has been the fastest-growing grain crop in India. It has witnessed 56 per cent output growth in the period compared with 20 per cent for rice and 32 per cent for wheat. The growth has been supported by an absence of government control widely seen in wheat and rice. The government, from time to time, has been imposing restrictions on the private purchase of wheat and rice and the exports of these grains are also regulated.

Interestingly, maize is the most grown grain globally. "Traditionally, most maize went to livestock as feed but modern technology has helped it find new uses in food industry with animal protein and starch driving global demand today. International maize trade is now larger than the international rice trade," says Samir Shah, Managing Director and CEO at commodities exchange NCDEX. India is one of the beneficiaries of the booming international maize trade. The country exported a record five million tonnes of maize in 2012/13, valued at Rs 7,000 crore and is now the fourth-largest maize exporter after the US, Brazil and Ukraine. In the last five years, exports have doubled.

According to Shah, transparent pricing and grading - developing standardised quality for the trade of the commodity globally - have contributed in a large way to the growth of maize production in India. "NCDEX futures trading in the last decade helped develop the value chain and physical market for maize by giving advance price signals and allowing risk management," he says. Strong demand has driven average maize prices from Rs 711 a quintal in 2007/08 to Rs 1,326 in 2013/14.

With its wide applications, maize is also referred to as the Queen of Cereals. It is estimated that nearly one-fourth of the stock keeping units in a modern grocery store contain maize in one form or the other. These range from toothpaste, detergent, paper, dyes, soaps to artificial sweeteners, fructose, etc. Maize also finds application in food containers, plastic food packaging, baby powder, diapers, medicine, vitamin tablets, textile products, candies and so on. Maizerich breakfast cereals, cooking oils, snacks and popcorn have also become popular. Internationally, maize has been processed to produce bioethanol in a big way for blending with auto fuels. In fact, maize is the only cereal that has such diverse uses.

Meanwhile, the government has appointed an inter-ministerial panel on crop diversification to help farmers look beyond paddy which consumes more water and fertiliser than maize. The agriculture price support policy of the central government is also designed to boost maize production. In order to incentivise farmers to diversify, the government fixed the same minimum support price - Rs 1,310 per quintal - for maize and common variety of paddy in 2013/14. Six years ago, the support price of common paddy was 20 per cent higher than maize. It is also unique since it can be grown round the year though the bulk of production comes from rabi, the winter crop.

Spurring maize production in the country is technological intervention in the form of hybridisation. It involves crossing two genetically different plants to produce a desired seed that can grow high yielding plants. The area under maize hybrids is expanding every year and it is expected to lead to a surge in production. Cotton production in the country, for instance, has grown by 160 per cent since 2003/04 with the adoption of hybrid cotton seeds. In fact, maize is the first major cereal crop to benefit from hybridisation.

But while Indian maize production has been rising, there is still a long way to go - the country's productivity is less than half of the global average. The productivity in India is 2.5 tonnes per hectare against the world average of 5.5 tonnes. US, the biggest maize producer, has a productivity of 10 tonnes.

Currently, hybrids constitute only about 30 per cent of the area in India under maize compared with 85 per cent in the US. Directorate of Maize Research, a body under the Agriculture Ministry, estimates that the area under hybrids will go up to 90 per cent by 2050. "Maize production has the potential to double in the next ten years provided we keep our focus on increasing productivity and keeping markets open for exports," says Ashok Gulati, Chair Professor of Agriculture at Indian Council for Research on International Economic Relations.

It is also important to ensure better price discovery of maize. "Maize is mostly grown by small and marginal farmers. Hence, improved price discovery and better realisation of crops become key in giving a push to maize production in India," says Shah. Futures trading in maize is a step in that direction. NCDEX had launched maize futures contract in 2005 with Nizamabad in Andhra Pradesh as a delivery centre. With the growing importance of Bihar as a maize producer it recently launched maize rabi futures with Gulabbagh in Bihar as a delivery centre.

B.K. Anand, Director and Business Head (Grains and Oilseeds Crush) for Cargill India, says maize used to be a subsistence crop for the farmers few years ago. "With the rising allocation of wheat and rice at affordable prices in the public distribution system at the central as well as the state level, farmers have moved away from maize consumption and it has led to a rise in the marketable surplus," he says. Direct consumption of maize is expected to dip further with rising prosperity levels in rural India.