Maize Prices Drop 24% Below MSP, Raising Concerns Over Rural Demand
Indian maize farmers are facing mounting income pressure as mandi prices have slipped nearly 24 per cent below the government's Minimum Support Price (MSP) in several key producing states. With prices hovering around Rs. 1,800-1,850 per quintal against the MSP of Rs. 2,400, an oversupply and inadequate storage infrastructure are forcing farmers to sell at steep discounts, raising concerns over rural demand and agricultural profitability.This is happening despite India witnessing a total maize production of more than 42 million tonnes in the current agriculture year owing to sufficient rains, quality seeds and plantation, owing to high demand from the poultry and ethanol industry.
Record Harvest Meets Weak Market Demand
Specialist economists in the field of agriculture suggest that there is an ordinary supply and demand relationship that results in falling prices for the commodity. The supply has been rising constantly, and procurement has not been catching up with the production as it does in the case of rice and wheat; therefore, the producers have been forced to dispose of their crop on the open market immediately after the harvest.
"There is a high arrival of stock during a limited time span whereas institutional procurement remains unaffected; hence, the prices will definitely fall below MSP until government procurement comes into the picture," said Dr. Ashok Gulati, an agricultural economist.Market insiders believe that poultry feed mills, which belong to the largest consumers of maize in the country, continue keeping their needs steady but insufficient due to the sudden rise in supplies.
Meanwhile, the ethanol business uses a number of raw materials in order to manufacture its product.
The official estimates show that in the last five years, there was an increase in maize production, since farmers moved from cultivating water-intensive crops because of the increasing demand from the industries. But the marketing infrastructure could not cope with the increased production.
Rural Income Concerns Grow
Decreased maize prices could act as a burden on income levels in several states where maize is considered a big earner for the farming community. Decreased farm-gate prices could also impact the consumption expenditure in the rural areas and bring new challenges for the FMCG and farm machinery companies that depend on agriculture.
From an economist’s point of view, it is evident from the present scenario that improved procurement mechanisms, higher storage facilities, and increased involvement of the private sector in the agri value chain are required.
"Price volatility does not encourage investments in high-value agriculture. If you cannot offer stable returns to the farmers, at the end of the day there are going to be poor incentives for production, irrespective of the increased production," Madan Sabnavis, Chief Economist, Bank of Baroda.
It is expected that prices of maize will gradually begin to rise in case of industrial demand and ease in export becoming favourable in the later half of the year. However, without any immediate response, it may be possible that mandi prices may fall in the coming weeks due to oversupply. As mentioned above, it once again highlights the gap between increasing agricultural production in India and ensuring proper prices for farmers.
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