Diverting maize for ethanol will increase poultry feed prices

The poultry industry anticipates that 10-20 percent of maize could be used for ethanol production, which would increase the demand-supply gap further, causing a spike in maize prices.

The Indian poultry sector expects feed prices to spurt, crimping its margins, if the Centre goes ahead with its plan to divert maize for ethanol production, as the grain is a primary ingredient of the feed.

Since the government has fixed a cap of 1.7 million tonnes of sugar for ethanol production anticipating a lower sugarcane output, it is hoping to largely fill the gap by allowing more quantities of maize to be used for producing ethanol, in order to achieve its target of 15 percent ethanol blending with petrol this year.

The oil marketing companies (OMCs) have sweetened the deal by hiking the procurement price of ethanol from maize and other grains by Rs 5.79, to Rs 71.86 a litre.

Though the Centre has not declared the volume of maize to be diverted, the poultry industry anticipates that 10-20 percent could go into ethanol production, which could increase the demand-supply gap further causing a spike in maize prices.

Last year, when the prices of soybean, another ingredient of the feed, escalated, the government allowed the import of GM soybean, which stabilised the prices of the commodity.

Maize prices in the country went up from Rs 21-22 per kg to Rs 25 following a poor kharif harvest, particularly in Karnataka, where scanty rains affected production. However, the acreage of the rabi crop of maize has been higher, kindling hopes of a better output. But the prices will depend on the quantity that goes for ethanol production.

The farmgate prices of chicken have gone up from Rs 90-100 to Rs 110-115 per kg. The retail price of chicken is hovering in the range of Rs 200-300 per kg in several cities, hitting demand.

Bigger companies are not feeling the pinch yet as several of them hiked the prices of their products when there was a jump in feed prices a year ago. “Though it is higher, the feed price has not increased to the level it did last year as soybean prices are stable. But the demand of maize has gone up in general, and diversion for ethanol production will lead to a lower supply, which could impact the industry,” said Vignesh Soundararajan, MD, Suguna Foods Pvt Ltd, a major player in the poultry sector.