India’s corn trade braces as ethanol mandate hike fires competition fears

The country is already one of the world’s big corn producers and consumers and is already facing an expected deficit as demand outstrips domestic production, but it has committed to reaching a 20% ethanol blend target – known as E20 – by April 2025.

The International Energy Agency (IEA) said earlier this year that India had attained an average blend rate of 10% by June 2022 and was phasing in E20 blends from April 2023.

While sugar will play a major role in producing ethanol, demand for corn is also expected to step up; one industry source told Fastmarkets they expect India’s corn use for ethanol demand to double to 12.5 million tonnes in 2025 from 6 million tonnes in 2024.

“Are we going to grow an extra 6 million tonnes of corn or are other industries going to suffer?” one trade source said of the forecast, with human food, fuel feedstock and animal feed demand all expected to compete for corn supplies.

The USDA forecasts India’s corn production to be stable year on year, landing at 37.5 million tonnes for both the 2023/24 and 2024/25 marketing years, making it the sixth-largest corn producer in the world.

But domestic consumption is already forecast to increase to 38.6 million tonnes, up by 850,000 tonnes from the previous year and over 1.1 million tonnes above production.

Nonetheless, imports are expected to decline to 500,000 tonnes, down by 350,000 tonnes, and stock levels are expected to decrease sharply, according to the USDA’s estimates, falling by 900,000 tonnes to 1.8 million tonnes and marking a five-year low.

“[The government is saying it] will increase ethanol blending targets, and certainly pressure will come on corn only,” a second trade source told Fastmarkets, saying that the effect has likely already been felt among importers.

India reported an active increase in corn imports through the 2024 calendar year; some states have campaigned to allow further imports, with domestic poultry producers – a significant domestic consumer – complaining about the relatively high price of animal feeds.

But allowing increased imports can come with political costs, as the country’s huge farming community is a significant electoral bloc and can suffer financial losses when increased imports lead to lower domestic prices.

Nonetheless, the country has already experienced a surge in imports through 2024, according to Fastmarkets data, with close to 290,000 tonnes of imports reported in January-August.

The bulk of that volume has come from Ukraine, according to customs data, with a small proportion also booked from regional suppliers such as South Africa and Myanmar, a trend that is likely to continue, sources said.

“Yes, there are already trades happening from Myanmar for November-December shipment,” the second source said, estimating that 250,000-500,000 tonnes will likely move from Myanmar to India through the last two months of the year.

Despite that, trade sources told Fastmarkets that increased imports would only be a last resort, with stocks likely to be drawn down and the country expected to harvest a relatively big corn crop.

Any imports would depend on the relationship between domestic and international corn prices, with imports only possible if they prove to be more competitive than buying corn from the local market, trade sources said.

“It means that import demand will also go up, but not right now, as we have a big crop harvest starting. So, imports should ideally happen in January-March or May-July,” a third local source said.

The onset of extreme weather has polarized the debate around climate change in recent months, catalyzing action in some regions but spawning backlashes in others amid higher costs of biofuels versus relatively cheap crude oil.

India, which earlier this year recorded extreme temperatures of over 50 degrees Celsius (122 degrees Fahrenheit) in the capital Delhi, has set out a roadmap to get to an E20 ethanol mix by 2030, although it looks to be on course to hit that 20% figure in 2025, according to the IEA.

Alongside that, the country has also mulled a 5% biodiesel blend target (B5), and, recently, professional services company Deloitte released a report suggesting that India could produce up to 10 million tonnes of sustainable aviation fuel (SAF) with the right incentives and support.

While the report factored in the use of 2.4 million tonnes of waste-based cooking oil in producing SAF, it also noted that 37 million tonnes of corn and 33 million tonnes of sugar would also form viable feedstocks to meet the target.

The influx of mandates, new incentives and technologies that are able to produce sophisticated, high-quality biofuels has galvanized the biofuels sector, despite potential rollbacks in some regions, but it has comprehensively reignited the food versus fuel debate.

For some countries, including India, the objective of ramping up more biofuel production is only partially environmental; there is also an energy security element that feeds into the dynamic.

The Indian government’s Roadmap for Ethanol Blending in India 2020-2025, released in 2021, set out the need for increased ethanol blending in India’s gasoline mix, and it began by highlighting that the country was a net petroleum importer of 185 million tonnes at a cost of $55 billion in the 2020/21 fiscal year.

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Tags: ethanol, consumption, demand, estimates, corn, USDA, Production, India, forecast, imports