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Drought, pests could force India to grant duty-free corn imports

Below-normal monsoon rains and an infestation of the fall armyworm, which devastated African crops in 2017, have slashed India’s corn output and boosted prices, increasing the chances the government will grant duty-free corn imports for the first time since 2016.

The shift to imports in the world’s seventh-largest corn producer, which typically exports to Asia, highlights the breadth of the crop losses due to the drought and armyworm. It also demonstrates the potential harm that the armyworm may wreak on India’s agricultural economy, which supports nearly half of India’s 1.3 billion people.

India harvests two sets of corn crops a year, a winter crop from March and a summer crop from September.

For the summer crop in the 2017/18 crop year ending in June, India harvested 20.24 million tonnes, according data from the Ministry of Agriculture and Farmers’ Welfare.

However, between the lower-than-normal monsoon rainfall and the armyworm infestation, summer crop output for 2018/19 crop year is forecast to drop to less than 16 million tonnes, according to Subhranil Dey, a senior research analyst at commodity brokerage SMC Comtrade Ltd in New Delhi.

“The weather wasn’t good and there was the pest infestation as well,” said Dey, adding that India’s government will need to allow imports.

“Imports will help in bringing down prices. But the government may not allow huge imports. It will allow them cautiously in a phased manner.”

India harvested 8.47 million tonnes of winter corn in 2018, but the planted area for the winter crop this year shrank 11 percent, according to data from the Ministry of Agriculture and Farmers’ Welfare.

As a result, corn prices in the state of Maharashtra, considered the domestic benchmark, have risen by more than 30 per cent in the past two months to a record of about Rs 20,000 ($280) per tonne. That is up from Rs 13,000 a year ago.

India’s government has allowed duty-free imports as recently as 2016, when the 181,000 tonnes were imported.

India’s government has not decided on petitions received from importers to allow duty-free imports, said a federal government official, who asked to remain unidentified since he was not authorized to speak to the media.

The government may also delay imports until after the upcoming national elections in May to bolster the ruling party’s status with farmers, said Mumbai-based trader at global firm.

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