The feed factor: Global maize shortage could affect local rice market
The Russia-Ukraine war has raised maize prices by $1 per bushel to $7.6
Exhausted by a global maize supply crunch and spiralling prices, local cattle and poultry feed producers mull replacing the grain with rice in the production line, which ultimately will deliver a supply and price shock to the domestic market of the food staple.
Besides, the country might not have the option of importing rice at reasonable rates to rein in the local market thanks to the Russia-Ukraine war – which has prompted the maize crunch, disrupting the foodgrain supply chain in the first place.
Against the background of the war between Russia and Ukraine – who jointly account for 15% of global maize exports – a number of countries have already switched to rice from maize for animal feed production.
The war has raised maize prices by $1 per bushel (around 25kg) to $7.6, according to the Bloomberg grain chart, while China is on a rice buying spree to fill its maize vacuum.
"We also might have to increase the use of polished rice as an alternative to maize. But, since maize and rice do not have the same nutritional value, it is not possible to throw away maize completely from the production line," Ihtesham B Shahjahan, president of Feed Industries Association Bangladesh, told The Business Standard.
According to data, Bangladesh produced 3.75 lakh tonnes of rice last fiscal year against a demand of 3.50 lakh tonnes. Despite having a surplus production, the country had to import rice to stabilise the surging prices of the food staple.
"Any unusual surge in demand will certainly affect the market," KM Layek Ali, general secretary of the Bangladesh Auto Major and Husking Mill Owners' Association, told TBS. He, however, said the domestic rice market has been stable so far.
According to the United States Department of Agriculture, Ukraine supplies 13% and Russia 2% maize to the global supply chain.
According to the Feed Industries Association, maize prices have started rising since the beginning of the Covid-19 pandemic. Now the rates are on a further rise due to the war.
Local feed producers said maize amounts to 60% of the products, while there are 10% rice and 30% soymeal.
In 2020, maize was at around Tk28 per kg, which has now increased to Tk33. In other words, the price of maize has increased by about 37% in two years, while that of polished rice has increased by 71% and soybean meal by 88%.
On average, feed raw materials prices have increased by 70% while feed prices have gone up by 20%-25% since the beginning of the pandemic in 2020, according to Ihtesham Shahjahan.
Bangladesh produces 60-65 lakh tonnes of animal feed every year.
Ihtesham Shahjahan said it is not possible to increase feed prices now though pricier maize has increased the production costs.
"Many farmers will have to shutter businesses if the already high feed prices jump further," he added.
Short on maize supply, China buying rice aggressively
China – the largest global buyer of maize – is now purchasing rice from Asian markets as an alternative to maize for animal feed, according to Reuters, pushing up rice rates in India to $320 per tonne from $290.
According to the USDA, China imported 29.51 million tonnes of maize in the 2020-21 fiscal year, while Bangladesh's import amounted to 1% of global trade.
According to Reuters, China this year booked around 2 million tonnes of Ukrainian maize, but most of those shipments are now in jeopardy due to the war. To replace those lost volumes, China is expected to import around 3 million tonnes of rice, up from about 2 million tonnes annually in the past two years.
Bangladesh imports maize mostly from India
Bangladesh imports most of its maize from India. According to the Bangladesh Bank, 59.19% of maize was imported from India in the 2020-21 fiscal year, 27.99% from Brazil, 4.42% from Argentina and 1% from Ukraine.
According to the Department of Agricultural Extension, Bangladesh produces 55 lakh tonnes of maize per year against an annual demand of 65 lakh tonnes.
However, all the maize produced in the country is not suitable for animal feed production.
Feed producers use about 35-36 lakh tonnes of maize every year, of which 40% is collected from the local market and the remaining 60% is brought in from the international market.
