Foreign Countries' Policies and Programs

India's corn production is stagnating, while consumption continues to rise. Under the current import and export policy announced last year, the government substantially liberalized corn imports by permitting private sector feed producers in the animal feed industry to import corn without a license, subject to the condition that the imported corn be used in the feed sector. Also in 1997, the government lifted the investment limitations in the poultry feed industry, opening the door for larger-scale operations.

Domestic corn prices in India are expected to rise in 1998 and some of the major users are already concerned that they may not get the corn they require. All of these developments are likely to result in shortfalls in the near future. Some sources forecast feed grain imports of 1-2 million tons as early as 2000, but such optimistic projections depend on the various factors outlined below.

With an annual production of around 10 million metric tons of corn from over 6 million hectares, India ranks tenth in production and fifth in area planted among corn-producing countries. However, the average corn yield in India, 1.7 tons per hectare, is one of the lowest in the world and compares with 8.0 tons in the United States, 4.4 tons in China and 3.2 tons in Thailand.

Corn production in India registered rapid growth in the seventies and eighties increasing from around 6 million tons to 9.7 million tons in 1989/90. Most of the production increase during this period was due to an increase in yields, rising from less than 1 ton per hectare to 1.6 tons per hectare, mainly because of the introduction of high yielding varieties. Corn area remained at around 6 million hectares. Since 1989/90 production has varied from 8.1 million tons to 10.6 million tons. The 1997/98 production is likely to fall back to around 10 million tons.

Corn is produced in most of India’s states. Production in 1996/97 for major producing states is shown below. Most of the increase in production in recent years occurred in Karnataka and to a lesser extent in Andhra Pradesh, where most of the corn is sown to hybrid seed. There has been some production increase in Bihar where corn cultivation has picked up in the winter season. In most other states, where corn production is largely during the summer kharif (monsoon) season under rainfed conditions using mostly traditional varieties, production has either stagnated or declined. Just over one-fifth of India’s corn area is irrigated, and about 60 percent of the crop is produced from high yielding varieties. Area, production, yield, and major input use levels in 1996/97 are shown in the following table:

State	Area (Thousand Hectares)	Production (Thousand Tons)	Tons per Hectare	Percent of High Yield Varieties*	Percent Irrigated*
Andhra Pradesh	377	1076	2.9	84	29
Bihar	746	1511	2.0	97	43
Gujarat	399	618	1.5	53	8
Himachal Pradesh	307	589	1.9	45	8
Jammu & Kashmir	305	454	1.5	61	6
Karnataka	437	1478	3.4	93	55
Madhya Pradesh	844	948	1.1	55	1
Maharashtra	324	490	1.5	96	11
Punjab	166	352	2.1	71	51
Rajasthan	921	1023	1.1	3	13
Uttar Pradesh	1076	1551	1.4	51	32
Other	346	522	1.6	N/A	N/A
Total or Average	6,248	10,612	1.7	59	22

Forecasting India's corn production is problematic because of unpredictable monsoon rains that cause swings in production. Looking at the large inter-state yield variations as seen from the above table--ranging from 3.4 tons per hectare in Karnataka to 1.1 in Rajasthan--there appears to be great potential for increasing corn production in India through yield improvement. However, because of various constraints, yield growth has stagnated except in a few states. These constraints include:

In recent years several large private national and multi-national seed companies have taken up hybrid maize seed production and have come up with hybrids with high yield potential. However, India's restrictive seed import policy and weak plant variety protection provisions hamper importation and development of high quality seeds and prevent farmers from gaining access to better quality seeds.

Indian government research organizations have also developed several high yielding and hybrid corn varieties. However, because of poor extension services, most better seed varieties developed by the government institutes do not reach farmers. The corn processing industry has also established an Indian Maize Development Association to promote awareness and educate farmers about the benefits of maize cultivation and to promote the use of corn.

Although corn has historically been for food use, the rapid growth in the poultry sector in recent years has resulted in a significant diversion of corn for feed use. Ample supplies of wheat and rice have, for the most part, made it possible in recent years to cover increased feed and industrial requirements of corn by curtailing food use. But when and if corn production--along with wheat, rice and other coarse grains--falls because of poor monsoon rains, availability of corn for feed use could decrease dramatically. In addition, because the government does not maintain any buffer stocks of corn, the impact of a production decline on prices will be more pronounced in corn than in wheat and rice, for which substantial government stocks exist. The future demand for corn consumption in various sectors is discussed below.

Animal Feed - According to industry sources, virtually all of the estimated 3.5 million tons of corn used for feed is consumed by the poultry sector. It has experienced phenomenal growth of 15-20 percent in recent years; however, after this period of rapid expansion, growth has begun to slow over the past two years. Excess production of parent stock and commercial broiler chicks, a slowdown in the growth rate of consumption of poultry products, and a reduction in profits are forcing some operations to downsize or close. Because of reduced exports of egg powder and other egg products, several newly established egg processing plants are unprofitable. The industry has now scaled back projections for future growth and some experts project medium-term growth of 5 percent in layers and 8 percent in broilers. However, low per capita consumption of eggs and poultry meat provides tremendous potential for future growth of the poultry sector.

There is little data available on the feed use and feed requirements by the dairy and livestock sector in the country except for some balanced feed rations recommended by animal nutritionists based on their experimental feed trails. Small farmers can seldom afford to give a balanced ration to their animals because of high feed cost and poor economic return from the animals. The majority of cattle survive mainly on forage and agricultural byproducts such as bran except when milking. Although no significant increase in animal population is expected, calculations of potential corn use in the livestock sector (principally dairy ) over 1.5 million tons in 1998 and over 2 million tons in 2002.

Starch - Industrial use of corn is also increasing with the growth in starch and food processing industries. An estimated 500,000 tons of corn is used by the starch industry. There are fourteen starch manufacturing units in India with a total processing capacity of around 1 million tons. Actual starch production is only 300,000 mt (60 percent from corn and 40 percent from cassava) and is estimated to be growing at around 10 percent per annum. The bulk of maize starch is used by the textile, pharmaceutical and confectionary industries. Corn is the preferred raw material but cassava and sorghum are also used as limited substitutes. Assuming that the 10 percent annual growth rate continues. the projected requirement of corn and cassava by the starch industry through 2002 is likely to be 1.5 million tons with the need for corn estimated at 800,000 tons.

Food - Corn and other coarse cereals such as sorghum and millet form an important component of the staple diet in several states. Food use of corn takes place mostly in tribal belts of Madhya Pradesh, Bihar and Rajasthan and hilly regions of Himachal Pradesh, Uttar Pradesh and Jammu & Kashmir and is mostly confined to rural areas. There appears to be a marginal decline in overall per capita corn use for food over the years because of greater availability of wheat and rice; this trend is likely to continue. Breakfast cereals, particularly corn flakes, are becoming increasingly popular with the urban middle class population although total consumption is presently very low. Similarly, use of corn powder for food use (such as custard powder and soups) is also growing from a low base. Total food use of corn in 1997 is estimated at around 4 million tons, which is likely to decline to 3 million tons by 2002.

India has not imported corn or other feed grains except in the late 1980's when 400,000 tons were imported from the U.S. under concessional terms and small amounts were imported from Argentina under commercial terms. A highly restrictive import policy permitted imports through government enterprises for corn "unfit for human consumption" and effectively banned imports. Although the government later changed the description of corn permitted for imports to "feed grade corn fit only for use as poultry feed," that did not encourage imports.

However, under the current import and export policy, the Government substantially liberalized corn imports by permitting private sector feed producers in the animal feed industry to import corn without a license. In addition, the restrictive clause regarding the quality of corn permitted for imports was dropped. The imports are subject to "actual user conditions" (the corn must be used in the feed sector) and registrations of letters of credit with NAFED, a government-run company set up to monitor imports. Although imports are still not open to private traders or non-feed users such as the starch industry, this was nonetheless a significant relaxation which followed several years of effort by the local poultry industry and others. Corn continues to have zero tariff.

Another important factor contributing to the high cost of poultry feed and poor interest in corn imports was an earlier regulation restricting poultry feed manufacturers, with the exception of poultry feed in pellet form, to small-scale enterprises with capital investment below INR 30 million ($705,000 at current rates). This restrictive policy inhibited the development of economies of scale in the poultry feed industry. In 1997, however, the Government lifted this restriction , paving the way for increased investment in the feed sector.

The following will be key in determining whether or not imports take place in the future:

Most feed units in India are small, so it would be necessary for importers to pool orders in order to take advantage of favorable prices. However, these importers may not be fully familiar with international trading practices and grade standards and the "actual-user" condition makes it difficult for large trading companies to get involved except as agents or end-users. Hence, the few large feed manufacturers, with total processing capacity of over 200,000 tons per year, may be the most likely importers.

Based on reports from the Office of Agricultural Affairs, American Embassy, New Delhi. For further information, please contact Rick O’Meara at (202) 720-4933.

Italy is one of the leading importers of U.S. dry beans, accounting for roughly 5 percent of total U.S. dry bean exports. In 1997, the United States exported nearly 11.5 million dollars (20,000 tons) of dry beans to Italy, comprised primarily of cranberry beans, dark red kidney beans, and navy/pea beans. Though the United States is the largest supplier to this 70-80,000 ton market, China is increasingly threatening market share, and may surpass the United States in coming years. However, the market has potential for further expansion, and high quality U.S. dry beans could benefit. While per capita annual bean consumption in Italy is currently only three kilos, Italian consumers are still influenced by historical regional consumption patterns from the beginning of the century, when bean consumption was at least 40 kilos. The resurgence of the "Mediterranean diet" is likely to revive bean consumption.

Health and beauty concerns have increased the popularity of the "Mediterranean diet," which includes dry beans. The Italian health food sector is estimated at around 600-900 million dollars per year, and annual growth has exceeded four percent during the last decade. Retail health food prices are generally 20 to 30 percent higher than supermarket prices, and profits in the sector are high. Research shows that most Italian health food consumers are willing to pay a premium to ensure that food quality meets their specialized nutritional needs. This indicates an opportunity for establishing a niche market for high quality U.S. dry beans, despite a 15 to 20 percent price differential between Chinese and North American beans.

Italian dry bean imports may further increase if Italy continues to strengthen its role as a bean transshipment and redistribution center, as Italy processes, bakes, and re-exports beans to Northern Europe. Italian canneries have joined in on the excellent market opportunities discovered by some leading European markets, such as the United Kingdom. Italy’s dry bean import trend basically parallels its canned bean exports, and partially explains the expansion of dry bean imports from 1992 to 1996. Domestic bean consumption is also being fueled by the rising popularity of salads and dry soup mixes containing beans. While market opportunities in Italy look favorable, U.S. dry bean exporters will have to be strategic to exploit the potential.

Based on reports by the Office of Agricultural Affairs, American Embassy, Rome. For further information, please contact Kim Svec at (202) 720-9523

The Republic of the Philippines has made some significant reductions in its grain import tariffs. In a move to relieve the local milling industry, the Government of the Philippines (GOP) has lowered food wheat import duties from 10 to 3 percent. At the same time, the duties applying to feed wheat and coarse grains (except corn) were lowered from 40 and 35 percent, respectively, to 20 percent. These new rates were instituted with an Executive Order signed by President Ramos during the last days of his administration, which ended on June 30, 1998.

The Philippines does not produce wheat, so its wheat milling industry wholly depends on imports for its supplies. Over 2 million tons of wheat have been imported annually, with the great bulk going into flour milling. The United States has been the traditional supplier for the lion’s share of these imports, with the Philippines ranking as the fourth most important market for U.S. wheat. The U.S. wheat industry as well as Philippine flour millers had been urging the GOP to lower wheat import duties to prevent the importation of highly-subsidized, low-priced wheat flour; the tariff on wheat flour had already been cut in half earlier this year, from 20 to 10 percent.

In the case of feed wheat, the duty reduction is aimed at reducing costs to poultry and livestock producers, and ultimately, the price of their products to consumers. During the past few years, an average of about 300,000 tons of wheat have been used for feed, with 550,000 tons projected for 1998/99. Besides feed wheat, the reduced tariff rate (to 20 percent) applies also to other feed grains such as rye, barley, oats, and grain sorghum, but not corn. The duties on these feed grains are scheduled to fall further, to 10 percent, in the year 2000. The previously high import duties on these grains minimized their import potential, but with the lower rates in effect, the prospects are improving. The U.S. Grains Council recently conducted a sorghum seminar in the Philippines in an effort to stimulate interest in this feed grain.

Corn is the only feed grain produced in the Philippines, and its producers are heavily protected by the GOP. Corn imports have been limited by quotas. Under WTO arrangements, the GOP agreed to allow a tariff rate quota (TRQ) on corn (154,266 tons in 1998), subject to a 35 percent duty. Imports outside the TRQ are permitted, but they are charged an 80 percent duty. The out-of-quota duty is scheduled to drop to 50 percent by the year 2004.

Since domestic corn production is insufficient to meet the growing local demand, local poultry and livestock producers periodically request additional corn import quotas with low or zero duties. In 1997, the GOP granted a supplemental 300,000 ton TRQ at a 35 percent duty, but this was not utilized because of the sharp devaluation of the local currency. This year, the government’s National Food Agency has imported around 300,000 tons of corn, duty free, to meet rising demand. In addition, poultry and livestock farmers are clamoring for a further 300,000 ton corn TRQ at a reduced duty to improve short supplies.

The United States clearly dominates in the wheat market. Philippine millers are accustomed to U.S. wheat types and qualities, and have enjoyed a good trading relationship with U.S. suppliers. Wheat imports are projected at 2.4 million tons in 1998/99, and the United States is situated, once again, to supply the great bulk. The United States has also been the principal supplier of the country’s corn imports. With local corn production lagging and feed grain demand growing during the past few years, a reliance on imports has been increasing. Thus far, the Philippine corn growers have succeeded in keeping a tight reign on imports, although the GOP has given in somewhat with stop-gap measures as supplemental TRQs and reduced duties on imports of "corn substitutes" such as feed wheat and coarse grains.

Although caught up to some extent in the ongoing Asian financial crisis, the Philippines appears to be faring somewhat better than most of its neighbors. Demand for wheat remains strong, and there is continued growth in the poultry and livestock sectors. Therefore, the outlook for grain imports appears positive, and the United States stands to benefit.

Based on reports from the Office of Agricultural Affairs, American Embassy, Manilla. For further information, please contact Rick O’Meara at (202) 720-4933.

In response to growing grain stockpiles, the EU Commission doubled its mandatory arable land area set-aside to 10% for the 1999 crop. Brussels estimates the change would remove 1.5 million hectares and 8-10 million tons, mostly wheat, from future grain production. However, past producer reaction to similar set-aside changes suggests that there will actually be smaller area reductions that, by themselves, would not solve the EU’s growing oversupply problem. USDA forecasts of a bumper 1998 EU grain crop, including a record wheat crop, are leading to predictions of further buildup in grain stocks on top of an 11 million ton (40%) rise last year.