MUMBAI, Nov 19 (Reuters) - Indian corn futures are likely to extend gains this week, after hitting their highest level in more than two months on Monday, due to below-expectation supplies in the spot markets amid strong demand from feed makers.
“Demand from feed makers is very strong. They are buying whatever supplies are reaching the market. Prices are unlikely to go down as demand for poultry products is expected to rise during ongoing winter season,” said Shreedhar Reddy, a trader in Davangere, Karnataka, the largest producer of corn in India.
Demand for poultry products usually rises during winter as people eat more fatty foods than in the high temperatures of the summer.
Traders were expecting supplies from the new season crop to rise this week, but that did not happen. Lower-than-expected supplies are keeping prices firm in both, the futures and the spot markets, despite a lack of demand from exporters, said Shankarji, a trader based in Karimnagar in Andhra Pradesh.
Local prices have also found support after the farm ministry forecast India’s 2012/13 summer-sown corn output at 14.89 million tonnes, down from 16.22 million tonnes in the previous year.
The summer-sown variety accounts for more than 80 percent of India’s total corn output.
Increasing domestic demand amid concerns over decline in production is keeping prices firm in local markets. Higher local prices could make it unprofitable to sell Indian corn in overseas markets and could cut trim India’s corn shipment by nearly 40 percent, traders said.
The projected increase in domestic demand and the lower production estimates have pushed local spot prices to around $240 a tonne, compared with around $200 last year. Traders are waiting for spot prices to fall by about $20 a tonne before buying for export.
In Chicago, the key December corn contract on the CBOT was up 0.83 percent at $7.33 per bushel at 1211 GMT.
The key December corn contract on the National Commodity and Derivatives Exchange (NCDEX) closed up 2.59 percent at 1,427 rupees (around $6.6 per bushel) per 100 kg, after hitting a high of 1, 431 rupees earlier in the day, a level last seen on September 7.
Indian cottonseed oilcake, or kapashkhali, futures fell on Monday to hit their lowest level in November, on rising cotton supplies in spot markets.
Kapashkhali is a by-product of cottonseed and is used as a cattle feed, mostly for dairy animals in northern India.
“Cotton supplies are rising in spot markets and it will make additional seeds available for crushing, thereby putting pressure on prices,” said Manjit Singh, a trader based in Ludhiana, Punjab.
The key December contract on the NCDEX closed down 0.21 percent at 1,420 rupees per 100 kg, after touching a low of 1,406 rupees earlier in the day, a level last seen on Oct. 29.
$1 = 55.0900 Indian rupees Reporting by Deepak Sharma; Editing by Anupama Dwivedi