Maize, diverted for ethanol production, has caused poultry feed costs to go up, impacted cooking oil prices, and reduced oilseed farmers’ profits. The ethanol program has led to consequences like increased maize imports and declining revenues for sugar industry, highlighting the complex trade-offs of biofuel policies.
Ethyl alcohol squeezed out of maize was supposed to make a dark fossil fuel slightly green— ethanol-blended petrol, the government said, would bring down dependence on crude oil imports and reduce carbon emissions.
It has, however, cast a shadow on several other sectors—it has pushed up the prices of poultry feed and cooking oils and hit the wallets of consumers and the profits of oilseed farmers.
CHICKENS COME HOME TO ROOST
Long before policymakers decided to ferment corn to produce biofuel that can be mixed with petrol, it was chicken’s favourite food. According to industry estimates, India’s poultry sector consumes 60% of maize produced in the country, with the rest being used mostly as livestock feed and by beer and whiskey breweries and starch manufacturers.
The biggest impact of maize’s diversion for ethanol has been on the poultry industry that uses the grain as poultry feed.
Dr KG Anand, general manager (south) of Venkateshwara Hatcheries, better known as Venky’s, says, “The poultry industry has started facing a severe shortage of maize as the grain’s use for ethanol has gone up from 1 million tonnes in 2022-23 (ethanol supply year runs from November to October) to 7 million tonnes in 2023-24 and is projected to grow to 13 million tonnes in 2024-25.”
With demand shooting up, maize prices have gone up.
“Maize prices,” says Anand, “increased by about 20% annually to an average of Rs 26 per kilo in 2024 and stayed at a record level of more than Rs 30 per kilo for a few months.”
Poultry farms, which raise chicken for meat, have been passing on the increase in maize prices to consumers during periods of peak demand. This could get worse. “We did not quite feel the pinch of the sharp increase in maize prices as the prices of soybean meal declined substantially from Rs 55 per kilo to Rs 35 per kilo,” says Anand, who is worried about what happens next.
“We expect maize prices to touch Rs 30-32 per kilo by July. If soy meal prices also go up, we will have to increase chicken prices or cut the production of chicken to reduce losses,” he adds. “We cannot increase egg prices as it is a price-sensitive market.”
CONS OF CORN
It was in 2022 that India began to incentivise the use of maize to manufacture ethyl alcohol to reduce the dependence on sugarbased ethanol. The share of maizebased ethanol in the country’s ethanol-blending programme (EBP) has increased from nil in 2021-22 to 40% in 2023-24 and could be over 50% in 2024-25. This sudden diversion of maize has had unintended consequences as production has not kept up with demand.
According to government estimates, maize production in 2023-24 was 37.4 million tonnes, down from 38 million tonnes in 2022-23. It is estimated that the production of maize this year will go up only by about 4 million tonnes to 41.4 million tonnes.
Maize-for-ethanol has not just impacted chicken feed but has had a ripple effect on livestock feed and the prices of cooking oil.
How did this happen? The edible oil industry, which processes oilseeds such as soybean, mustard, cottonseed and groundnut to make cooking oils, gets its revenues partly from selling the oil and partly from selling the waste, called oilmeal, that is leftover from the extraction of oil.
Oilmeal is used as feed for cattle, poultry and fish. However, with the growing production of ethanol from maize, the waste that comes out of the process, called distiller’s dried grains soluble (DDGS), has also gone up.
DDGS, which is used in cattle feed, is now available at nearly half the price of different oilmeals such as soybean meal. This has pushed down the prices of soybean meal and, in turn, soybean.
“About 15-20% of maize DDGS is included in cattle feed, replacing various oilmeals. With 27-32% protein and 7-9% oil content, maize DDGS is very competitive and helps lower the cost of cattle feed. The price of different oilmeals has come under pressure due to maize DDGS,” says Balram Yadav, MD of Godrej Agrovet. Soybean is the top oilseed crop in India.
Revenues of oilseed processors have declined due to the falling prices of soybean oilmeal and its declining exports. They have, in turn, reduced the prices paid to soybean farmers.
Soybean prices slumped below the minimum support price (MSP) for most part of last year, breeding huge discontent among farmers. To protect the interests of soybean farmers, especially before the elections in Maharashtra—the second largest soybean-producing state, after Madhya Pradesh—import duties on cooking oils were hiked by 20%. This move led to a rise of 20-30% in cooking oil prices, but did not shore up soybean prices
. Along with vegetables, the increase in the prices of cooking oil pushed retail inflation to a 14-month high of 6.21% in October, squeezing household budgets.
The Solvent Extractors Association, which represents the cooking oil industry, has requested government incentives for oilmeal export, which has fallen by 7% in April-October over last year.
Sugar industry is also worried. With the government promoting maize-based ethanol, the demand for ethanol from sugar is not growing as per the capacities and expectations of the industry, impacting its revenues.
In 2024-25, against the offer of 970 crore litres of ethanol from the sugar industry, oil marketing companies allocated only 837 crore litres, leaving 79 crore litres unallocated. The Indian Sugar and Bio- energy Manufacturers’ Association (ISMA) says the non-allocation could lead to under-utilisation of capacity, causing financial losses to the industry.
“Due to less than 40% allocation of ethanol to sugar industry and stoppage of exports, sugar prices are coming down, leading to a crisis in farmer payments and in the industry,” says M Prabhakar Rao, president, ISMA.
A senior official in the food ministry says the government is taking steps to mitigate the effects of maize’s diversion for ethanol. “The government has allowed import of maize from neighbouring countries such as Myanmar several times this year through its agencies such as NAFED,” says the official, adding that other agencies such as the National Cooperative Consumers Federation are working with farmers to increase the sowing area of maize and are supplying quality seeds to growers.
The demand for maize has turned India from an exporter—of 2-4 million tonnes annually—into a net importer. While maize exports dropped to nearly half a million tonnes in the first few months of 2023-24, 1 million tonnes were imported from Myanmar. Meanwhile, maize farmers are smiling.
Union Transport Minister Nitin Gadkari said at an event in Pune this week that maize farmers from Bihar are happy with the diversion for ethanol. “We can also export ethanol in the international market,” he added.
MORE MAIZE
Agricultural expert GK Sood estimates that in 2024-25, India would need an additional 8 million tonnes of maize. “There is an additional demand for 6 million tonnes for ethanol and 2 million tonnes for poultry, food, starch, etc. However, the availability of maize has increased only by 4 million tonnes. This could lead to pressure on prices and an increase in imports. The result could be further demand destruction in feed and starch segments besides higher prices for products like poultry,” says Sood.
Right now, India uses ethanol to blend 13% of petrol. This meant about 550 crore litres of ethanol were used to make the fuel cocktail by August. The government is looking at a target of 20% by 2025, which would require more and more of maize.
Industry experts say more farmers will shift to maize, eating into the area where soybean, tur, mung and urad are cultivated. It will be another maze to navigate.
