Agriculture and Its Multifaceted Impact

Agriculture plays a crucial role in providing essential resources such as food, feed, fibre, and fuel. A notable example is cotton, which produces not only fibres but also seeds that yield edible oil and protein-rich cakes used as livestock feed. However, the use of agricultural products as fuel, particularly maize for ethanol, is causing significant market shifts.

Impact of Ethanol Production on Maize and Prices

Until the 2021-22 period, India's maize production exceeded domestic demand. The situation changed when maize became a major source for ethanol production, leading to increased demand and price surges.

• India's maize output was 32-33 million tonnes, exceeding the domestic demand of 28 million tonnes.
• Maize is now used for ethanol production, contributing to a domestic shortfall.
• Increased ethanol production (31.51 crore litres in 2022-23 to 484.35 crore litres in 2024-25) has led to maize shortages and price hikes from Rs 14,000-15,000 to Rs 24,000-25,000 per tonne.

Collateral Impact on Soybean Prices

The ethanol process yields a byproduct, DDGS, which serves as a competitive livestock feed ingredient due to its protein content. This development affects the soybean market.

• DDGS is priced lower than traditional de-oiled cakes used for feed, causing a 30% decrease in soybean DOC prices.
• Soybean is trading below its minimum support price, negatively impacting soybean growers.

Import Policies and Domestic Agriculture Strategies

Given the increasing maize prices and production imbalances, there's a push for liberalizing maize import policies, including GM maize for ethanol.

• India allows up to 0.5 million tonnes of maize imports annually, with higher duties on quantities beyond this and a prohibition on GM maize for feed and food.
• The feed industry advocates for GM maize imports for ethanol production to stabilize maize supply and reduce costs.
• Suggestions include boosting domestic maize production by reallocating rice acreage, which is water-intensive and in surplus, to maize cultivation.

Conclusion

The shift towards biofuels in agriculture is creating complex economic impacts. Balancing the interests of maize and soybean farmers while stabilizing livestock feed markets requires thoughtful policy adjustments and improved agricultural strategies.