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Corn prices have witnessed a roller-coaster ride in last 2 years. After hitting a record high of USD 842.38 per bushel in August 2012, US corn future prices have plunged more than 60 percent to hit a fresh five year low this month. Record prices in 2012 lured farmers to harvest more corn in the following years thereby resulting in record output this year. As supply outpaced demand, prices fell forcing farmers to sell crops at lower rates. Eventually farmers will start looking for other crops to harvest where yields are better than corn. This is a typical commodity cycle which happens in several agri crops.
Sukhjit Starch, a Punjab based company is likely to benefit from lower corn prices. The company is one of the largest producers of maize starch, corn-based biochemical products and corn-syrups. As seen from the chart, maize prices shot up in second half of 2012 and company’s margins came under pressure for the next four quarters (Dec-12 to Sep-13). The correction in corn prices led to rebound in margins as raw material cost of percentage to total sales began to moderate.