February 9, 2007

Asian feedmills taking interest in China feed wheat as corn prices rise
 

China, with an abundant wheat supply, is expected to raise exports of feed wheat at a time when Asian feedmillers are looking for an alternative to expensive corn.

Traders and industry officials said on Thursday corn supply remained tight due to strong demand from the ethanol and starch industries, but wheat supply was ample after a bumper crop last year, even as details are sketchy.

China is issuing the quotas bit by bit, traders said. The government is remaining tight-lipped on how much wheat it intends to release. However, from the wheat auctions held for the past few months, the market is assuming wheat supplies are still abundant. Of the 40 million tonnes of wheat purchased by Sinograin, only 8 million were sold, one analyst reckoned. Beijing was likely to allow exports of 1-2 million tonnes this year, despite the impact of drought on the 2007 crop, traders said. 

For the corn market, however, exporters are having difficulty meeting export contracts due to a late harvest and sharp price rises.

Wheat exports in 2006 were up more than fourfold from the year before, whereas corn exports fell 64.3 percent.

As US corn prices have been up 20 percent since October last year, Asian feed mills are viewing China wheat with renewed zest. This is especially so because in the past, Beijing gave tax rebates for feed wheat exports.

China also announced it was offering more corn for shipment in February or March at prices around US$190-US$200 a tonne, as US prices climbed, traders said.

However, large volumes are not expected for March and new quotas have not been set.

The National Development and Reform Commission, the top planning body, had not agreed to fresh corn export quotas, anticipating larger consumption by the corn processing industry.

Still, China's corn prices are expected to be higher than previously but lower than US ones to remain competitive.