April 28, 2008

US may use more wheat for feed as corn prices hit all-time highs

The US feed industry will likely veer towards using more wheat as wheat prices retreated from two months of hitting record highs, and as corn prices hit a record of US$6 bushel, analysts said.

Prudential Financial analyst Shawn McCambridge said that people are anticipating to use wheat as feed this year.

McCambridge and other analysts said that the strong corn market has played a key role in the anticipated threefold increase in the use of wheat as animal feed so far this year, according to a Reuters report.

Analysts report few bookings of new-crop wheat among cattle and hog feeding operators, but that could change by the start of the US winter wheat harvest in late June.

Around 5 to 10 percent of the US wheat crop is used as feed every year, mostly in June and July as the wheat harvest begins and cash prices are low. Corn supplies are typically tight at that time, with the fall harvest still months away.

Wheat feeding declined in 2007 as wheat prices soared, particularly in comparison to corn.

However, wheat usage for feed could jump to 200 million bushes in 2008 ¨C 2009, more than tripling the 60 million bushels estimated by the USDA, McCambridge said.

Wheat can start to work its way into feed rations when the spread, or premium, for a bushel of wheat over a bushel of corn drops below US$1, analysts said.

Wheat has come down from above US$6 as recently as March, and is likely to narrow some more, making wheat a more viable feed option.

CBOT July wheat futures have plunged 35 percent in value since mid-March on prospects for a big US and world wheat crop.

Meanwhile, corn futures have risen as wet weather in the US Midwest has slowed corn planting, raising questions about yield potential.