September 7, 2007

 

EU feed producers seek cheaper wheat substitutes

 

 

Record high wheat prices are pressuring European animal feed makers to immediately seek cheaper alternative ingredient imports.

 

Traders said on Thursday (September 6) that huge tonnages of Brazilian corn, Thai tapioca and Argentine soymeal have been bought. However, prices of these grains have quickly soared due to EU's rush to find cheap alternatives.

 

About 70 percent of European Union animal feed ingredients are grains, mostly wheat, says French analyst Strategie Grains.

 

But cereals prices have shot up to record levels in past weeks on fears of tight global supplies after poor harvests.

 

French November delivery wheat futures hit a record 300 euros a tonne on Wednesday (September 5), up from 180 euros in late June.

 

Cheap feed grain supplies from east Europe have also dried up after poor crops.

 

A trader from Germany said many EU feed makers have turned to Brazilian corn as an immediate alternative as "European prices are so high that the extra shipping costs and import duties still made South American corn attractive."

 

He added that more Brazilian corn will be coming in as feed makers are shunning US corn due to its genetically-modified corn seeds.

 

German feed makers are thought to have purchased about 250,000 tonnes of Brazilian corn in recent weeks while further 200,000 tonnes have been imported in France since the start of the season, traders said. Such imports in normal years are rare.

 

In Britain, traders said there had also been a pick-up in imports of Brazilian corn as farmers seek alternatives to high priced domestic feed wheat.

 

Corn purchasing has in turn increased demand for the feed grain sorghum, with substantial purchases believed to have been made from the United States.

 

In France between 120,000 and 180,000 tonnes of US sorghum is deemed to have been bought for delivery between December and February.

 

A trader said blending sorghum into corn neutralizes the yellow colour in chicken meat, thus, more corn purchase would mean more sorghum.

 

But strong corn demand has pushed up prices. Brazilian corn was traded from ships in German ports at 205 euros a tonne plus import duties in late August, this week trades of 250 euros a tonne were reported.

 

Brisk European purchasing of tapioca, especially from Thailand, has also been seen, along with strong soymeal buying.

 

A Dutch trader said strong tapioca demand has upped prices but buying interest continues.

 

Tapioca for nearby delivery traded this week at 230 euros a tonne FOB Rotterdam, up from 175 euros in July and 135 euros in June.

 

On the other hand, Thomas Mielke, CEO of German oilseeds analysts Oil World, said he expects substantial European purchasing of soymeal in coming months if grain prices stay high.

 

Mielke expected large European purchasing of Argentine soymeal in coming months. Argentina has huge soybean stocks following an energy crisis after the country suffered its coldest winter in decades in past months.

 

The government restricted electricity use by industry, forcing oilseed crushers to cut production sharply. But spring weather in Argentina means power restrictions have now ended.

 

Mielke said much depends on whether consumers will accept higher prices for meat caused by higher feed costs. If meat production will fall, so will feed demand, he said.

 

Since the start of the season French feed makers have raised average prices by 30 percent but this was still below the more than 50 percent rise in wheat price seen in the same period.