February 14, 2022

EU feed buyers turning more to wheat, away from corn 

Animal feed buyers in the European Union have been gradually shifting from imports of corn, turning to feed wheat purchases, particularly from France, as corn has lost nearly all of its competitiveness with feed wheat amid tightening corn fundamentals globally.

Expectations of declining corn production in South America have supported crop prices in recent weeks, including in Ukraine — the EU's primary corn supplier this marketing season (July-June). The Argus-assessed Ukrainian spot corn contract last closed at $284.50/tonne on the free on board (FOB) market, up by $14.50/tonne since the start of this year.

In contrast, wheat prices — particularly of feed grade — have extended near-steady losses since December, as the gradual arrival of Australia and Argentina's bumper wheat harvests have provided downwards pressure. France's spot feed wheat was last seen at about $294/tonne on a FOB Creil basis, down by more than $15/tonne since January 1. This brought French feed wheat's premium to Ukrainian corn on a FOB basis to below $10/tonne, its narrowest since August.

Corn and wheat fundamentals were off to a mixed start earlier in 2021-22, when unfavourable weather conditions weighed on wheat quantity in Russia, the United States and Canada, while pressuring crop quality in France. In contrast, Ukraine's bumper corn harvest this year curbed price increases for crop. Wheat-corn spreads widened sharply at the time, with the French feed wheat premium to Ukrainian corn peaking at a record $60/tonne in late November.

Narrowing wheat-corn spreads since December have particularly boosted French wheat exports within the EU. The French harvest this year — low in quality but high in volumes — meant the country's product was less competitive globally, with higher-quality milling and feed grades coming out of the Black Sea, Australia, Argentina and India. This left the country with a sizeable export surplus that needed to be redirected to alternative destinations.

French wheat exports to the EU totaled nearly 600,000 tonnes in December, their highest for the month since 2006. This was as large corn buyers, including the Netherlands and Belgium, have turned to French wheat supply.

France's wheat exports to the EU have been strong since the start of this season, totalling 3.67 million tonnes in July-December, up from 2.63 million tonnes last year and their highest for the period since 2017-18. All key buyers in the EU, except for Italy, stepped up their purchases of French wheat on the year.

In comparison, France's non-EU exports have risen at a slower rate on the year, surpassing those to the EU by just 806,000 tonnes — the narrowest spread since 2017-18.

As the EU turns to feed wheat, its corn imports globally continue to decline, totaling 9.79 million tonnes so far in 2021-22, down from 10.28 million tonnes last year and their lowest for the period since 2016-17.

- Argus