April 16, 2011


Asia turns to Australia's feed wheat amid record corn prices



Grain buyers in Asia bought Australia's feed wheat this week as corn prices climbed to a record high on tightening global supplies and traders believed more deals are likely in the following days.


Feed millers in the Philippines, Indonesia and Malaysia were inquiring about Australian feed wheat and around 15,000 tonnes was traded at around US$320 a tonne, including cost and freight (C&F), regional traders said.


"Sales of Australia feed wheat are going to be dominating the Asian feed industry as it is highly competitive," said one feedgrain trader in Singapore. "Any fresh demand for feed grain consumption will turn to Australia for coverage because it is pretty competitive and it is displacing corn ."


South American corn was quoted around US$370 a tonne, C&F into Asia, compared with Australian feed being offered close to US$320 a tonne, traders said. Corn from India, which is usually a cheaper origin, was selling around US$340-US$350 a tonne.


Benchmark Chicago Board of Trade corn <Cc1> jumped to a record high of US$7.83-3/4 a bushel on Monday (Apr 11) and it has been trading at premium to wheat <Wc1> for the first time since 1996.


Traders said Australian wheat sales are likely to pick up after stability returns to the wheat market.


"We are now waiting for the next wave of demand," one Sydney-based wheat trader said. "The buyers are looking for the market to settle down a little bit before they resume purchases."


Some buyers have also turned to Myanmar corn, which was being offered in containers below US$340 a tonne C&F. "There is some interest in corn from Myanmar as it can be traded duty free within the Asean region," said another Singapore-based grains dealer. "Indonesia has taken some 10,000 tonnes, but buyers are sceptical as buyers don't know much about the quality."


South Korea's largest feedmaker Nonhyup Feed bought 55,000 tonnes of corn for July delivery via a tender closed on Thursday (Apr 14), while passing on another corn tender to buy 55,000 tonnes for August.


The feedmaker bought the US No. 3 or better yellow corn from Toepfer at US$1.6982 per bushel over July futures on a cost-and-freight basis, traders said.


Trading was slow even in the wheat market in Asia as prices remained volatile. CBOT front-month wheat <Wc1> fell 8% this week after climbing 5% a week ago.


Australia's prime wheat was offered at US$380 a tonne, free on board, a loss of around US$20 from last week, while Australian hard wheat was being sold for US$480 a tonne.


US dark northern spring wheat was priced around US$460 a tonne, while hard red winter was at US$420 - both varieties quoted around US$10 lower than last week. The standard white wheat was at US$380 per tonne, little changed from the last week.


Japan's farm ministry bought 147,712 tonnes of food wheat from the US as planned in a regular tender that closed on Thursday. The wheat is for loading in June.


The trade is expecting more sales of Australian feed wheat into Asia after some stability returns to the market. The Philippines, Indonesia and Malaysia are likely to buy feed wheat to replace expensive corn.


Feed grain buyers and sellers will also be looking forward to the US export data on Thursday to see if all-time high corn prices have been successful in rationing demand.

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