April 28, 2021

 

Asian feed producers turn to wheat as corn prices surge to multi-year highs

 


Asian feed producers in China, South Korea and Vietnam have switched to buying more wheat from Australia and the Black Sea region for livestock feed as corn prices surge to multi-year highs, said two Singapore-based grains traders, Reuters reported.

 

The three countries combined are projected to purchase 26.4% of worldwide corn imports in 2021, based on data by the United States Department of Agriculture (USDA) so any substitution for wheat could majorly impact global grain trade flows.

 

Ole Houe, a director at brokerage IKON Commodities in Sydney, said there is demand for wheat from Australia by feed producers, but there aren't many lower quality wheat that can be used for livestock feed. Houe said corn has become more expensive than even milling wheat from the Black Sea region.

 

Chicago Board of Trade corn futures surged to its highest since 2013 this week, gaining 21% this year. Wheat has increased 16% since the start of 2021 to its highest since February 2013.

 

The two Singapore-based grains traders said milling wheat from the Black Sea region is quoted at US$290 a tonne (including cost and freight) to Asia for August exports, while corn comes to about US$305 to US$315 a tonne (including cost and freight).

 

There are concerns over worldwide corn supplies due to strong demand, poor weather in the United States, and estimated lower output in Brazil. Wheat does not have major supply issues.

 

One of the Singapore-based traders, who works at an international trading company that sells grains to Asian and Middle Eastern buyers, said there will be volatility expected in grain trade flows for the rest of 2021, adding that the surging corn prices will see declining corn demand in Asia and lower corn imports by some countries.

 

Traders said countries that use wheat as livestock feed such as Indonesia, Thailand, and the Philippines are expected to increase purchases.

 

The other Singapore-based feed grains trader, who sells South American corn in Asia, said even South Korea is projected to use more wheat for livestock feed, but Japan will maintain its use of corn.

 

The enormous feed industry in China has already substituted corn for wheat in key swine producing areas, affecting demand for soymeal.

 

Vietnam corn imports have dropped since August, while wheat imports reached 200,000 tonnes in March for the first time since January 2020, based on data by Refinitiv. This reversed a trend in Vietnam's corn purchases. Based on USDA data, Vietnam's imports for the Their imports for the 2019/2020 crop year increased to 10.6 million tonnes from 1.1 million tonnes in 2011/2012.

 

The past four years saw worldwide corn inventories decline. Global reserves for corn are projected to drop to 283.85 million tonnes in 2020/2021 from an all time high of 351.81 million tonnes stockpiled in 2016/17.


- Reuters