May 3, 2012


Northern Europe's feed wheat prices higher than bread wheat



As feed makers scramble for supplies, parts of northern Europe's animal feed wheat prices have unusually risen higher than bread-quality wheat, traders said on Wednesday (May 2).


"An exceptionally cold winter reduced feed grain exports from the Black Sea while European meat sales have been positive and soys are also expensive," one German grain trader said. "Suddenly some feed makers in Germany, the Netherlands, Denmark and Poland find they have strong feed demand and low supplies."


In Germany, feed wheat for nearby delivery in the South Oldenburg animal feed grains market near the Netherlands was offered for sale at EUR239 (US$314) a tonne on Wednesday, way above milling wheat for May delivery in Hamburg at EUR232 (US$305) a tonne.


"A lot of bread wheat is being sold for feed, especially in Germany," another trader said. "Wheat is a commodity and it will simply be sold to the highest bidder, on the bottom line farmers do not care what it is used for.


"I think many feed manufacturers had been expecting weak grain prices in early 2012 and were caught out as prices rose."


Nearby EU benchmark milling wheat prices in Paris rose from around EUR180 (US$240) a tonne in late December 2011 to around EUR215 (US$283) on Wednesday. An early season surge in Russian and Ukrainian grain exports following larger harvests had weakened prices, but Black Sea exports lost momentum in early 2012 as supplies sold out and an exceptionally cold weather disrupted shipping.


Meanwhile, Germany's key pig meat market is stable with good demand, the German Farmers Association said. The sector was recovering from a crisis in early 2011 when discovery of the poisonous chemical dioxin in feed caused a slump in pork sales and a 40% price collapse at one point.


One Belgium trader said prices for soymeal and rapeseed meal, used in compound feed industry as protein sources, have surged since December, also turning more demand to feed wheat. EU high protein soymeal contracts were at EUR400 (US$526) a tonne on Wednesday against EUR280 (US$368) a tonne in December. Rapeseed meal cost EUR255 (US$335) a tonne against EUR170 (US$223) in December.


"Compared to protein prices (rapeseed and soymeal) feed wheat prices are reasonable," the Belgian trader said. "Because of the financial crisis and economic uncertainties, compound feed producers are not well covered as they buy only to meet their immediate needs."


With feed prices high and spring weather freeing shipping, north EU feed manufacturers are making rare purchases of Black Sea grains. Traders cited interest in feed wheat from EU members Romania and Bulgaria and in corn from Black Sea neighbour Ukraine.


"It's the market's job to find alternatives when prices are too high," a north European cash broker said. "Feed grain availabilities are very limited in the UK and Germany and we're only at the end of April."


There is market talk of a rare shipment of Romanian wheat being booked for northern Germany. Interest in imports of non-EU wheat, however, may be cooled by limited options for obtaining EU import licences, traders said.


The EU's wheat quota for imports of US wheat at reduced customs tariffs in 2012 has been exhausted, with the last licences awarded due to expire at the end of May.


Corn, which benefits from a zero EU import duty is seen as a possible alternative for EU feed makers. Ukraine would be the most competitive non-EU corn origin, traders said, citing talk that three or four large shiploads of Ukrainian corn had been booked for transport in May and June to north Europe.


In a sign of the recent wave of feed demand for French grain from the Benelux countries, a rare shipment of French barley was due to be loaded in Rouen for the Netherlands.


In import-dependent Spain, dealers said feed wheat supplies were now enough to tide consumers over until the domestic harvest after hefty shipments from the Black Sea wheat, supplemented by imports from unusual origins such as Brazil and the US.


Dealers reported demand from animals meant feed and milling wheat prices were sometimes the same in parts of Spain, but higher grade wheat still commanded a large premium.

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