June 29, 2010


Asian mills buy Black Sea feed wheat; threaten US corn



Mills in Thailand and Vietnam have signed contracts to import Black Sea-origin feed wheat in one of the first new-crop bulk deals to Southeast Asia, a direct challenge to South American and US corn shipments.


Traders said more deals are likely as exporters from Ukraine and Russia were making aggressive offers into the region, which largely relies on corn imports for its animal feed industry from Argentina, Brazil and the US.


"People are really interested in feed wheat now as it is cheaper than the price of corn," said one trading manager with an international trading firm.


Thailand bought two cargoes of 55,000 tonnes each to be delivered in August and September, while Vietnam purchased 55,000 tonnes for August shipment, traders said.


Thailand bought one cargo at US$200 per tonne on a cost and freight (C&F) basis, paying US$192 C&F for the second cargo. Vietnam paid US$195 per tonne C&F. This compares to Argentinean corn being quoted at US$225-230 a tonne.


A trader noted that the protein content is same at around 8-9% in corn and feed wheat, adding that it makes more sense to buy feed wheat, unless consumers are particularly keen on adding corn to their feed.


Earlier this month, British traders reported a cargo of 50,000-55,000 tonnes of UK feed wheat sold to Vietnam, which signals a growing trend in favour of replacing feed wheat with corn.


Typically, corn and soy mills are key ingredients in making feed for pigs, chickens and fish, but price conscious buyers can turn to wheat instead.


Wheat futures on the CBOT, weighed by heavy global supplies, have fallen nearly 50% since the start of 2008, while corn futures have fallen just over a quarter in the same period.


Japan is the biggest corn importer in Asia, taking more than 16 million tonnes a year, while South Korea, Malaysia and Vietnam and other significant buyers.


Riding growing production and bulging stockpiles, Black Sea producers, led by Russia, have also been even targeting the milling or food grade wheat market, where Australia and the US have so far held sway.


Russia's farm industry organised a major marketing offensive in Singapore earlier this year, launching direct talks to export wheat with top importers such as Japan, South Korea, Indonesia and Bangladesh.


Asia imports more than 20 million tonnes of wheat a year, with top regional buyers Japan, South Korea and Indonesia taking some 14 million tonnes. Smaller buyers such as Malaysia, Bangladesh, Vietnam, Thailand and the Philippines take the rest.


Efforts by Black Sea producers to sell milling wheat into Asia seem don't seem to be futile. Japan said it planned to loosen its reliance on food wheat imports from the United States, Australia and Canada by giving trading houses flexibility in handling logistics for bulk imports, starting from September loading.


Japan, the world's fourth-biggest wheat importer, is also considering importing milling wheat from Ukraine, Kazakhstan, Russia, Argentina and Germany in a bid to diversify its sources of wheat, according to Shirara Shiokawa, director of the grain trade division at the Ministry of Agriculture, Forestry and Fisheries.