September 12, 2011

 

Asia's feed wheat demand robust on rising corn prices

 

 

Due to rising corn prices, Asia's demand for feed wheat will likely remain robust for the rest of the year, trade participants said Friday (Sep 9).

 

Lower forecasts of US corn yields and output have sent prices higher, widening corn's premium to feed-grade wheat, according to a Dow Jones report.

 

Australian feed wheat is now offered at a US$60-a-tonne discount to US corn on a delivered basis in East Asia, trading executives said. The discount was less than US$25 four months ago during a slump in global grain prices.

 

US corn for November shipment from the Gulf Coast is available around US$365/tonne, cost and freight, at East Asian ports, while Australian feed wheat is being offered at US$305/tonne, C&F.

 

Vietnam has purchased a 30,000-tonne cargo of Australian feed wheat for around US$305-US$310/tonne for October shipment. Japan purchased 10,600 tonnes of feed wheat Wednesday, and has tendered for another 50,000 tonnes. South Korea is likely to purchase at least four cargoes totalling 220,000 tonnes feed wheat for December arrival.

 

The practice of feeding cows and chickens wheat instead of corn has spread from the southern US to China, since wheat is at a discount to corn futures in China, ANZ Banking Group said.

 

On Thursday, corn traded at a premium to wheat on the Chicago Board of Trade, one of the several instances since April when it moved higher than wheat for the first time in 15 years.

 

"We are now heading into a period when CBOT corn will trade higher than wheat on a sustained basis," a Kuala Lumpur-based trading executive said.

 

Not everyone agrees and many analysts say that lower prices push up the demand for feed wheat, narrowing its discount to corn.

 

Due to a strong US demand for soft red winter wheat as animal feed, sales of corn are being rationed, a Tokyo-based commodities brokerage analyst said.

 

Some private analysts forecast US closing stocks of corn by August 31, 2012 around one billion bushels, nearly double the trade estimates, an analyst with Iowa-based MaxYield Cooperative, Karl Setzer, said.