September 23, 2010

World shifts from wheat to alternative sources

Global demand for feed wheat has shifted to sources such as corn and barley.

Continued demand for feed grain in China has added great pressure to the largest corn supplier, the US. A measure of this demand pressure is the stocks-to-use ratio.

In the US stocks-to-use ratio for 2010-11, corn stands at 8.3%. Despite the fact that the US is expecting a record corn crop this year, this is the lowest ratio for corn in 15 years. Traders are banking on a strong market for corn.

US futures markets are showing the largest long positions in four years.

Australia's domestic pressures have pushed stock feed wheat to a new high of AUD300 (US$287) a tonne delivered Melbourne mill this week, a rise of AUD9 (US$8.6) a tonne from last week.

New-season prices for cereal grains are generally AUD3-AUD5 (US$2.9-US$4.8) a tonne easier this week, mainly on the back of a higher value for the Australian dollar.

Multigrade contracts for APW wheat delivered to Victorian ports were available last week at AUD287 (US$274) a tonne.

Prospects for a huge harvest in eastern Australia are showing in grain forecasts.