November 25, 2008

Smithfield's hog unit to import wheat for animal feed


Murphy-Brown, the hog-raising unit of Smithfield Foods Inc. (SFD), plans to import wheat from Britain and Brazil for use as animal feed, a company spokesman said Monday (November 24).


It is cheaper to import the wheat to the US East Coast than to transport domestically grown corn or wheat by rail from the Midwest, spokesman Don Butler said. The company also plans to import some wheat middlings, a by-product of milling wheat that can be used in dietary formulas, from Nigeria, he said.


Butler would not say how much wheat Murphy-Brown plans to import or how much money it will save by importing it. The grain will come into the US through Wilmington Bulk LLC, a North Carolina-based feed-buying consortium representing large southeastern livestock companies.


"We will be bringing in some wheat in December and January to really take advantage of the differential between ocean going freight rates and rail delivery," Butler said. "I won't go into the details of the dollars and cents involved in our transaction. The reduction in the ocean going freight rates is beneficial to us."


Rail rates "have been high for a long time and they remain high," he said.


Traders on the Chicago Board of Trade agricultural floor have heard rumours for the past several weeks that UK wheat would be imported to the US East Coast. This will be the first time in three years that Murphy-Brown has imported grain through Wilmington Bulk, Butler said.


It is a bit surprising that Brazil would import wheat to the US as analysts recently have suggested Brazil may need to buy US wheat to meet its own needs. Brazil normally buys most of its wheat from Argentina, but Argentina is facing a shortfall due to dry weather and reduced plantings.


The US this year produced a bumper crop of soft red winter wheat, grown in the Midwest, due to favourable weather and expanded plantings. SRW production totalled 614 million bushels, up from 358 million last year, according to the US Department of Agriculture.


CBOT wheat futures have dropped nearly 60 percent since hitting a high of US$13 per bushel in February. CBOT corn prices are down about 55 percent since climbing to almost US$8 this summer.

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