Thursday, 30 July 2015 12:40
SINGAPORE: Black Sea feed wheat is flooding the Asian market as millers snap up cheap supplies, booking shipments right up to December as they replace corn in animal rations.
South Korea, the Philippines and Thailand have booked close to 3 million tonnes for shipment between July and December, worth about $ 600 million. A jump in Asia’s feed wheat consumption could reduce the region’s dependence on corn imports from the United States and South America, weighing on prices of the feed grain.
“In the past few weeks Brazilian corn has been a little more expensive than feed quality wheat coming from Ukraine,” said one Singapore-based trader.
“Millers have booked several (wheat) cargoes. We expect some importers to buy feed wheat on a regular basis.”
Benchmark US wheat prices have fallen nearly 20 percent this month on ample supplies, dragging down prices for Black Sea feed wheat to levels where it can compete strongly with corn.
Cheaper Black Sea food wheat, meanwhile, has been dominating business in the Middle East and north African markets. Egypt, the world’s biggest wheat importer, has been booking mainly Russian, Ukrainian and Romanian cargoes.
In one of the latest deals in Asia, the Philippines bought 100,000 tonnes of Ukrainian feed wheat for shipment in September and October at around $ 210-$ 220 a tonne, including cost and freight (C&F).
By comparison Brazilian corn rose to a recent high of $ 220 C&F a tonne to Asia although prices have declined since the past week with the feed ingredient being quoted at around $ 190 a tonne.
Still, some feed millers prefer wheat over corn in animal rations and are willing to pay a premium of $ 10-$ 15 a tonne as wheat contains more protein.
US corn futures, which have dropped more than 11 percent in July, could face more downside risk as Asian buyers, especially major buyer South Korea, shift to feed wheat.
Corn prices are already under pressure as near-perfect weather aids crop development across the US Midwest, boosting hopes of another record crop.
South Korea is the world’s third largest corn importer, buying 9.6 million tonnes last year, mainly from the United States and South America. It is forecast to import close to 10 million tonnes in 2015/16 (October-September), according to the US Department of Agriculture.
“South Korea could buy as much one million tonnes of feed wheat (a month) if prices remain competitive,” said a second Singapore trader.
“But now corn prices are falling sharply as Brazil has a massive crop to sell. It will be tussle, we have to wait and see how much wheat can drop.”
The USDA has estimated Brazil’s corn exports at 26.5 million tonnes in 2015/16, up from 22 million tonnes a year ago. Ukraine’s wheat exports are seen by the agency at 12.5 million tonnes in 2015/16 (July-June), up from 11.5 million tonnes a year ago.
Thailand has been snapping up about 150,000 tonnes of Black Sea feed wheat a month, traders said.
