SINGAPORE, June 2 (Reuters) – Asian mills that churn out animal feed are buying large volumes of wheat for a second year, shifting away from corn as supplies of that grain dwindle following drought in key exporter Brazil.
Indonesia has bought over 1 million tonnes of feed wheat this year, while Thailand has locked in close to 2 million tonnes with the country booking cargoes right up to December, according to three trade sources. That compares to limited shipments a couple of years ago.
Strong Asian appetite for feed wheat is good news for major producers such as the Black Sea region and Argentina, and has narrowed the spread between prices for the grain and milling wheat, used to make flour for human consumption.
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“The demand for feed wheat is so strong in Asia that it has narrowed the spread between milling and feed wheat to historically low levels,” said a Singapore-based trader who sells Black Sea and Canadian wheat in Asia.
New-crop Ukrainian feed wheat with 10.5-percent protein is being quoted at $170 a tonne, on a free on board basis, for August shipment. That is just $8 below $178 quoted for milling wheat with 12.5-percent protein. The spread was around $20 a couple of years ago.
Thailand last week bought 60,000 tonnes of Black Sea feed wheat for $187 a tonne, including cost and freight, for August shipment, trade sources said.
Most feed makers are taking Ukrainian shipments, although some Argentinian and French cargoes have also made their way to Asia. About 400,000 tonnes of shipments from Argentina have landed since January, according to traders.
Vietnam, which typically prefers corn to feed wheat, is also likely to be forced to switch to more wheat.
“Vietnam will most likely take European feed wheat, either from France or Bulgaria,” said a second Singapore trader. The traders declined to be identified as they are not authorised to speak with media.
CHANGING TIMES
Southeast Asia feedlots usually prefer Brazilian corn for its darker colour and harder texture compared with U.S. grains.
“There is a myth in Southeast Asia that darker corn will be better for the cattle,” the first trader said.
But Brazilian supplies have dropped in recent months after drought hit output, forcing the country to turn into a net importer of the grain.
Measures by Indonesia to reduce corn imports have also boosted feed wheat demand.
Indonesia decided in April to cap corn imports for feed mills at 1 million tonnes, but local corn supplies haven’t been able to meet booming demand in Southeast Asia’s largest economy, prompting inflows of feed wheat.
