From the heart of the U.S. big farm belt to Colombia, Vietnam and Indonesia, livestock producers are snapping up wheat damaged by bad weather or low in protein, providing pigs and poultry with grain more often milled for making bread.
The increased global purchases of cheap, poor quality wheat for animal feed come as a combination of bumper crops and low prices increase its appeal compared to alternatives like corn.
“There’s a massive amount of wheat out there that didn’t make the grade,” said one U.S. grain merchandiser. “The next best option is to either carry it or find another mouth for it as feed.”
Farms in the United States, the Black Sea region, Europe and Australia have had bumper harvests, which are likely to push global wheat stocks to record levels for the third consecutive year in 2016/17, according to the USDA. But quality problems have weighed on prices. Now wheat is eating into demand for corn – also a staple animal feed and already under pressure from its own ample global supplies.
The USDA recently hiked its estimate for global wheat consumption in the coming year by 13.3 million tonnes to the highest ever, “primarily on increased feed use” which the agency estimated at 144.42 million tonnes. The USDA cut its forecast for global consumption of coarse grains, including corn, by 3.3 million tonnes.
“Wheat’s a great substitute for corn, there’s plenty of it, and it’s at $7 or $8 a tonne discount (to corn),” said a U.S. grain export trader. “I’ve had some Colombians take it, and I’d love to sell them more.”
Colombia’s neighbor, Brazil, is an exception. It had its own feed wheat frenzy earlier this year when hog and poultry producers used wheat for the first time in a decade as corn prices soared following a severe drought. Now, with a huge corn harvest rolling in, Brazil no longer needs to use feed wheat. “You cannot substitute corn 100 percent, but I think the animal feed manufacturers and importers will take wheat content to the limit,” said a German trader.
Another German trader, said demand for feed wheat has risen sharply from some of the big Asian importers, such as South Korea and Indonesia. The latter has already slapped controls on imports in a bid to encourage feed mills to use domestic corn.
“Korean importers have told me that, in the present price constellation, they will switch to more feed wheat tenders from corn in coming weeks,” this German trader said. “In South Korea alone, this could result in about 150,000 tonnes a month of corn imports being switched to feed wheat.”
Source: Reuters
