Asia feed grain importers seeing high prices, low stocks

Australia feed wheat supplies dropped due to demand, poor weather

Asia’s feed grain importers are seeing increased prices and decreased stocks as the worst U.S. drought since 1956 pushes Chicago corn futures to over $8 per bushel and strains alternative supplies in places like Australia, according to reports.

A 25 percent jump in cash prices for Australia’s feed wheat as a result of reduced stocks is hurting Asian feed makers, who get their supplies from Australia and replaced some 7–8 million metric tons of corn with feed wheat, worth about $2.0–$2.2 billion, in 2011. “It is a very tough situation for the feed industry and we feel prices will stay high for the entire season,” said the head of grains trading at one of Malaysia’s biggest feed mills. “Substitutes are not going to be cheap.”

But weather has been a factor for Australia, as well. Australia’s record 29.5-million-metric-ton 2011 harvest was hit by late rains, which damaged the quality to the point where one-third of the wheat was feed quality. This followed a similar downgrade in 2010. For 2012 Australia is likely to produce a smaller, high-quality crop, which means wheat stockpiles will remain depleted. The Black Sea region and South America have suffered from dry weather, while India is retaining its own stocks for domestic use because monsoon rains are running a fifth below normal.