Mumbai, May 29 (Commoditiescontrol):China's animal feed market is experiencing a significant shift as cheap wheat replaces substantial amounts of corn, leading to reduced consumption of both corn and soymeal and potentially lowering import demand. This development comes at an unfavorable time for Brazil and the United States, major soy and corn suppliers to China. Brazil's soybean shipments to China are lagging behind last year's rate, while China has canceled over 800,000 tonnes of U.S. corn orders in favor of waiting for cheaper alternatives later in the year.
Yuan Song, chief analyst at Juxing Agriculture Group, highlights that the impact is most pronounced on corn, which may struggle to rebound in price and subsequently impact imports. China, the leading global wheat producer, is currently harvesting a bumper crop while also importing record volumes of wheat, particularly from Australia. Chinese buyers paid an average of $374 per tonne for Australian wheat last month, which is $30 less than Chinese wheat.
With total wheat imports reaching 6 million tonnes in the first four months of the year, a 61% increase from the previous year, and an impending domestic harvest, Chinese wheat prices have dropped by 15% in the last two months. This makes wheat a cheaper alternative to corn in many areas. Chinese corn futures have also experienced an 11% decline during the same period due to mounting grain stocks.
The switch from corn to wheat began in southern China, where wheat is harvested first, but has now expanded to northern regions. This trend is expected to continue until the end of the summer, making wheat a prominent feed ingredient. Feed mills in multiple provinces, including Shandong, Henan, Hebei, and Hubei, are increasing their usage of wheat. Some companies are even replacing up to half of their corn feed with wheat, particularly in northern China.
The rise in wheat usage is also expected to reduce soymeal consumption as wheat has a higher protein content compared to corn, decreasing the need for soy as a protein-rich component in feed. Feed makers suggest that the increased use of wheat will progressively lower soymeal consumption, impacting profit margins at Chinese crushers and dampening their import appetite. Soymeal prices have rallied recently due to lower stocks, prompting feed makers to cut costs by reducing their reliance on the ingredient. Soymeal usage could potentially decline by approximately 5%.
Global soy prices are currently at their lowest level since late 2021 due to a well-supplied market. While soymeal demand may rebound slightly after wheat supplies are depleted, it appears that China's wheat supply is abundant, indicating the potential for its continued usage for several more months.
Despite the recent plunge in Chinese wheat prices, more wheat cargoes are expected from Australia, with total arrivals from all sources projected to exceed 10 million tonnes for the first time this year. Traders report receiving fresh inquiries and indicate no slowdown in buying, even though the decline in Chinese wheat prices may temporarily affect purchasing from Australia in the coming months.
(By Commoditiescontrol Bureau; +9198201 30172)
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