Naveen Thakral

SINGAPORE, (Reuters) – Record numbers of low-quality wheat imported from India and Australia will fill the gap in Asia’s feed market. This is due to a lack of South American corn exports, analysts and traders told Reuters.

According to estimates by the U.S. Department of Agriculture, combined wheat production from Australia and India, which are the fifth and second largest wheat producers, will reach 143 million tonnes for the 2021-22 season. This is more than 20 millions tonnes higher than the annual average of the two countries from 2015 to 2020.

Accordingly, exports of the country are set to soar to an unprecedented 32.5 million tonnes, which is twice the average annual volume over the same time period.

Although most of the exports are of food quality, many of them will still be usable for animal feed in Asia.

GRAPHIC – Australia & India wheat production, exports and stocks since 2000

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Australian wheat is in high demand. Ole Houe is the director of advisory services for IKON Commodities, an agriculture brokerage in Sydney.

It is being sold to the feed market in large quantities.

South Korea purchased approximately 400,000 tonnes new-crop Indian Wheat last week. The Philippines, along with other Southeast Asia importers, have also taken Australian wheat.

CORN CUT

Asia’s favorite feed grain is corn, which is five times more popular than that of wheat.

Yet, Asian livestock have made significant gains in wheat rations. The record-setting 16.1% Asian feed market share for corn and wheat was achieved last year, compared to less than 12% in 2015.

GRAPHIC – Asia feed use corn and wheat

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USDA’s 2021-22 estimate of Asia feed wheat share is 14.7%. However, this level may rise as feed exports increase and corn shipments from South America are slowing due to the drought.

Also, benchmark crop prices work in wheat’s favor. Chicago’s most-active corn futures traded at their lowest discount to feed grade wheat for more than 10 years this month.

GRAPHIC: Benchmark Wheat vs Corn Prices

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Although other wheat suppliers offer feed-grade wheat for Asian buyers, these are undercutting aggressive Asian sellers.

Indian wheat is one of the cheapest origins available, quoted last week at $315 a tonne, including cost and freight (C&F), to Asian destinations. Australian Standard White (ASW) wheat is being offered at $335 a tonne C&F.In comparison, wheat from the Black Sea is around $355 a tonne C&F.

A flour mill manager in Asia said that Black Sea Wheat has been losing ground because of the low output from Russia. It is now mainly Australia or India.