Asia's feed mills caught short by costly corn.

Discussion in 'Commodity Futures' started by kanellop, Jul 30, 2012.

  1. kanellop


    Hello Again to All.

    Exist the following News:


    Asia's feed mills caught short by costly corn

    By Naveen Thukral

    SINGAPORE, July 30 (Reuters) -

    As corn prices climb past the record levels hit this time last year,

    a major factor has changed for Asian importers of the grain:

    Australia no longer has heaps of cheap feed wheat as a substitute.

    For a region that buys just under half the world's traded corn,

    the 25 percent jump in cash prices since the start of June for the main animal feed ingredient

    means more costly pork, chicken and beef by the end of the year.

    The worst U.S. drought since 1956 has pushed Chicago corn futures,

    the global benchmark,

    to a record above $8 a bushel.

    What is really going to hurt feed makers,

    and eventually Asia's rapidly growing ranks of meat lovers,

    is the lack of alternatives.

    Asian buyers last year replaced some 7-8 million tonnes of corn with feed wheat,

    worth about $2.0-$2.2 billion.

    This came mostly from Australia,

    but stocks there are being run down quickly.

    "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."

    Global corn output and Asia's rising consumption:

    Agriculture commodities price comparison:


    Australia's record 29.5 million tonnes 2011 harvest was hit by late rains,

    which damaged the quality to the point where a third of the wheat was feed quality,

    fit only for animals.

    This followed a similar downgrade in 2010.

    This year Australia is likely to produce a smaller,

    high-quality crop,

    which means no topping up of depleted feed wheat stockpiles.

    "We are offering standard milling wheat for the feed market,

    even locally,"

    said Stefan Meyer, a manager for cash markets at brokerage INTL FCStone in Sydney.

    "I have sold prime hard milling wheat to a feed mill in Melbourne."

    As the supply of Australian low-quality wheat dries up,

    the discount against high-quality milling wheat has shrunk to just $10 a tonne,

    from $70 at the end of last year when the crop was being harvested.

    Other countries that could also supply Asia are struggling.

    The Black Sea region and South America have battled with dry weather,

    while India looks likely to keep most of its ample grain stocks at home,

    given that monsoon rains are running a fifth below normal.


    Global grain importers expected the U.S. to produce a record crop to ease a tightness in supplies the industry has faced since 2011.

    But more than a month of relentless heat across the U.S. Midwest has hammered the crop.

    A Reuters poll on U.S. corn production forecast the lowest yields in a decade.

    The government recently cut its estimates for the harvest by 46.2 million tonnes,

    or 12 percent,

    from its June forecast.

    Asia's top consumers China and India have large grain stockpiles to cushion the impact.

    But traders said in countries with smaller buffers the bulk of the region's livestock industry

    has not covered feed grain needs beyond September.

    "They have been caught unawares,

    caught naked,"

    said a senior grains trading manager at an international trading company in Singapore.

    "As of now they are shying away from the market,

    but come October they will have to come back."

    Traders estimated that world number one corn buyer Japan has bought ahead for just two months of imports,

    or around 2.5 million tonnes,

    while Malaysia has locked in three months of supply.

    Vietnam and Indonesia are covered for just one or two months of imports.

    Farmers would rather slaughter animals than pay for expensive feed.

    So while the cost of meat for consumers could dip initially,

    tighter supplies will fuel prices during the high consumption winter months.

    "Then you have the worst case scenario,

    a shortage at home and you can't buy much from the international market because supply everywhere is tight,"

    said Jean-Yves Chow, a senior livestock industry analyst at Rabobank in Hong Kong.

    Rising food prices are a headache the region's policy makers can do without as they try to tackle slowing economic growth.

    Cutting interest rates,

    a typical policy response to boost economies,

    could stoke inflation.

    Still, while meat will get more expensive,

    plentiful supplies of rice means little chance of a rerun of 2008,

    when a spike in prices for staple foods caused widespread unrest.

    That is scant comfort to farmers.

    "We are worried about our future,"

    said Donal, whose poultry farm some 60 km south of Jakarta, Indonesia, has some 100,000 chickens.

    "I am afraid of losses in the coming months when Ramadan is over and chicken meat demand and its price decline."


    Kind Regards,

    George Kanellopoulos.
  2. that's why discriminating American beef eaters only buy grass fed.

    Breed them low with short legs