CHICAGO, Feb 26 (Reuters) - The rejection of a French wheat cargo and subsequent cancellation of tenders by Egypt, the world’s biggest wheat buyer, helped send U.S. prices to five-year lows and could prompt livestock producers to use cheap wheat as animal feed.
Comparatively more stable corn prices pushed the closely tracked wheat-corn spread <0#1W-C:> to the lowest level since 2013. New lows could be forthcoming as wheat’s premium to corn often hits seasonal lows during the summer wheat harvest.
Chicago Board of Trade wheat was down 5 cents at $4.40-1/4 per bushel at midday on Friday. CBOT corn futures were down 2-1/2 cents at $3.54, leaving wheat’s premium at only 86 cents. That is down from a premium of $1.50 in November 2015.
The current price disparity makes wheat, which generally has higher protein content than corn, more attractive as a feed.
“Wheat will certainly be something we look at,” said Allan Sents, owner of McPherson County Feeders, a 13,000-head cattle feedlot in central Kansas. Sents uses mostly corn, last feeding wheat in 2013 from June to September.
“At harvest time, we can take advantage of local (wheat) basis,” Sents said of the potential for cheap wheat in Kansas, the top growing state.
World wheat supplies are forecast by the U.S. Department of Agriculture to swell to a record 238.87 million tonnes this year. USDA’s forecast for domestic feed wheat and residual use is 150 million bushels, up from 122 million bushels last year. The agency could boost its feed wheat use forecast based in part on aberrations in the wheat-corn spread, a USDA economist said.
There are already signs some global buyers are seeking to take advantage. Thailand sought 256,000 tonnes of feed wheat in a tender this week, in what would be one of the largest volumes in years, before prices declined further and the country passed on offers.
“Southeast Asian buyers are looking for value here,” a trader and risk manager for a U.S. meat producer said of the feed wheat tender.
Cattle feedlots in general will only switch their feed formulations if they can secure enough supplies for months. Hog producers in the Southeastern United States were expected to feed two cargoes of Argentine feed wheat, the latter of which was scheduled to arrive in Wilmington, North Carolina, in the coming days. (Editing by Matthew Lewis)