Canadian feed wheat is flowing into the southeastern United States in the largest quantities for more than a decade, highlighting tight U.S. corn supplies and a surplus of feed wheat in Canada, several trade sources said on Wednesday.
Wilmington Bulk LLC, a consortium of North Carolina poultry and swine producers including Smithfield Foods, has bought between 100,000 and 200,000 tonnes of western Canadian feed wheat, industry sources in Canada and the U.S. said.
Strong demand from ethanol producers has driven corn stocks to a 15-year low, while Canada has more feed wheat than usual after excessive rain last year and untimely frost.
The Canadian Wheat Board, which holds a monopoly on export sales of western Canadian wheat, typically makes much smaller feed wheat exports to the U.S.
But less than 40 per cent of Western Canada’s wheat crop fell in the top two milling-quality grades in 2010, compared to the norm of up to 70 per cent, swelling supplies for the animal feed market.
The CWB’s director of weather and market analysis, Bruce Burnett, declined to comment on specific sales to the southeastern U.S., but said the board has moved grain there in the past.
“Other marketers have sold into that region as well (in the past), in terms of Brazilian wheat, some European wheat at times.”
Calls to Wilmington Bulk were not returned.
Traditionally, the CWB sells much of its feed wheat to Pacific Rim countries, Burnett said, but “with our larger supplies, the logistics sometimes dictate other markets come into play.
“We’re looking at all possibilities for marketing the feed wheat, given the corn situation especially.”
Feedmakers in the southeastern U.S. have also drawn in truck and rail shipments of soft red winter wheat from Ohio and Indiana in recent weeks as the price of corn soared to the highest in two and a half years.
“Wheat could easily be a supplement as corn supplies continue to tighten,” said Richard Lobb, spokesman for the National Chicken Council.
“There’s a lot of pressure on the (poultry) industry and the high-cost feed ingredients, particularly corn, is just a continuing headache for them,” he said. “They’re reluctant to go to wheat, but if it’s there and the price is right they’ll do it.”
The premium of spot month wheat futures on the Chicago Board of Trade (CBOT) over spot corn futures narrowed to 37-1/4 cents on Wednesday, the tightest since March 6, 2007.
Wheat futures traditionally have traded at a US$1.50 per bushel or greater premium to corn, but the spread has narrowed as corn prices surged amid the tightest U.S. corn stockpile in 15 years.
Feedmakers normally begin to consider replacing some of the corn in their rations with feed wheat when the price of wheat narrows its premium to corn to about 80 cents to $1 a bushel.