Dire EU Crops Leave More Wheat for Cows at Corn’s ExpenseBy and
Feed-wheat demand seen at highest since at least 2007-08
Wheat prices have become more attractive compared with corn
European livestock farmers will use the most wheat in a decade as they cut back on corn to fatten up animals.
As rain-damaged crops leaves more grain unfit for human consumption, usage to feed cows, chickens and pigs this season will rise 3.4 percent to the highest since at least 2007-08, European Union data show. Prices are attractive too. London feed-wheat futures have been cheaper than French corn since mid-2015, compared with a premium in most of the two years before that.
Deluges in top producer France this year decimated crops and caused many plants to fall over, stoking concern about diseases and that grain quality won’t be good enough to make bread. Groupe Soufflet said a “catastrophic” year for French farmers has been unlike anything seen in four decades. Total EU wheat production is set to drop 11 percent this season, according to Offre & Demande Agricole.
"Due to quality issues, a lot of French wheat doesn’t qualify for milling, but only for feeding animals," said Carsten Fritsch, a commodities analyst at Commerzbank AG in Frankfurt. "The EU wheat harvest is going to be lower than expected due to France and Germany."
Livestock typically accounts for about 46 percent of EU wheat consumption, with demand from humans closer to 40 percent and other uses making up the rest. The region will direct 57.9 million metric tons to animals in the season that started last month, 15 percent more than the five-year average, European Commission data show. The amount of corn used as feed will fall to 57.6 million tons, the lowest in four years.
French wheat production is set to plunge by about a quarter to 30 million tons, with more bearish forecasts pointing to 28 million tons, said Francois Berson, director of grain collection at Soufflet Agriculture. The company buys about 4 million tons of grains in France each year.
German wheat quality will be on average worse than last year and areas in the south-western part of the country have faced similar conditions to France, trader BayWa AG said last month. Rains have been delaying the harvest in the nation and farmers have only picked a third of the crop in some regions, the German Farmers Association said in a statement Wednesday.
Rainy weather will also reduce output in the U.K. to the lowest in three years. Production will probably fall to 14.5 million tons, down 12 percent from a year earlier and the lowest since 2013-14, according to CRM Agri-Commodities in Newmarket, England, and data from the Agriculture and Horticulture Development Board.
Priced in euros, feed-wheat traded on ICE Futures Europe has dropped 23 percent since late 2013, compared with a 4.2 percent increase in corn futures on Euronext in Paris.
"The lower wheat prices are relative to maize prices, the more you would expect wheat to be fed as animal feed,” said Arthur Marshall, an analyst at AHDB Market Intelligence. "As a buyer, you would be comparing those prices and working out what works best for you.”
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