Millions of Hungry Swine Are Keeping German Wheat Business AliveBy
‘It’s helping us survive’ in market without exports: trader
Feed wheat prices trading higher than grain for milling
German wheat traders are discovering that their best customers are swine.
Demand for wheat to use in livestock fodder -- normally of lesser quality than grain milled into flour -- is so strong it’s now selling at a premium to wheat used for baking. The sales, mostly to feed the nation’s roughly 30 million pigs, have helped inject some life into an otherwise moribund market.
“If it weren’t for the feed industry, we would have a really big problem,” said Frank Deckert, a senior trader at Ceravis AG, a Rendsburg-based grain collector. “It’s the only stable element in the market.”
German wheat sales outside the European Union have sunk by more than half this season, battered by low prices amid record harvests from top exporter and low-cost grower, Russia. At the same time, heavy rainfall last summer reduced the availability of high-quality grain. Overall supply is also smaller because of fewer imports from Poland and the Czech Republic, themselves hurt by bad crops.
Valued at about 7.1 billion euros ($8.7 billion), the country’s feed industry is Europe’s largest, catering mainly to pig farmers in Lower Saxony and North Rhine-Westphalia. While health concerns and an influx of refugees are changing German eating habits, the country remains Europe’s biggest hog-producing and pork-eating nation, slaughtering almost 58 million pigs last year.
Compound feed manufacturers change their recipe depending on the price of the ingredients, and wheat currently costs less than alternatives like soy and corn. Cheaper grains such as rye and barley are not as cheap as before.
“They are all looking for protein, the cheapest source of protein,” said Katharina Kleingarn, the owner of Kleingarn Agrarprodukte GmbH, which supplies ingredients to the feed industry. “They have programs that calculate and optimize the recipe.”
Feed wheat for delivery in February or March is fetching 168 euros a ton on the domestic market, compared with 164 euros a ton for milling wheat delivered to Hamburg, according to Getreide AG, a trading house based in the city, the grain’s main export hub.
Some farmers prefer to sell milling wheat to feed manufacturers, which helps avoid any future discounting should the grain fail to meet millers’ quality requirements, according to Getreide’s trader Tobias Fallmeier.
“It’s helping us to survive in a market where nothing else is happening,” Jens Kass, managing director of C. Mackprang jr. GmbH, said in an interview in Hamburg. “The feed industry usage here in Germany, and in the western and northern region of Europe, is quite good.”
— With assistance by Brian Parkin