Livestock farmers are proving "reluctant" to switch from corn to wheat despite the cost savings, Australia's AWB said, a trend which could have a significant impact on futures prices if repeated in the US.
The Melbourne-based grain exporter, whcih ships largely to Asian countries, said that rise in corn prices relative to those of wheat, culminating in corn futures gaining a rare premium in Chicago last week, had been "supportive for Australia feed wheat values".
However, Mitch Morison, ABW's general manager commodities, added that while there were "significant quantities of feed wheat available and despite the wide price spread to corn, consumers are not switching significant feed grain demand to wheat".
An AWB spokesman told Agrimoney.com that while "there have been plenty of sales of feed wheat, the expectation was there would be a lot more switching 'between grains] than there has been".
"It may be people are a bit more wedded to their standard feed than they would make you believe."
Corn vs wheat
Rates of switching between the two grains are being viewed with keen interest in the industry, with wheat viewed as filling in a gap in corn supplies depleted by disappointing harvests and strong demand from ethanol plants.
The US Department of Agriculture caused uproar on futures markets early this month in forecasting a hefty level of replacement of corn in feed rations by soft red winter wheat, the type traded in Chicago.
In theory, wheat's higher protein content makes it the better option for livestock rations even with some premium, with broker Allendale putting its feed value advantage at 15%.
However, observers have also noted the reluctance among farmers to change from tried and tested feed ingredients. Even farmers switching need to implement the change gradually to avoid side effects in animals.
Fears overbaked?
AWB's comments came as it lowered by Aus$10 a tonne, to Aus$352 a tonne, its forecast for returns to farmers from its benchmark east coast wheat pool.
The downgrade came hours after the Canadian Wheat Board, the world's biggest wheat and barley seller, cut its pool estimates by up to Can$16 a tonne, citing that dry conditions for crops in Europe and China had yet to cause significant damage.
"The reality is that neither crop has been totally compromised," the board said.
"The European Union wheat crop is in generally good condition and only the continuation of dry and hot conditions for a prolonged period would have a significant impact on yield potential.
"The Chinese wheat crop has been damaged, but this must be kept in context as the majority of the acreage is under irrigation."
Furthermore, India and Pakistan might "challenge" their wheat export records.
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