Asian feed mills prepare to use more corn after Black Sea tensions escalate

Asian feed mills are preparing to increase the use of feed corn instead of feed wheat in their formulations after escalating tensions in the Black Sea pushed up freight rates and CFR prices.

“Feed mills [in Vietnam] will switch to using corn instead of wheat… wheat prices are now very high, and shipping costs from the Black Sea to [Vietnam] have increased significantly,” a Vietnamese feed grain importer told S&P Global Platts on July 14.

Two sources from different Vietnamese feed mills confirmed the trend. One of them said: “Yes, I see greater corn usage because feed wheat is now 300-400 dong/kg ($10-15/t) more expensive than corn.”

Another feed manufacturer said Vietnam’s expected monthly imports of 400-500 thsd tons of feed wheat are likely to decline to about 200 thsd tons due to the sharp increase in Black Sea wheat prices.

Platts previously reported that CFR offers for Black Sea milling wheat into Southeast Asia increased by around $10/t from the previous week for August-September shipments.

According to a Vietnamese importer, freight rates from Ukraine to Vietnam increased by $10/t, rising from $46/t for August shipments during the week ending July 10 to $55-56/t on July 14. Freight rates from Russia to Vietnam also increased by about $10/t compared with the previous week.

However, according to local trade sources, feed manufacturers in South Korea are unlikely to be significantly affected.

“In fact, we had already excluded cargoes shipped from Russian and Ukrainian ports from our procurement, so there has been no direct impact on our purchases,” a source from a South Korean feed grain buying group said.

A South Korean trading agent added that recent purchases of Black Sea feed wheat by feed mill buying groups involved shipments only from the Romanian port of Constanța, which has not been affected by the recent Black Sea conflict.

Market participants remain optimistic about the feed grain market. An Indian trader said: “We believe the Kerch Strait issue could continue for some time, supporting higher prices throughout the season, as farmers who have seen higher prices will be reluctant to lower them, especially given that production in Argentina and Australia is expected to be significantly smaller.”

Meanwhile, traders and producers in Australia and Asia expect demand for Australian wheat to increase because of logistical disruptions.

Platts, part of S&P Global Energy, on July 13 raised its CFR Northeast Asia feed corn assessment by $3/t to $264/t for cargoes arriving between October 11 and November 10.

Tags: wheat, Argentina, freight rates, war, Australia, Asia, Ukraine, Russia, corn, South Korea, Vietnam, Black Sea region