The USDA’s Foreign Agricultural Service, Global Market Analysis report Tuesday said that with record corn imports forecast this month at 24.0 million tonnes for 2020/21, China’s demand for feedstuffs continues to rise as its swine herd recovers from African Swine Fever.
HIGH CORN PRICES SUPPORT SUBSTITUTION
High corn prices are supporting record feed use of wheat and rice. Plus, feed use of these grains is rising with increased availability of old-crop wheat and rice from auctions at prices competitive to domestic corn.
China’s 2020/21 non-food wheat use was forecast at a record 30.0 million tonnes, more than 10 million more than the previous year because of record auction volumes of domestic wheat and stronger compound feed production. High domestic corn prices helped drive the auction volumes, with more than 12 million tonnes reported sold in January.
Beginning in December, domestic wheat prices there trended below corn for the first time in more than six years. China wheat imports were raised for the sixth straight month to 10.0 million tonnes, the highest in more than 25 years.
Although most wheat imports were allocated for human consumption, their relatively low prices against China’s domestic corn prices make it attractive for feed use in China’s southern region. France has been the largest supplier for the first half of 2020/21.
Rice is not used widely in feed because of its higher price, but some mills also are beginning to use it. High corn prices have narrowed the premium that rice typically holds.
China has been auctioning older stocks of rice from state reserves at low prices for feed use. Rice must be crushed by a state-owned enterprise and mixed as an 85% rice/15% wheat blend to ensure its use as feed.
The rice-based feed likely is used for poultry, given narrowing margins in that sector. Rice consumption is raised by 1.5 million tonnes this month with much of the additional demand attributed to feed.
Demand for low-priced rice also spurred higher imports in recent months, especially from Burma and Pakistan. Additionally, China has begun to import broken rice from India for the first time in decades, reportedly to be used for feed.
With China’s domestic feed use rising, especially for older rice from the reserves, exports that would otherwise go to price-sensitive markets were expected to decline. As old-crop stocks are drawn down, their use for feed could diminish.
CATTLE, BEEF RECAP
Fed cattle trading was reported last week at $112 to mostly $114 per cwt on a live basis, down $1 to up $1 from last week, and at $178 to $180 on a dressed basis, up $1 to $2.
The USDA choice cutout Wednesday was down $1.27 per cwt at $233.02, while select was up $0.23 at $220.96. The choice/select spread narrowed to $12.06 from $13.56 with 74 loads of fabricated product and 62 loads of trimmings and grinds sold into the spot market.
The USDA reported Tuesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.00 to $1.25 a bushel over the Mar CBOT futures contract, which settled at $5.34 1/2 a bushel, down $0.21 3/4.
Thirty-six heifer and 18 steer delivery intentions were tendered at zero against the Feb futures Wednesday; 66 heifer contracts were retendered at one; five steer contracts were retendered at two, and five steer contracts were demanded at two.
The CME Feeder Cattle Index for the seven days ended Tuesday was $135.65 per cwt, up $0.02. This compares with Wednesday’s Mar contract settlement of $139.50 per cwt, up $0.85.