Asian feed millers prepare to use more corn following escalation of Black Sea conflict

Asian feed millers are preparing to use more feed corn instead of feed wheat in their formulations following an escalation of tensions in the Black Sea, which have driven up freight and CFR destination rates.

"Feed mills [in Vietnam] will change to use corn instead of wheat...the wheat price is very high right now [and] the cost from Black Sea to [Vietnam] increased strongly," a Vietnamese feed grains importer source said July 14.

Two sources from separate Vietnamese feed mills concurred, with one saying, "Yes I do [see more corn], the feed wheat is now VND 300-400/kg ($10-15/mt) higher compared to corn."

The other feed miller said that Vietnam's expected imports of 400,000-500,000 mt of feed wheat in a month would likely be lowered to just 200,000 mt amidst the surge in Black Sea feed wheat prices.

Platts previously reported that CFR offers of Black Sea milling wheat to Southeast Asia were about $10/mt higher week over week for August-to-September shipments.

Freight rates for Ukraine to Vietnam rose $10/mt from $46/mt for August shipments during the week ending July 10 to $55-$56/mt on July 14, while Russian to Vietnam freight was also $10/mt higher week over week, according to the Vietnamese importer source.

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

"Actually, we have excluded cargoes loading from Russian and Ukrainian ports from the beginning, so there has been no direct impact on our purchases," said a South Korean feed grains buyer group source.

A South Korean trade agent said that recent purchases of Black Sea feed wheat by South Korean feed miller buying groups were only for loading from Port Constanza, which was not affected by the recent Black Sea conflict.

Market participants continue to hold bullish sentiment on the feed grains market, with an Indian trader saying, "We are thinking the Kerch Strait issue might prevail for some time and that might keep prices elevated for the season as farmers, once tasing high prices, will not be willing to discount, especially where Argentina and Australian productions are going to be significantly less."

Meanwhile, Australian wheat demand is likely to increase due to the logistics disruptions, according to traders and producers in Australia and Asia.

Platts, part of S&P Global Energy, assessed feed quality corn CFR Northeast Asia up $3/mt at $264/mt on July 13 for cargoes arriving over Oct. 11 to Nov. 10.