China's feed mills have bought the highest volume of feed-grade wheat since March at weekly state sales after a jump in domestic wheat prices, reflecting healthy demand from animal feed producers. Despite big state sales, feed mills are likely to reduce use of wheat and shift back to corn in coming months as the price gap between the two grains has narrowed following the decline of domestic corn prices.
Wheat is about 100 yuan ($15.737) per tonne cheaper than corn, narrowing from as much as 500 yuan per tonne in the third quarter, when feed mills used a large volume of cheap wheat to replace corn. "Following the rise of wheat prices, feed mills will gradually shift back to corn, but the shift may not happen immediately and big feed mills are likely to continue to use a large volume of wheat in November," said one industry analyst with China National Grain and Oils Information Centre (CNGOIC).
The government sold 142,617 tonnes of feed wheat on Tuesday, the largest volume since late March when it began feed wheat sales. Tuesday's sale brought total feed wheat sales to 1.35 million tonnes. Before the release, the government held about 1.6 million tonnes of feed-grade wheat in state reserves, which would support the auctions until the end of the month. Wheat remains competitive, particularly for mills in the largest wheat areas of Shandong, Henan as well as south-west province of Sichuan. China has already stepped up imports of wheat as well as corn to meet robust animal feed production.
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