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EU feed makers switch to maize from expensive wheat
HAMBURG, Nov 12 (Reuters) - European Union animal feed makers have switched massively to cheaper maize (corn) after wheat prices soared due to tight world supplies, traders said on Monday.

The switch has been so large that large volumes of EU wheat normally used as a feed ingredient could be freed to allow higher than expected wheat exports in coming months.

Brazil has also won major new maize import business from Europe in recent weeks. EU grain markets soared in past months because of tight global supplies. Prices for wheat - normally a major ingredient in animal feed - are more than 100 euros a tonne above last year's levels.

But a good maize crop in west EU countries - although there have been poor harvests in the east - has presented cheaper alternative supplies to EU feed producers.

"Maize is 10 to 20 euros a tonne and more cheaper than feed wheat in many markets," one German trader said. "The good maize harvest in west Europe has provided a safety valve for feed maker struggling with high prices for other grains."

"Millions of tonnes more maize have been used as feed ingredients this season, but a lot of it is not from the EU."

"The EU cut its maize import tariffs because of high international maize prices and this has permitted huge imports, especially from Brazil." EU figures show the bloc has licensed imports of 5.7 million tonnes of maize so far this crop year, up from only 1.6 million tonnes the same time a year ago.

Animal feed makers in France have increasingly turned to domestically produced maize rather than other cereals thanks to its unusually low cost, French traders said.

"The situation has been completely abnormal. Maize is without doubt the cheapest cereal out there," said a French trader.

French maize from regions to the north of Paris and the centre of the country currently costs around 20 euros less than barley or feed wheat, a trader said.

French maize prices have fallen 26 percent since September following a good crop this summer and massive imports of cheap South American maize. French arable crop office ONIGC is expected this week to raise its estimate of maize used in feed by 100,000 tonnes to 3.7 million tonnes, up 42 percent compared with the previous year and at the highest in at least 20 seasons.

In contrast, the amount of feed barley and wheat used to produce animal feed is expected to fall by 36 and 18 percent respectively compared with last season.

Feed compounders in Britain are also using more maize in response to high feed wheat prices although it is Brazil rather than continental Europe which has mainly benefited, British grain traders said.

UK imports of maize in July and August totalled 209,215 tonnes, up from 164,561 tonnes in the same period last year, official figures show. Traders said they believed Brazil was the main supplier.

British traders stressed compounders were limited in the amount of maize they could use, especially in poultry feed as meat can turn yellow if birds eat too much maize. German traders also said maize use by feed makers had risen sharply. "I think we are likely to see about 20 to 40 percent more maize used in compound feeds this season," one trader said. "It will be both from imports and rapid purchasing of the new crop which feed makers have been buying up the minute it was been taken off the fields."

But Italian feed makers do not expect that soaring wheat prices would push the sector towards a sizeable switch to maize, but forecast an increase in maize use in line with an expected 3-4 percent rise in feed output this year.

MORE WHEAT FOR EXPORT ?

Some traders believe the heavy use of maize could mean more EU wheat exports. "The tonnages of maize being used for feed ingredients seem to be huge," one German trader said. "If maize is being used something else is not being bought."

Another trader said: "EU maize imports have risen by about four million tonnes so far this season alone, leaving aside more use of EU-produced maize by feed makers. When you talk about millions of tonnes this will have to have a market impact somewhere else."

"The suspicion is the feed industry bought several million tonnes less wheat than previously expected. This wheat will have to be sold somewhere and EU wheat supplies available for export early in 2008 are likely to be larger than previously thought." (Additional reporting by Valerie Parent in Paris; Nigel Hunt in London and Svetlana Kovalyova in Milan, Editing by Peter Blackburn)
MGR Archive 13.11.2007
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