ANALYSIS – Strong demand for rice in animal feed in Asia raises food supply concerns

By Naveen Thukral

SINGAPORE, March 16 (Reuters)Soaring wheat and corn prices are spurring demand for low-quality rice in animal feed rations across Asia, pushing up prices for the world’s most important commodity at a time when global food inflation is already near record highs.

Global crop importers are fighting for supply after Ukraine’s Russian invasion disrupted grain shipments from the two countries, which together account for 16% of world wheat and corn exports.

Chicago wheat futures Wv1 set a record last week while corn Cv1 rose to its highest level in a decade after war-torn Ukraine closed its ports and Western sanctions hit Russian exports.

Rising prices for wheat and corn, on the other hand, have prompted buyers to look for alternatives, including in China, by far the world’s largest feed market. Traders and analysts say importers are negotiating to buy extra quantities of broken rice – a quality rice where the grains cracked during the milling process – to fatten pigs and other animals.

The price of rice is generally more expensive than that of wheat, but a 50% rise in the price of wheat a month ago has significantly reduced the gap between the two grains and made even more expensive wheat than some of the lower quality rice.

Benchmark for food grade rice from Thai exporters RI-THBKN5-P1 Since October 2020, it achieved its highest weekly gain last week due to increased demand for food and feed, rising 5% to about $ 421.50 per tonne.

This is the highest value since last June, and sources say prices could rise further if the Black Sea flow disruption persists. Export prices from Vietnam RI-VNBKN5-P1 and India RI-INBKN5-P1 also climbed. RIC / AS

According to Shirley Mustafa, a FAO rice economist based in Rome, “There may be more interest in broken rice for animal feed if the current wheat and corn market continues.

“It’s not just animal feed, it’s substitutable for other uses, such as more people turning to rice for food.”

CUTTING MAIZE

China has booked up to two million tonnes of Ukrainian corn imports this year, but most of these shipments are already in danger due to disruptions in Ukrainian logistics chains.

To make up for the loss, China is expected to import about three million tonnes of broken rice, up from about two million tonnes a year in the past two years, a Beijing-based rice trader said.

One importer in Guangdong wants to buy broken rice from Thailand, while others have recently bought broken rice in India for feed, another source said.

“Demand for broken rice in India has risen due to higher corn prices. Feed manufacturers are trying to replace corn with rice,” BV Krishna Rao, president of the Association of Indian Rice Exporters, told Reuters.

The price of 100% Indian broken rice rose to $ 320 a tonne this month from $ 290 in February, he added.

To further support the price of rice, Thai feed manufacturers are looking for more broken rice to replace corn, which will boost domestic prices across the country, Bangkok traders said.

“There has been a huge increase in demand for lower quality rice from the Thai feed industry,” a trader in Bangkok said. “In fact, most of the broken rice in Thailand is likely to be consumed in the domestic market.”

FOOD FEARS

World rice prices could rise further in the second quarter as wheat consumers in India – the second largest consumer of rice after China – switch to rice due to record high wheat prices. NWTc1which would accelerate the decline in rice stocks, said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association.

While global rice stocks are hitting a record 190 million tonnes this year, the U.S. Department of Agriculture says global rice production is expected to exceed world consumption by less than 5 million tonnes in 2022, so a sharp rise in global demand is rapidly depleting these stocks, and reinforces the bullish mood in the market.

Rising rice prices, in turn, are exacerbating food security concerns in the poorest countries in Africa and Asia, where millions rely on cheap availability of essential raw materials.

“Currently, broken rice goes mainly into the feed sector, but as the war drags on and buyers can’t get adequate wheat, it’s about food security,” a Singaporean grain trader said.

“Buyers are doing everything they can to replace expensive wheat with rice or other alternatives.”

Global rally in wheat and corn spikes boosts rice feed needs https://tmsnrt.rs/363vbq6

Global food prices are kept close to all-time highs after the surge in edible oils and cereals https://tmsnrt.rs/3JfWJa6

(Report by Naveen Thukral; other reports: Hallie Gu in Beijing, Khanh Vu in Hanoi, Patpicha Tanakasempipat in Bangkok and Rajendra Jadhav in Mumbai; editor: Gavin Maguire and Richard Pullin)

((naveen.thukral@thomsonreuters.com; + 65-6870-3829; Reuters Messaging: naveen.thukral.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.

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