China’s expanding hog herd is vacuuming up the world’s feed grains and forcing traders to dip into wheat reserves, a crop that’s normally saved for humans to eat.
According to Archer-Daniels-Midland Co., one of the biggest agricultural traders, corn arriving in China will soon be more expensive than wheat.
“China continues to be buying everything they can,” ADM Chief Executive Officer Juan Luciano said Tuesday on a call with investors. “They’re buying corn. But they’re buying wheat” as well.
The Asian nation’s soaring demand for animal feed has helped lift crop prices to the highest in years, benefitting traders like ADM and signaling higher meat prices for consumers.
Chinese hogs aren’t the only culprits behind pricey corn. The world’s cattle, hogs and chickens are all gobbling up the grain faster than farmers can grow it. Corn is so expensive that it has at times surpassed wheat, a rare occurrence.
Earlier this month, a type of wheat grown in the southern U.S. Plains that’s usually used to make flour for bread traded at the biggest discount to corn since 1977.
The disparity prompted some U.S. cattle feeders to buy wheat that will get harvested beginning around June.
“We are running out of the corn in the country and wheat got really cheap,” said Joe Nussmeier, a broker at Frontier Futures in Minneapolis. By mid-June, “the only thing to feed critters at that time will be wheat.”
There are risks, though. Wheat shouldn’t be fed to younger cattle and if cattle eat too much wheat, they get bloated, according to Penn State Extension research. Researchers at North Dakota State University recommend that wheat make up no more than 15% of an animal’s diet when it’s being introduced.
– Bloomberg