FEED barley has competed with corn into feed markets in South East Asia for many years and now it's wheat's turn.
Australian feed wheat is being sold and shipped into China, instead of corn, in massive volumes.
Although corn is not a substantial component of the Australian grains industry, corn prices have a direct impact on prices for wheat and barley.
Corn demand has been driven by the ever-relentless ethanol industry in the US, which accounts for 43 per cent of total US domestic demand.
Corn futures markets in the US now track the break-even prices that the ethanol industry can afford to pay, given the price they are able to achieve for ethanol.
Grain prices this season have been underpinned by historically low corn stocks relative to demand.
The US Department of Agriculture last week estimated the world corn stocks to be the lowest since 1996.
At this rate, the global stocks of corn would cover demand for only 18 days.
Accordingly, any production disruptions could lead to fears of higher prices by consumers. Last week, news of a series of frosts in Mexico caused a surge in corn prices. The Mexican Government estimated that a massive 300,000 hectares of corn would need to be replanted.
To assist the Mexicans in recovering from this frost, an additional 1 to 2 million tonnes of corn would need to be imported from the US. These frosts affected both corn and wheat prices.
F1 feed barley has lifted $13 over the week to $238 a tonne delivered to all three Victorian ports.
Demand for feed barley into markets such as Saudi Arabia supported prices into markets with a ready supply of feed barley, such as Port Adelaide.
This ready supply has pushed prices to a health price premium of $250 a tonne delivered to Port Adelaide.
The market price for feed barley into the stock feed mills in Melbourne was forced to follow the rise and was quoted at $244 a tonne delivered, $16 higher than last week.
This export-inspired price rise puts feed barley at a $9 premium to wheat for the stockfeed market.
In the domestic market, Melbourne feed barley prices had exceeded those for on only two occasions in the past 10 years - in February and March in 2003 and in May 2007.
The key global wheat importers continue with their active programs.
There's an emerging shortage of milling wheat from March to May prior to the harvest of the northern hemisphere crop, including the US.
Wheat prices were up again this week with APG1 up $5, APW up $16 and H2 up $2 for deliveries into sites in the Geelong freight zone.
