South Korea, Thailand and the Philippines are likely to import feed wheat cargoes to replace corn cargoes, pressuring corn prices already hovering near four-year lows on expectations of record production in the United States.
"There is no shortage of feed wheat around and we may see some of that come to Asia as freight rates are reasonably cheap," said Paul Deane, senior agricultural economist at ANZ Bank in Melbourne. "It would be competition for corn."
While quality readings in France are still emerging, reports so far suggest a large portion of the crop will fail to meet the flour-making standards of its main clients, driving exporters towards animal-feed markets.
"The demand side is a bigger bearish element for corn than anything else in light of extra feed wheat available," said the analyst, who declined to be identified as he was not authorized to speak to media.
Feed millers in Europe itself are likely to use an additional 3 million tonnes of wheat in animal rations this year, reducing their dependence on imported corn, traders said.
In its latest forecast, the U.S. Department of Agriculture reduced its estimate for European Union corn imports to 11 million in the year to September, 2015 down from 13 million tonnes predicted in July and 15.5 million tonnes shipped in 2013/14.
Still Too High
South Korea, the world's third-largest corn importer, relies heavily on U.S. corn shipments and is likely to switch some of its demand to Black Sea wheat, traders and analysts said. South Korea buys close to 10 million tonnes of corn a year, or about 8 percent of global trade.
"It doesn't work as of now," said one grains trader in Singapore. "But feed wheat suppliers have no choice but to reduce prices to compete with corn."
Analysts expect global milling wheat prices to decline on expectations of higher supplies, which will result in an even bigger drop in feed wheat prices.
A bumper harvest of early grains and a lack of funds for further planting and preparing for winter sowing have led farmers to accelerate sales, pushing Ukrainian grain exports to a multi-year high.
Farmers in western Europe are less likely to cut prices, so they could end up with higher closing stocks of lower quality wheat, traders said.
Asian feed makers may also be prepared to pay a premium for feed wheat as it has a higher protein content than corn.
Corn has an around 8 percent protein level, while feed wheat could stand at 11 percent even with rain damage.
And livestock producers prefer rain soaked wheat as it is easier for animals to digest.