Asian feed manufacturers are switching to wheat in animal rations as multi-year high corn prices constrict demand for the yellow grain widely used to fatten hogs and chickens.

Some of the world’s top corn buyers such as China, South Korea and Vietnam are buying more wheat from Australia and the Black Sea region in the months ahead as the landed cost of corn has climbed to a rare premium to wheat, said two Singapore-based grains traders.

Combined, those three countries are forecast to buy 26.4% of global corn imports this year, according to the U.S. Department of Agriculture, so any substitution for wheat could have a large impact on global grain trade flows.

“It is more attractive to use wheat, we have seen demand for Australian wheat coming from feed makers although our crop quality is pretty good and there is not much lower quality wheat which can be termed as feed wheat,” said Ole Houe, a director at brokerage IKON Commodities in Sydney.

“But even milling wheat (from the Black Sea region) is cheaper than corn, so the switch is happening.”

Chicago corn futures climbed to their highest since June 2013 this week and have gained 37% in 2021, while wheat has jumped 16% since the beginning of the year to its highest since February 2013.

Black Sea milling wheat is quoted around $290 a tonne, including cost and freight (C&F), to Asia for August shipment compared with corn at around $305-$310 a tonne, C&F, said the two traders.

A combination of strong global demand, adverse weather in the United States and expectations of lower output in Brazil have raised concerns over global corn supplies.

Wheat has followed corn higher even though there are no major supply issues as of now.

“We expect volatility in grain trade flows to continue for the rest of the year,” said one of the Singapore-based traders, who works at an international trading company that sells grains to Asian and Middle Eastern buyers. “With such gains in corn prices, there will be destruction in Asian corn demand and result in lower corn imports by some countries.”

Indonesia, the Philippines and Thailand, which use feed wheat on a regular basis, are likely to step up purchases, traders said.

“It is not just price-sensitive consumers in Asia, but even countries like South Korea are expected to start using more wheat for animal feeding,” said one Singapore-based feed grains trader who sells South American corn in Asia.

“Japan is largely going to keep using corn.”

The rally in grain prices was triggered by China and other importers late last year stockpiling food, fearing supply disruptions from the coronavirus pandemic.

China’s massive feed sector has already switched out corn for wheat in key hog producing areas, impacting soymeal demand.

Corn imports to Vietnam, one of the world’s fastest growing feed grain markets, have slumped since August while imports of wheat topped 200,000 tonnes in March for the first time since at least January 2020, according to Refinitiv data.

This reversed a trend in Vietnam’s corn buying. Their imports for the 2019/20 crop year rose to 10.6 million tonnes from 1.1 million tonnes in 2011/12, USDA data shows.

Global corn inventories have declined over the past four years. World corn reserves are forecast to shrink to 283.85 million tonnes in 2020/21 from an all-time high stockpile of 351.81 million tonnes in 2016/17.