SE Asian crisis batters feed and flour mill firms

SE Asian crisis batters feed and flour mill firms

SINGAPORE (Reuters): Southeast Asia's currency crisis has driven some feed and flour mill companies to the brink of collapse while others are shying away from any buying until they have to, traders said yesterday

"Everybody is bleeding. Many of the smaller Southeast Asian feed companies are on the brink of bankruptcy. The other big ones are not buying until the very last minute," a dealer for a U.S. commodity trading house said.

"Currencies are the key. The economic outlook is much weaker in Indonesia, Thailand and Malaysia," another dealer said. "I think a lot of people are sitting on their hands and waiting until the last possible moment before buying."

The crisis was triggered by the de facto devaluation of the Thai baht in July. Some other regional currencies tumbled in its wake immediately. Most of the rest have now succumbed to gloomy investors fleeing regional markets.

As a result, dealers said feed demand in the region may drop by 10-20 percent as plunging currencies make it more expensive to import animal feed for the poultry and livestock sectors.

Consumption of bread products is also likely to suffer and this will hit the profit margins of flour millers in Southeast Asia who are almost wholly dependent on imported wheat.

"In this situation, people will probably go back to eating rice," a dealer said. "Chicken is just too expensive for them."

The situation has become so bad that some trading houses reported major feedmills in places like Indonesia and Malaysia were now asking to spread out payments for grain and oilseed purchases.

"Even people we regularly sell to are asking for deferred payment terms," a European trader said.

'Scary'

Another dealer said the situation is "scary".

"You're not sure if the companies you're dealing with are going to be around tomorrow. So what you do is you just stick to your regular customers," he added.

One industry analyst said Indonesian imports of wheat, usually around two million tons a year, will take a hit. The country is the biggest importer of wheat in Southeast Asia.

"Wheat imports are going down," he said. "The crisis is starting to have an impact."

The situation for Indonesia's corn imports is less clear.

It usually imports 800,000 to one million tons of corn a year. While the currency crisis will make imports cost more, a drought caused by the El Nio weather anomaly will force Jakarta to buy more corn, probably from China.

"They have to import corn because of the drought," a dealer said.

The only whiff of business being done in the region is in reports that Indonesia may be in the market for three cargoes of Indian soymeal totaling around 30,000 tons, dealers said. The soymeal will be for November/December delivery, they said.

"Some of the Indonesians may buy soon, but they're still shopping around for good prices," one dealer said.

"People in the region are trying to put off the inevitable. But they really have to buy at some time," a trader said.

In the meantime, the grains and oilseeds business in the region remained quiet, praying that the waves of speculative attacks on Southeast Asian currencies will end soon.

"The currency crisis has really harmed buying here," a dealer said.