January 3, 2008

China's grain export tax turns up the heat on Korean feed industry

China's export tax on grains, which went into effect yesterday (January 2, 2008), is likely to inflict further pain on South Korean feed users, who have already seen a steep rise in compound feed prices last year.

Compound feed prices in South Korea rose 25 percent last year, according to the Korea Feed Association, the country's largest importer of feed grain.

After China imposed a 20-percent tax on wheat and 5 percent tax on rice, corn and soy, further price increases are "inevitable", said Kim Chi-young, general manager at the purchasing team of the association.

The tax may prompt Korea to turn to alternative producers US and Brazil, further boosting already-high grain prices on the international market.

Kim said the choice of suppliers is rapidly shrinking.

The association buys more than 90 percent of its corn needs from the US, China supplies less than 10 percent. If China is ruled out because of the price increases, that leaves only the US.

The Korea Corn Processing Industry Association came away from previous tenders empty-handed due to high prices.