January 22, 2004

Korea To Import 9.6 Million MT Corn In 2003-04

Faced with uncertainty about China corn exports policy, Korean and Chinese traders succeeded in shifting corn deliveries contracted for January 2004 to December 2003. Korean feed millers are now tendering for optional origin corn with Brazil, the United States and possibly other origins as the likely suppliers of Korean demand left unmet by China, according to a report issued by the U.S. Department of Agriculture attache.

In MY 2003/04, Korean corn imports are forecast to reach 9.6 million metric tons, an 800,000 MT increase over MY 2002/03. Reduced world supplies of feed wheat are expected to drive the increase in corn imports.

Korean feed wheat consumption, which amounted to 1.6 MMT in MY 2002/03, is expected to decline to 600,000 MT in MY 2003/04. The reduction in feed wheat consumption is expected to be offset by a 1 MMT increase in corn consumption for feed.

Reflecting the uncertainty surrounding China's policy on corn exports in 2004, Korean and Chinese traders shifted delivery of corn contracted to arrive in January 2004 to December 2003. The Chinese corn shifted from January to December delivery was contracted prior to China's retreat from corn exports. Since China's retreat from corn exports, Korean buyers have contracted for optional origin purchases through March 2004, the report said.

Based on admittedly meager information, local grain traders speculate that Chinese corn may become available in the second half of 2004. Traders suggest that, unless China returns to corn market by the end of September 2004, a good opportunity will exist for the United States to recover a significant share of Korean feed corn purchases.

Recognizing that the U.S. share of the Korean corn market is largely dependent on the Chinese government's pending export policy decisions, we project that U.S. exports to Korea will reach 2 MMT in MY 2003/04. The projection is based on an assumption that Chinese corn exports will be limited in the first half of CY 2004. Our assumption is supported by reports from local traders indicating some optional origin sales for February delivery have already been declared for U.S. corn. Korea is expected to turn to Brazil in the absence of ample Chinese corn supplies for additional non-GM corn used by Korean corn processors to produce products for human consumption.

MY 2002/03 corn imports were revised to 8.8 MMT based on Korea Customs Service data; a slight reduction from the previous estimate of 8.9 MMT. U. S. corn exports fell to 330,000 MT (4 percent of total corn imports) due to intense price competition from Chinese corn in both the feed and processing markets.

Total compound feed production is expected to remain unchanged from the previous year in MY 2003/04 reflecting mixed demand from livestock and poultry producers. Outbreaks of diseases in the swine and poultry sectors at the end of CY 2003 dampened consumption of mixed feed. However, hog growers continue to maintain inventories despite reported low profit margins. Intense media coverage of Korea's avian influenza outbreak and the bovine spongiform encephalopahthy, or mad-cow disease, case in the United States should support pork consumption and production. Beef cattle inventories have increased since 2002 and are accounting for more mixed feed consumption. Dairy cattle inventories continue to decrease in response to low milk prices.