February 3, 2004

 

 

East Asian Feed Makers Seeking Cheaper Corn Alternatives

 

Feed millers in Asia are sourcing for cheaper alternatives to expensive US corn, but are hampered by uncertainty over certain Asian suppliers, regional traders said  on Monday.

 

China, the world's number two corn exporter last year, has not decided if it will export this year, leaving regular buyer Korea searching elsewhere to secure deals.

 

In a rare trade, South Korea's Major Feedmill Group (MFG) bought 15,000 tonnes of Thai, Indian or Chinese corn by optional origin from Cargill late Friday at $169.50 per tonne C&F for March 10 arrival at Kunsan.

 

If Chinese corn proves elusive, MFG would end up with the other options. Korea has not imported corn from India and Thailand since it bought 3,655 tonnes of Indian corn in 1997 and 2,000 tonnes of Thai corn in 1994.

 

"Like MFG, we will try to buy 25,000 tonnes of corn cargo by optional-origin among Thailand, India and China for April arrival," a Nonghyup Feed Inc official in Seoul said.

 

The MFG deal price of $169.50 per tonne C&F compares with U.S. corn available at more han $190 per tonne C&F. U.S. exports have been hit by soaring freight rates, which rose to more than $80 per tonne for the benchmark U.S. Gulf-to-Japan route from about $75 last week, regional traders said.

 

"All feed makers are interested in Chinese alternatives as Chinese corn is expected to be much less available this year and U.S. corn costs too much," another trader said.

 

Some Korean feed makers were hesitating to buy Thai and Indian corn due to its unfamiliar quality and worries about the spread of bird flu in Thailand has added to anxiety levels. That has prompted some buyers to look to alternative grains, such as feed wheat, traders said.

 

Korea imports about seven million tonnes of corn a year for feed, mostly from China because of price advantages.

 

Taiwanese feed makers favour Chinese corn for its price and are pressing the island's government to allow imports.

 

Great Wall Feed group has joined the Federation of Swine Cooperatives in asking if a government ban on imports of Chinese corn could be lifted indefinitely.

 

The Taiwan government lifted the ban in November, but re-imposed it at the end of January.

 

"With corn prices rising and chicken sales down due to the bird flu, we are finding it hard to pass on the higher costs," said an executive at Great Wall.

 

"Chinese corn is simply cheaper than that from the U.S. and with the added costs of higher freight rates importing Chinese corn is cheaper," she said.

 

Great Wall bought 22,000 tonnes of corn from China in January, while the swine cooperative has bought 45,000 tonnes.

 

Taiwan's grain trading is expected to be quiet this week. Traders said Taiwan Sugar might tender to buy a mixed 35,000 tonne shipment of corn and soy.

 

Japanese food makers have been buying corn at a slower pace than feed makers, who appear to have covered some 80-90 percent of their second-quarter shipments.

 

In the oilseed market, a trader said he believed some 50 percent of Japan's soybean needs for April had been completed. Japan usually buys 400,000 tonnes of soybeans a month.

 

But a tight freight market has continued to boost premiums.

 

"Our eyes will be glued on freight rates," a Tokyo trader said. "You just cannot get your hands on a ship now," he said.