February 14, 2012

South Korea to purchase 385,000 tonnes of feed wheat for June-July

South Korean feed millers aim to purchase at least seven cargoes of feed wheat totalling 385,000 tonnes for shipment in end-June and July, trading executives said Monday (Feb 13).

South Korea, one of the world's top importers of feed grains, has purchased almost 1.7 million tonnes of feed wheat, corn and soymeal including 830,000 tonnes of feed wheat since January 6, mostly to cover its requirements for the second quarter. Its purchases are closely tracked in the international market because of their implications for global prices.

"After last week's purchases [of 275,000 tonnes], more deals are on the cards but buyers are looking for lower prices," said a Seoul-based executive with a global commodity trading company.

Thursday, Major Feedmill Group bought four cargoes and Korea Feed Association bought one at prices around US$296.75-301/tonne, cost and freight, the highest prices in more than nine months. Traders said most shipments are likely to be from the US. The deals were for arrival in late May and early June.

South Korea's largest feed miller, Nonghyup Feed Inc. (Nofi) has already purchased two cargoes for end-June and July arrival at cheaper prices and the upcoming purchases of seven cargoes will be from the Seoul-based Korea Feed Association, the Busan branch of KFA and the Major Feedmill Group, said another trader in Seoul.

Nofi purchased the two cargoes on January 27. They totalled 110,000 tonnes from Glencore at US$282/tonne, C&F.

Other feed millers are now scouting for cargoes below US$290/tonne, C&F, traders said.

Near-month wheat futures on the Chicago Board of Trade fell sharply last week and ended at US$6.30/bushel, down 6.7% from the beginning of February, due to high global inventories and Russia's decision not to impose a much-anticipated export tax on grains.

However, cash prices have not tracked futures prices due to strong demand and congestion at Australian ports, less feed grade wheat in Eastern Australia compared to a year ago, tight supply in Canada and increasing use of soft white US wheat as animal feed due to high corn prices.