May 19, 2008

South Korea's grain imports to accelerate in June

Declining grain prices will pick up South Korea's grain imports but purchase may be small on weaker demand from the domestic livestock industry, traders said.

The country's imports stood on the sidelines recently as they already made advanced significant purchases in the face of soaring global grain prices.

As of February, South Korea had already bought over 8 million tonnes of grains, more than half of the 14.1 million tonnes that the country requires for 2008, according to the farm ministry.

Requirements for the second half are likely to be reduced as the Korean livestock industry struggles with falling meat prices and rising feed costs. A grain trader even dubbed the livestock crisis as "the worst situation for some time as farmers are simply not buying feed due to the commodity's soaring prices and meat's plummeting costs.

Many farmers are already on the brink of bankruptcy in recent months, hit by the country's worst-ever bird flu outbreak and preparations to open up the local market to cheaper US beef imports.

A wheat trader said wheat imports were also likely to rebound in June as prices slip from record highs on prospects for a bumper crop year but cautioned that purchases might be less than usual.

The trader said "all the good news you can imagine is out now" thus, markets are still volatile and become more sensitive to news of price hikes.

South Korean grain importers issued only a few tenders in April and May and had to remove some of them as prices of corn, the main feedstock, hit record highs on weather-related delays to US corn planting.

The tenders include a purchase of 50,000 tonnes of non-GMO corn from China by the state-run Korea Agro-Fisheries Trade Corp, a purchase of 165,000 tonnes of US corn by Nonghyup Feed Inc. and flour millers' imports of 42,800 tonnes of US wheat.

Traders said the weakening of Korean won is also making importers reluctant to dash into the market as the local currency continues to trade near a 2-year low against the US dollar, inflating prices of imported goods.