May 25, 2011

 

South Korean feed grain demand may fall on animal diseases

 

 

Feed-grain demand in South Korea, the world's third-biggest corn buyer, may decline by as much as 10% this year after millions of pigs, cattle, and poultry were culled because of diseases, a local feed group said.

 

Consumption may fall 7% to 10 % in 2011 from an estimated 9.35 million tonnes for 2010, said Kim Chi Young, a director for grain purchases at the Korea Feed Association, the nation's top grain-buying group.

 

Corn futures in CBOT have doubled in the past year, climbing to the highest since 2008, as global supplies failed to keep pace with demand. South Korea, which relies on imports for almost all its corn and wheat requirements, has destroyed about 9.7 million cattle, pigs and poultry after outbreaks of foot-and-mouth disease and bird-flu last winter.

 

"The Korean livestock industry may remain sluggish for a long time after the outbreaks," said Kim at the group's headquarters in Seoul. "It will probably take a long while for the pork industry, in particular, to recover."

 

The nation culled 3.32 million pigs, or 34% of the total, and 151,000 cattle, or 4.5%, since late November through April as it fought to contain the spread of its worst outbreak of foot-and-mouth disease, data from the government and the group showed.

 

Demand for corn may fall more than wheat this year as feed makers would seek to increase use of wheat at the expense of corn, Kim said, without giving a forecast. Output of the so called compound feed made from various ingredients including corn and wheat may decline as much as 10 % this year from 17.53 million last year, he said.

 

"Feed makers are trying hard to cut costs as they can hardly raise prices, while grain prices are rising," Kim said.

 

The import cost for corn was about US$63 a ton higher than wheat in April, compared with about US$25 a year earlier, Kim said.

 

Corn futures were little changed at US$7.535 a bushel at 11:38 a.m. Seoul time on CBOT, while wheat was also little changed at US$8.035 a bushel. Corn has advanced about 20% this year, while wheat rose 1%.

 

"Corn prices may remain strong as there's always a risk of adverse weather and high oil prices support demand for ethanol, while demand from emerging markets keeps on growing," said Park Jong Beom, a trader at Tong Yang Securities Inc. in Seoul.

 

South Korea's corn imports will drop to eiight million tonnes in the year that ends September 30, down from 8.46 million a year earlier, the USDA's Foreign Agricultural Service said in a report on May 4. Wheat imports will slide to four million tonnes in the year ended June 30, compared with 4.362 million a year earlier, the USDA unit said.

 

South Korea, Asia's second-biggest grain buyer, imported 6.54 million tonnes of feed-corn last year, representing about 76% of total corn imports, data from the Korea International Trade Association showed. Feed-wheat imports stood at 2.23 million tonnes, or about half its total wheat imports.