June 26, 2010

 

Corn demand on road to recovery in South Korea

 

 

Feed-corn demand in South Korea, the world's third-biggest corn buyer, may advance about 5% this year as the recovering economy boosts meat consumption, spurring demand for grain as animal feed.

 

Corn consumption for use in domestic feed production is forecast to climb by 300,000-400,000 tonnes to about 6.3 million tonnes this year, Lee Young Il, general manager for foreign trade team of Nonghyup Feed Inc. said.

 

Meanwhile, corn futures have dropped 12% this year on speculation that warm, wet weather would boost production in the US, the world's biggest exporter.

 

Lee noted that demand has increased because the economic environment is good, adding that cattle and cow breeding rose a lot and farmers are also raising more poultry.

 

South Korea, Asia's fourth-biggest economy, earlier raised its growth forecast for this year to 5.8%, from the 5% projected in December, saying the faster-than- expected global recovery has spurred exports and domestic demand.

 

Production of compound feed for livestock, which uses grains including corn as ingredients, may increase about 5% to more than 16 million tonnes this year, Lee said.

 

Beef cattle breeding increased 9% from a year earlier to 2.7 million heads in the first quarter, while pig and chicken breeding rose 4%, according to the Korea Meat Trade Association (KMTA).

 

According to KMTA data, the Asian nation, which imports 99% of its corn needs, last year bought from overseas a total of 7.3 million tonnes of corn including both feed and food use.

 

Import prices for shipments contracted up to October averaged about US$220 a tonne on a cost-and-freight basis, lower than his forecast of US$225 a tonne, Lee said. Prices may decline further on expectations for a bumper crop in the US and falling freight prices, he said.

 

The US crop is forecast to expand to a record 339.6 million tonnes in the 2010-11 marketing year, from 333 million tonnes a year earlier, according to the USDA. That will push global stockpiles to 147.3 million tonnes at the end of the season from 143.4 million a year ago, it said June 10.

 

Still, China's buying remains a potential trigger for prices to gain, Lee said. China, the world's most populous nation, has bought at least 885,000 tonnes of corn for delivery by August 31, according to USDA data.

 

Earlier, the US Grain Council president Thomas Dorr said China may buy more than one million tons in the next 18 months, on top of what has already been purchased.

 

Corn futures in Chicago gained 0.3% to US$3.655 a bushel at 1:50 p.m. Seoul time.