August 10, 2004

 

 

South Korean Grain Imports Slow On Faltering Feed Sales

 

South Korea, Asia's biggest grain importer after Japan, sees its offshore grain needs slowing on weak domestic feed demand and a sluggish economy, market traders and sources said.

 

Feed inventories are swelling, prices are under pressure, and the hottest summer in the past decade is also reducing the appetite of livestock. "Some producers are struggling to slash stocks, dumping their feed on the markets," said one Seoul trader at a foreign grain supplier.

 

Korean feed makers are facing demands that they lower feed prices to farmers, who are citing recent softer transportation costs. Feed makers, however, were importing grains at higher costs early this year.

 

"We used to import panamax-sized corn cargoes every 20 days, but now every 30 days because of rising stocks," said a senior official at the Korea Feed Association's regional members in Pusan.

 

An official at Nonghyup Feed Inc. said that feed makers normally carry one-month worth of stocks, but inventories have currently swelled to three months. "Grain stocks are huge," he said.

 

South Korea's feed output fell almost 4 percent to about 7.3 million tons in the first half of this year from the same period last year, according to the Korea Feed Association.

 

Early this year, Korean government and industry officials had campaigned to boost meat sales, which tumbled on concerns over bird flu in local poultry and mad cow disease in the United States, who is Korea's major beef supplier.

 

Faced with slackened sales, feed producers will not be in any hurry to import grains. They also have enough time to wait for better prices. For instance, many feed producers have already covered their corn needs through mid-November arrivals, industry sources said.

 

In recent deals, feed makers bought a panamax-sized optional-origin corn at around $150 per ton C&F. That is about $40 higher than what they paid for those of China origin a year ago.

 

However, that is about $40 per ton C&F less than what they paid in March for importing the same-size corn cargo for July arrivals. "They should have raised feed prices, reflecting higher costs, but they couldn't do so as grain prices fell back on lowering freight rates," the grain trader said.

 

"Now they are reluctant to import grains as it is hard to forecast if freight rates will continue to rebound," he said.

Panamax dry bulk rates have been regaining strength to around $52-$53 per ton as of last week, after they ebbed under Chinese measures to cool its economy. The current levels are still lower than the record high of $75-$80 per ton in February. But they are above the $40 levels last September, when markets started to gallop. Except for a small increase in corn imports, South Korea's imports of major ingredients for feed have fallen in the January-June period.

 

Korea imported about 3.2 million tons of corn for feed, up about 3 percent, industry data said. But Korea's feed wheat imports accounted for 406,602 tons, only 47 percent of what it imported a year earlier, with supplies from the Ukraine and Russia disappearing.

 

"It's getting hard to find feed wheat at favorable prices as freight rates are rebounding," another trader said. Soybean imports for crushing edible oils and producing meal for feed lost almost 4 percent to 708,906 tons in the first half of the year. Soymeal imports fell more than 6 percent to 654,880 tons.