November 9, 2009

South Korea's MY (marketing year) 2009-10 total wheat import estimate is forecast at 3.9 million tonnes, up 600,000 tonnes due to strong demand for imported feed wheat from the Black Sea Region, according to a US Department of Agriculture attache report posted Friday (November 6) on the Foreign Agricultural Services Web site.

The total MY 2009-10 corn import estimate is lowered to 7.6 million tonnes because of rising feed wheat usage. The United States will remain the top corn supplier with imports forecast at 5 million tonnes. In order to stabilize sagging farm gate prices, the government and the country's largest farmer's cooperative, NACF, will help finance purchases of a record 2.81 million tonnes of domestic rice.

Growing consumer demand for locally grown milling wheat is expected to push MY 2009-10 wheat production up 80 percent to 18,000 tonnes. In fact, several local wheat millers have increased purchase contracts for local milling wheat. Area planted is projected to expand to 8,600 HA during this period. This projected increase is part of the government's ambitious plan to increase the country's self sufficiency rate to 10 percent with production reaching 200,000 metric tonnes by 2017. The wheat planted under this programme will be a winter variety, most of which will be planted in rice fields following the rice harvest. Consequently, rising wheat production is not expected to put downward pressure on the country's rice production at this time.

In MY 2009-10, total wheat consumption is forecast at 3.9 million tonnes, up nearly 900,000 tonnes from the previous year. The increase in consumption is mainly due to strong demand for competitively priced feed wheat.

Meanwhile, total milling wheat consumption for MY 2009-10 is expected to remain unchanged from the previous year because of excess domestic rice supplies. In fact, some food processors that were previously using wheat flour have reportedly now switched to rice flour.

Wheat imports (excluding flour) during MY 2009-10 are forecast to climb nearly 600,000 tonnes, reaching 3.9 million metric tonnes. The projected increase is due to strong demand for competitively priced feed wheat from the Black Sea Region. The MY 2009-10 feed wheat import forecast has been revised upward to 1.8 million tonnes, an increase of 700,000 tonnes from our earlier estimate. To date, nearly 1.5 million tonnes of feed wheat contracts have been made with deliveries scheduled through March 2010. The average prices of these optional origin contracts ranges from US$167 to US$209 per tonne. The MY 2009-10 import estimate for US milling wheat has been revised downward to 1.0 million tonnes due to stronger competition from Australia as that country's production prospects improve. Increased Australian competition will reduce the US share of the milling wheat market to around 50 percent, which is in line with historical trends.

Total corn consumption for MY 2009-10 is lowered to 7.7 million tonnes, down 400,000 tonnes from the earlier forecast due to increased demand for competitively priced feed wheat. Feed corn consumption is forecast at 6.0 million tonnes, down 500,000 tonnes from the previous estimate. Compound feed production is expected to hold steady at around 16 million tonnes in MY 2009-10. Feed corn is the main ingredient used in compound feed and has accounted for 40-45 percent of the total ingredients used in compound feed production over the last decade. However, during MY 2008-09 this ratio slipped to 39 percent because of the increased availability of inexpensive feed wheat. This ratio could again dip slightly lower this year for the same reason, but is not expected to be a long term trend. Processing corn consumption during MY 2009-10 is unchanged from our earlier estimate at 1.6 million tonnes. Year over year processing corn consumption is up 200,000 tonnes as beverage and food processors have gradually switched from sugar back to cheaper high fructose corn syrup (HFCS) since April 2009.