January 8, 2009

Nonghyup Feed, South Korea's largest feed maker, may cut corn imports by 20 percent and increase wheat purchases instead, a senior company official said on Wednesday (Jan 7).

The domestic livestock industry is shrinking sharply, which will lead to a decline in feed stock imports this year, said Lee Jong-il, deputy general manager of Nonghyup's foreign trade department.

Corn imports this year may fall to about 2 million tonnes from 2.5 million tonnes last year, and some of the portion could be switched to cheaper wheat, said Lee.

South Korean feed makers stopped importing wheat between and the second half of 2007 and late 2008 as wheat prices surged to record highs on poor weather conditions in major producing countries such as Australia.

South Korean feed makers virtually stopped purchasing wheat between the second half of 2007 and late 2008 as prices of the grain soared to record highs on poor weather conditions in major producing countries such as Australia.

However, wheat prices have since dropped sharply from a record high in February 2008 on bumper harvests worldwide and the economic crisis which further pulled down commodity prices.

The price difference between corn and wheat has widened to about US$40-50 per tonne, and feed makers are increasing wheat purchases to lower production costs, said Lee.

Feed wheat is now trading at around US$150 per tonne, much lower than corn's US$205 per tonne quote.

Feed wheat, which can be used as a substitute for corn in some grades of animal feed, is now trading at around $150 a tonne, sharply lower than the $205 a tonne quoted for feed-use corn.

South Korea is the world's third largest corn buyer, importing 6.9 million tonnes of feed corn in the first 11 months of 2008, up 11 percent on-year, according to industry data.