March 13, 2012

South Korea begins corn buying for September-October arrival

In order to shield themselves from prices they see as broadly rising over the next few months, South Korean feed millers have started buying corn for September-October arrival, trading executives said Monday (Mar 12).

South Korea's largest feed miller, Nonghyup Feed Inc., or Nofi, has purchased two cargoes totalling 125,000 tonnes of optional-origin corn from Bunge and Concordia on a cost-and-freight basis for arrival by September 1 and October 15, the executives said.

Nofi bought a 65,000-tonne cargo from Bunge Ltd. at US$2.0270/bushel over the September futures contract on the Chicago Board of Trade, they said. There is an additional charge of US$1.75/tonne each for unloading part of the cargo at second and third ports.

It bought a 60,000-tonne cargo from Concordia Agritrading Ltd. at US$2.0150/bushel premium over CBOT September corn. There is an additional charge of US$1.40/tonne each for unloading part of the cargo at second and third ports.

At current CBOT September contract prices of around US$5.93/bushel, the prices work out to around US$313/tonne, cost and freight, excluding the additional charges.

"Nofi probably bought on a premium basis instead of the flat price because it expects prices to ease once US growers start plantings next month," said a Seoul-based executive with a global commodity trading company.

But looking past the near-term "psychological" easing of prices, the price outlook is bullish for the medium term due to the drought in South America and uncertainty over the size of next US corn crop, he said.

South Korea, one of the world's largest buyers of feed grains, has purchased almost 2.9 million tonnes since January 6, including 1.05 million tonnes of feed wheat and 1.5 million tonnes of corn. Feed millers have bought around 700,000 tonnes of feed grains so far this month.