August 6, 2010
High feed wheat prices may augment South Korea's corn imports
South Korea's imports of corn are likely to rise sharply later this year due to a surge in feed wheat prices, according to trading executives.
They said monthly feed corn imports may rise by more than 100,000 tonnes to 700,000 tonnes each in November and December.
South Korea is one of the world's major importers of corn, and any shift towards purchases of more volumes will push up global prices.
The nearby September wheat futures contract on the Chicago Board of Trade Thursday (Aug 5) rose 60 cents or 8.3% during electronic trade to US$7.85 3/4 a bushel. September corn futures ended 10 3/4 cents or 2.8% higher Wednesday (Aug 4) at US$4.00 1/4 a bushel.
Feed wheat prices over the last two months have risen too far for South Korea to be able to import, although most millers have covered their requirements until October, an executive at a global trading company said.
He said that in June, feed wheat was available at a per-tonne discount of US$20-US$25 to corn but is now at a US$30-US$35 premium. Prices for feed wheat have risen by more than US$100/tonne in the last two months. There is also uncertainty over the delivery of earlier contracted deals of feed wheat to South Korea.
Traders said current prices of around US$300/tonne, cost and freight, for feed wheat are too costly and millers may increase the share of corn in their compound feed formulations.
They said South Korea imported around 160,000 tonnes of feed wheat every month earlier this year, but the volume is now expected to fall to anywhere between 50,000 tonnes and 100,000 tonnes for November and December delivery.
Compound feed manufacturers prefer to have at least some volume of wheat in their formulation but will definitely scale it down because of the latest surge in prices.
Traders said feed wheat from Ukraine, a major supplier to South Korea, is not currently available even for US$300/tonne, basis cost and freight, compared with actual purchases at around US$190/tonne in June.
Corn imports are expected to rise, but buyers are still on the sidelines, hoping for a downward correction in prices.
Traders said No. 3 corn from the US is being offered around US$240-US$250/tonne, basis cost and freight, but buyers are keen on prices closer to US$220/tonne.