Bloomberg News

Corn Imports by Korea to Rebound in 2012 as Hog Herd Builds

February 21, 2012

(Adds trader’s comment in fourth paragraph.)

Feb. 8 (Bloomberg) -- Corn imports by South Korea, the world’s third-biggest buyer, may rebound this year as the livestock industry recovers from the nation’s worst-ever outbreak of foot-and-mouth disease, said a feed industry group.

Feed-corn shipments may gain to as much as 6 million metric tons this year, compared with 5.72 million tons last year, Kim Chi Young, director for grain purchasing at the Korea Feed Association, the nation’s biggest feed-grain buyer, said in an interview. Wheat imports will probably rise as much as 8.3 percent to 2.5 million tons this year, Kim said.

Higher demand from Asia’s second-biggest buyer of grains may support prices of corn, which rose 2.8 percent last year, and wheat. The domestic pig herd may gain to about 9 million by September, from 8.17 million at the end of 2011, according to a forecast on the website of the Korea Rural Economic Institute.

“The prospect for increasing demand from end users can prop up corn prices,” said Kim Jin Youb, a trader at Korea Exchange Bank Futures Co. in Seoul. “The corn market still remains tight, leaving room for prices to head upward.”

The U.S. Department of Agriculture may reduce its estimate for global corn stockpiles before this year’s Northern Hemisphere harvest to 124.44 million tons from 128.14 million tons in January, a Bloomberg News survey shows.

Corn futures for March delivery climbed 0.3 percent to $6.4425 a bushel by 4:21 p.m. in Seoul on the Chicago Board of Trade and March-delivery wheat rose 0.5 percent to $6.6550 a bushel.

‘Recovery Path’

“The hog industry is on a recovery path,” Korea Feed’s Kim said yesterday in Seoul. “Feed output is likely to gain this year, although not rapidly, and therefore grain imports should increase a bit too.”

South Korea culled 3.32 million pigs, or 34 percent of the total herd, and 151,000 cattle, or 4.5 percent of the total, from late November 2010 through April 2011 because of the animal disease, according to government data.

Still, the nation’s livestock-feed output dropped by a less-than-expected 5 percent to 16.7 million tons last year as a recovery was faster than expected and may increase by about 5 percent this year, Kim said. Reduced output resulted in an 8 percent drop in grain use in feed production last year, he said.

Wheat imports jumped 10 percent last year, while corn purchases slumped 13 percent as feed-makers sought cheaper alternatives to pricier corn to cut costs amid weaker demand, Kim said.

Wheat Purchases

“The price gap between corn and wheat for feed use has widened pretty much in the past several years,” he said. “Feed producers increased wheat purchases last year and the trend to prefer wheat to corn will continue this year.”

The import cost for feed-corn is about $320 a ton now, about $30 to $40 per ton above the cost for wheat, Kim said. The spread was about $5 to $10 per ton in 2008, he said.

Feed producers will also seek to increase purchases of corn from South Africa and South America as an alternative to U.S. corn as quality from those regions has improved, he said, without giving forecasts.

Imports from South Africa almost quadrupled to about 800,000 tons last year, according to data from the Korea International Trade Association. Purchases from the U.S., the biggest supplier, dropped 19 percent to 4.84 million tons.

--With assistance from Luzi Ann Javier in Singapore. Editors: Richard Dobson, Jake Lloyd-Smith

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net


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