South Korea’s top grain importer has urged the U.S. to consider cutting the use of corn and soybeans in biofuel production to ensure stable food supplies as prices soar amid the worst U.S. drought in decades.
“Purchases from South America and Eastern Europe aren’t a solution and substitution is also not possible as most grain and oilseed prices are surging,” said Kim Chi Young, director for the purchasing division at the Korea Feed Association.
Soybeans reached a record today and corn rallied to the highest level since June 2008. The drought is baking farms from Arkansas to Ohio, reducing yields, after frosts followed by drought cut wheat harvests in the former Soviet Union, prompting the United Nations and the U.S. Department of Agriculture to pare estimates for world grain harvests.
“The impact on domestic livestock and food industries will come later this year or early next year as we’ve covered most of our corn requirements,” Kim said. “For feed wheat and soybean meal, buyers have covered their needs through November.”
South Korea’s feed industry used 5.7 million metric tons of corn, 2.3 million tons of wheat and 2 million tons of soybean meal last year. The U.S. supplies over 80 percent of South Korea’s total feed-corn demand, Kim said.
Ethanol production in the U.S. sank 2.3 percent to 802,000 barrels a day last week, the lowest level since the Energy Department began tracking weekly data in 2010.
December-delivery corn gained as much 1.4 percent at $7.95 a bushel on the Chicago Board of Trade, the highest for the most-active contract in more than four years. Soybeans for November delivery gained as much as 1.5 percent to a record $16.445 a bushel.
Dimming corn-crop prospects in the U.S. may push global food costs higher, the Food & Agriculture Organization said earlier this month. South Korea, Asia’s biggest corn buyer after Japan, will import 8 million tons of corn for food and feed in 2012-2013, according to the July report by the USDA.
The rallies come at a time when compound feed output in South Korea is expected to rise about 10 percent this year as the hog population recovers from an outbreak of foot-and-mouth disease last year, he said.
The country 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 disease, according to government data.
South Korea’s compound feed production may increase to more than 18 million tons this year from 16.7 million tons last year, according to the association. In the first six months, feed output rose 9.6 percent to 9 million tons, the group said.
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