Nonghyup Feed Inc., South Korea’s biggest feed-grain buyer, is increasing corn imports from South America as Brazil boosts exports on a weaker currency and higher output, offering a cheaper alternative to U.S. supplies.
Purchases this year may climb to at least 450,000 metric tons, mostly from Brazil, from 50,000 tons last year, Lee Tae Woong, a deputy general manager at the Seoul-based company, said in a phone interview. Total corn imports were about 2 million tons last year, he said without giving a 2012 forecast.
The price of corn has dropped 16 percent this year as the U.S. Department of Agriculture forecast last week that farmers would produce a record 14.79 billion bushels in 2012 after planting the most acres since 1937. Exports from the U.S., the biggest shipper, dropped 6.6 percent from September through April, with shipment to Korea, the world’s third-biggest buyer, falling 26 percent, according to USDA data. Sales to China jumped almost nine-fold, it showed.
“Korean feed-makers will look to import more South American corn for the rest of this year as there’s a wide price gap between U.S. and South American origins,” Lee said. South American corn was priced about $20 per ton cheaper than U.S. grain on a cost and freight basis, he said.
Corn for December delivery rose 1.6 percent to $5.4275 a bushel on the Chicago Board of Trade at 6:16 p.m. Singapore time. The price touched a 20-month low on June 15.
Output in Brazil, the world’s third-largest producer, will rise to a record 73.7 million tons in the crop year that started Sept. 1, from 57.1 million a year earlier, researcher Agroconsult said June 14. Brazilian real has lost 9.3 percent against the greenback this year, making the South American country’s crop cheaper relative to U.S. supplies.
Soybean and corn growers in Brazil will probably increase exports this year as the local currency’s decline against the dollar makes the shipments more profitable, Joao Rabelo, undersecretary of economic policy at the country’s finance ministry, said on June 4. Exporters will probably profit from a weakening Brazilian real until the end of this year, he said.
Korea’s feed-corn imports dropped 1.5 percent to 2.49 million tons during the first five months of this year from a year earlier, with shipments from the U.S. down 11 percent, the nation’s customs data show. South American supplies rose to about 250,000 tons from nil in the same period, the data show.
“Although there could be ups and downs year on year, I would argue it will be a long-term trend for the next decade or so that buyers continue to seek South American corn as output there will rise,” said Nonghyup’s Lee.
The nation imported 5.67 million tons of corn for feed production in 2011, of which 85 percent was sourced from the U.S., showed data from the Korea International Trade Association. The U.S. supplied 92 percent of imports in 2010. The Korea Feed Association in February forecast 2012 purchases at as much as 6 million tons.
U.S. exports to Japan, the country’s largest customer, plunged 11 percent since the marketing year that began Sept. 1 through April 30, while sales to Taiwan slumped 37 percent, according to USDA data. Japan, Taiwan and Korea took up 44 percent of U.S. corn exports in the period, the data show.
China in April listed Argentina as an approved supplier and in June set its import standards for the Brazilian government, increasing the odds that the world’s largest corn user may start buying from the South American nations.
“China, recognizing its corn imports are rising, is trying to increase its sources from countries other than the U.S., which so far has been its predominant supplier,” said Li Qiang, chairman of Shanghai JC Intelligence Co.