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U.S. Corn Sales to Korea May Fall as Latin America Cheaper

Feb. 28 (Bloomberg) -- South Korea, Asia’s second-biggest corn buyer, may reduce imports from the U.S. for a third year as it increases cheaper purchases from South America, the largest local feed miller said.

Shipments including feed and food may fall below 2 million metric tons, from 2.84 million tons in 2012, Lee Tae Woong, a general manager at Nonghyup Feed Inc., said in an interview in Seoul on Feb. 26. Last year’s imports were the smallest amount since 2005, Korean customs data show.

Brazil, Argentina and Ukraine are taking market share from the U.S. in the three biggest importers -- Japan, Mexico and Korea -- after drought in the American grain belt pushed prices in Chicago to a record last year. The Latin American nations will increase output by 5.9 percent to a record this year, the U.S. Department of Agriculture said Feb. 8.

“South America is producing more, while the availability of U.S. supply is tight,” Lee said. “Unless the U.S. crop gets significantly cheaper, or even at the same price, it’s hard to choose it now.”

U.S. corn is about $30 per ton more expensive than the South American grain on a cost and freight basis, with the gap likely to remain until the next crop is brought to market later this year, he said.

Corn futures for May delivery were little changed at $6.95 a bushel on the Chicago Board of Trade at 4:24 p.m. in Seoul. The price remains has declined 0.5 percent this year after climbing 8 percent in 2012, the fourth straight yearly advance.

Quality Boost

U.S. corn supply accounted for 35 percent of Korean imports in 2012, the lowest since 2005 and down from 78 percent in 2011 and 85 percent in 2010, customs data show.

“The quality of South American corn has also improved,” Lee said.

Nonghyup’s purchases will drop to less than 500,000 tons this year from about 1 million tons in 2012, with the company’s total corn imports to be largely unchanged around 2 million tons, he said.

Korean buyers will continue to switch to South American purchases of corn, Kim Chi Young, a director at the Korea Feed Association said in an interview on Feb. 1.

Nonghyup plans to increase purchases through private negotiations with some suppliers to half its grain needs starting this year in an effort to cut costs, Lee said. The company has traditionally bought most of its grain via public tenders.

In Japan, U.S. corn imports fell to 11.1 million tons in 2012, representing 74 percent of total purchases, data from Japan’s agriculture ministry show. Japan’s total corn imports dropped to 14.9 million tons last year, the lowest since 1986, according to the data.

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

To contact the editor responsible for this story: Brett Miller at bmiller30@bloomberg.net

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