S. Korea’s feed importers trade wheat off against corn as prices slip

Heavy falls in corn futures have failed to stimulate buying interest from South Korea's huge feedmaking sector, with importers choosing instead to book feed wheat cargoes and hope for further falls on corn, trade sources told Agricensus.

Traders expect the buying to remain limited until corn falls to a discount of around $10-15/mt.  

Animal feed producers in the country, which is one of the biggest corn importers in the world, have recently secured feed wheat cargoes as its superior qualities and better pricing versus corn continue to make it the preferred choice. 

Major Feedmills Group (MFG) booked 65,000 mt of feed wheat from CHS at a tender just last week, followed by a second parcel sold by Olam this week.

The deals were concluded at $313/mt and $304.25/mt CFR South Korea respectively, and come amid heavy falls across futures within the wider agriculture complex with wheat continuing to maintain more competitive pricing. 

Importers began to substitute corn with wheat in spring when corn futures reached multi year-highs and animal feed compound producers have been holding off from buying corn and only dipping into the market to cover their bedrock basic requirements.

“Almost all South Korean buyers are still watching the market price for corn now. They think the price will be lower than these days, so they are still waiting for the bearish market,” a South Korea-based trader told Agricensus.

Nevertheless, according to trade sources, one of South Korea’s biggest corn importers Korea Feed Association (KFA) privately picked up 60,000 mt of corn overnight from Chinese state-owned trader Cofco with the buying likely to be forced on them as they look to plug a gap in supply.

The association paid $315/mt CFR Busan for relatively prompt spot loading position, with the cargo likely to load between August 1-20 from either South America or South Africa, and arrive by September 30.

Most other importers are aiming to pick up supply at around $290-295/mt on a CFR delivered basis into South Korea.

“The price idea for corn is about $10-15 lower than feed wheat. Then they will move,” one trader said.

“South Korean buyers’ target price for corn is way below the current market as they have already bought some positions at a quite high price,” another trader commented on the situation.