South Korea, Asia's second-biggest grain importer, made its first overseas purchases of feed wheat in about a year, buying 165,000 metric tons as near-record corn prices force it to look for cheaper alternatives.
The Major Feedmill Group and the Korea Feed Association, the country's biggest importer of feed grains, bought 55,000 tons of feed wheat from Ukraine on May 9 and the same amount on May 13, Kim Chi Young, the KFA's purchasing team manager, said by phone today from Seoul. Nonghyup Feed Inc. also bought 55,000 tons on May 13, said a company official, who asked not to be identified.
A move away from corn by Korea may slow a rally in the price of the grain, which has climbed 62 percent in the past year and reached a record $6.39 a bushel on May 9 on increased demand for livestock feed and grain-based ethanol. Wheat prices have almost halved since jumping to a record $13.495 a bushel on Feb. 27.
``There was speculation South Korea recently bought another five to six cargoes of feed wheat, mostly from Black Sea countries,'' Nobuyuki Chino, president of Tokyo-based grain- trading company Unipac Grain Ltd., said.
The country's annual purchases of feed wheat could rise to as much as 3 million tons, Chino said. South Korea is forecast to import 500,000 tons of feed wheat in the year ending May 31, 2009, according to the U.S. Department of Agriculture.
``As long as the price of feed wheat stays this far below corn, we may replace more than 50 percent of our corn needs with feed wheat,'' Kim said. May's purchases, in private transactions as opposed to tenders, were the first by the KFA for feed wheat since March 20, 2007, and the first by Nonghyup since June 18.
The price of wheat has fallen 14 percent this year, while corn has gained 35 percent. Corn for July delivery was up 0.4 percent at $6.17 a bushel on the Chicago Board of Trade in after- hours electronic trading at 2:49 p.m. Singapore time, while wheat for July delivery gained 0.7 percent to $7.585 a bushel.
Korea's Major Feedmill Group and KFA bought feed wheat from Cargill Inc., the largest U.S. agricultural company, on May 9 at $352.50 a ton, including shipping costs, for arrival by Sept. 30 at Incheon, the KFA's Kim said.
On May 13, they bought at $354.95 for arrival by Oct. 15 at Gunsan or Ulsan, Kim said, citing association data. The purchase prices compared with current corn offers of above $390 a ton, according to Kim.
Nonghyup Feed Inc.'s purchase was for arrival by Nov. 15, according to a company official.
South Korea's total wheat imports in 2008-09 may rise to 3.1 million tons, compared with 3 million tons in the previous year, according to a USDA report issued on May 9. Corn imports may reach 9 million tons, comprising 7.2 million tons for feed and 1.8 million tons for food, it said. Only Japan, Asia's biggest grain importer, and Mexico buy more corn overseas.
Korea stopped buying feed wheat last year when prices climbed after adverse weather reduced production in Australia, Canada and Europe. Since then, farmers around the world have increased planting of the grain.
Global wheat supplies are expected to rise to 131 million tons in the year ending June 30, 2009, up 17 percent from a year earlier, the International Grains Council said on May 30. Growers may produce 650 million tons, up 7.6 percent, it said.
Growers in the U.S., the largest wheat exporter, last month started harvesting what the USDA says will be the biggest crop in a decade. The U.S. will produce 65.1 million tons in 2008-09, up 16 percent from a year earlier, the USDA said.
Other major wheat exporters include Canada, Australia, Russia, Argentina and Ukraine.
Ukraine is forecast to export 6 million tons of wheat in 2008-09, up from 700,000 tons in the previous year, according to the USDA.
The Ukrainian government voted May 21 to allow exports of grain, except sunflower seeds. It has set wheat-export quotas at 1.2 million tons.