South Korea Increases Corn Imports from Brazil
South Korea has found a cheaper alternative to US corn supplies, with Korean feed-grain buyers looking to import more corn from South America.
South Korea’s biggest feed-grain buyer, Nonghyup Feed Inc., is increasing corn imports from South America and from Brazil in particular, Bloomberg reported on 19 June 2012, quoting Lee Tae Woong, a deputy general manager at the Seoul-based company. According to Mr Lee Tae Woong, purchases in 2012 may climb to at least 450,000 metric tonnes, mostly from Brazil, relative to 50,000 tonnes purchased last year.
Mr Lee Tae Woong also notes that Korean feed-makers will look to import more corn from South America for the rest of the year on account of the wide price gap between US and South American corn, with corn of South American origin being approximately $20 per tonnecheaper than U.S. grain on a cost and freight basis.
Brazil’s corn exports are indeed theless costly option for the Korean importers, due to a weak performance of the real against the greenback. Bloomberg reports that in 2012, the Brazilian real lost 9.3 percent against the US dollar, making the import of Brazilian crop cheaper in comparison to the import of US crop. Mr Lee Tae Woong predicts that even though there might be some ups and downs, buyers would continue to seek South American corn for the next decade.
!m(/uploads/story/77/thumbs/pic1_inline.png)Corn as well as soybean growers in Brazil are likely to increase exports in general so as to benefit from the real’s decline against the dollar, which makes shipments more profitable. Bloomberg quotes Joao Rabelo, undersecretary of economic policy at Brazil’s Ministry of Finance, who estimates that Brazilian exporters will manage to profit from the weaker real performance until the end of 2012.
In addition, output in Brazil is expected to rise to a record high of 73.7 million tonnes in the crop year which started on 1 September 2011, according to data of the Brazilian market research company Agroconsult, as reported by Bloomberg.
Brazilian corn in particular and South American corn in general might turn out to be a necessary alternative not only for South Korea but for other major importers of corn as well, especially if the US runs short of corn this summer. According to a Reuters analysis published in the beginning of June, the “startlingly high prices” of corn from Ohio to Kansas might be an indication that the country will run short of corn, which will in turn affect exports to big customers such as South Korea, Mexico, Japan and China. According to Bloomberg, China, which is the world’s largest user of corn, listed Argentina as approved supplier in April and set import standards for the Brazilian government in June, indicating a potential import shift to South American corn.
The US Department of Agriculture (USDA) estimates that the corn supply at the end of August will be adequate to meet the needs of exporters as well as those of millers and livestock feeders, as reported by Reuters. Yet,there are some concerns that the USDA estimates might be overly optimistic, with analysts arguing that the government may not have a reliable picture of the shrinking stockpile.