South Korea's corn demand in marketing year 2023-24 (September-August) faces further downside potential after feed buyers started increasing feed wheat usage in feed ratios to replace corn.
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Register NowThis follows the release of local rice stocks by the national granary to feed millers, marking around 400,000 mt of corn demand already replaced by alternative feed grains.
South Korea's Feed Leaders Committee bought 65,000 mt of feed wheat from Cargill in a private deal late March 14, paying $243.25/mt CFR, trade source said, marking the second feed wheat-corn substitution in South Korea in 2024 amid falling global wheat prices. The cargo is likely delivered from US Pacific Northwest ports.
The first substitution was made by fellow feed buyer Major Feedmill Group, who earlier booked 60,000 mt of EU-origin feed wheat from ADM at $246/mt CFR in a private deal March 5, according to trade sources.
"Black Sea [feed wheat] cannot offer as competitively for that [shipment] period [compared with US PNW]. Freight is still not favorable," a Singapore-based grains trader said.
South Korean feed buyers took a change in perspective after a previously bearish view on corn prices.
"After discussions, we think that corn [prices] will be firm and feed wheat will be bearish. We have started substituting [corn demand with feed wheat] and the trend is clear, there could be more substitutions in the months to come," said a South Korean feed miller, adding that the uncertainty of Brazilian weather ahead of Safrinha corn planting does not encourage a break in this trend.
In the March release of the World Agricultural Supply and Demand Estimates March 8, the US Department of Agriculture revised South Korea's corn import in MY 2023-24 down 200,000 mt to 11.60 million mt.
Local sources attributed the downward revision to lower corn usage in the feed industry after the South Korean government released around 350,000-400,000 mt of rice stocks at a discount from the national granary for feed millers' usage.
Destination corn prices saw a rebound in March, gaining more than $10/mt since the start of the month as Platts assessed corn CFR Northeast Asia at $247.50/mt March 14, S&P Global Commodity Insights data showed, amid higher ocean freight rates and firm FOB premiums in the US and Argentina.
Market participants said buyers were reluctant to buy corn at a higher price than their last purchases and may postpone their corn purchases unless it reaches their price target.
Meanwhile, weakening global wheat prices have also caused some destination buyers to delay demand coverage on feed wheat as they hope for even better deals.
Feed buyers in the Philippines, for example, held off on their feed wheat tender last week in anticipation of lower Australian feed wheat prices, as bearish sentiments outweighed the bullish impact of Australia's smaller, higher-protein 2023-24 season (October-September) crop.
Platts, part of S&P Global, last assessed Australian Standard White FOB Australia at $249/mt, falling 12.9% since the start of 2024.