South Korean feed millers buys more feed grain, prices hit multimonth high

Feed millers in South Korea have ramped up feed grain purchases and have opted to replace a portion of corn demand with cheaper feed wheat for the second consecutive year, propelling Asian corn prices to multimonth highs.

Platts had assessed CFR North East Asia corn at $341.50/mt on Feb. 9, marginally below the 8-month high of $342/mt assessed on Feb. 8. Asian corn, which Platts started assessing on Feb. 13, 2017, hit an all-time high of $349/mt on May 10, 2021.

South Korea's 2021 feed sales grew by about 3%-4% in 2021, which gave a renewed boost to buying sentiment, while fears of a further price spike in the near future on the back of strong crude markers and firm futures have sustained the buying momentum.

Feed buyers in Korea have booked a total of about 1.5 million mt of corn since the start of the year for deliveries up to early June 2022.

They have accelerated their pace of corn buying compared with the same time last year when less than 500,000 mt was purchased as buyers were spooked by the price surge and resorted to buying hand to mouth.

Given the strength in corn, feed wheat substitution has also kicked off yet again and may continue going forward, extending the 2021 trend, market sources said.

The spread between Platts CFR North East Asia corn assessments and feed wheat trades done on a CFR South Korea basis stood at minus $10.52/mt on Feb. 9. This spread had nosedived from plus $34.15/mt on Dec. 1, 2021 into negative territory on Jan. 26, 2022 to reach minus $10.52/mt on Feb. 9.

"We have plans to use more feed wheat to replace corn," one feed maker said.

The feed wheat to corn price spread continue to be the driving factor in this switch as feed millers try to minimize cost amid near record feed grain prices.

To-date, South Korean feed millers have booked 870,000 mt of feed wheat arriving in the first half of 2022 as compared with only 375,000 mt for the same arrival period last year, Platts trade data showed.

However, South Korean feed buyers ramped up their feed wheat purchase for arrival in the second half of 2021, importing just over 1.2 million mt in H2 2021.