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S Korean feed buyers weigh corn against feed wheat amid price drop

S Korea's Nonghyup Feed Inc. has invited offers for two corn cargoes for Nov. 5 and Dec. 1 deliveries but within the same tender, the buyer is also seeking feed wheat offers for Nov. 5 delivery. The tender comes as Korean buyers have doubled their feed wheat purchases compared with 2020 levels due to its price competitiveness with corn, and market participants are expecting more feed wheat to replace corn to the tune of 10%-15% of total corn demand.

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It was not clear if NOFI intends to buy both corn and feed wheat for the same Nov. 5 delivery position.

Late July 6, another feedmiller Major Feed Group in South Korea booked a 65,000 mt cargo privately from Viterra at $286.86/mt CFR with a second port premium at $1.25/mt for Sept. 20-Oct. 10, shipment from the Black Sea.

CFR NE Asia corn price settled at $316/mt July 6, with offers for October delivery around $330/mt CFR NE Asia. With MFG's deal, feed wheat is therefore priced at more than a $29/mt discount to corn. The widest corn-feed wheat spread was at $33.20/mt mid-April this year, according to S&P Global Platts data.

Wheat prices are under pressure from the Black Sea harvest, which is currently progressing along the southern wheat belt and showing signs of strong yields.

The market is expecting a healthy wheat production overall out of the Black Sea, with several participants expecting FOB prices to drop further going forward.

"The buyers will keep lowering their buying ideas. Soon, you will be chasing a crowded short trade," said a trader in Singapore.

Corn prices have been supported by production concerns on poor weather both in the US and in Brazil.

NOFI was quick to issue a buy tender when markets opened in Asia July 7 following a plunge in the wheat and corn futures on the Chicago Board of Trade.

Expectations of precipitation in the US Corn Belt eased concerns about corn yields after an unseasonal dry June, and CBOT July corn futures were trading at 653.25 cents/bushel by 1530 GMT, dropping 46.75 cents/bu from the end of the week prior, Platts previously reported.