South Korea's Nonghyup may cut corn imports by 20 percent

South Korea's biggest feed maker Nonghyup Feed may cut corn imports by 20 percent this year due to falling demand from local livestock farmers, and could raise cheaper wheat buys, a senior company official said on Wednesday.
"The domestic livestock market is shrinking sharply and that will lead to an overall decline in feed stock imports this year," Lee Jong-il, deputy general manager of Nonghyup's foreign trade department, told Reuters. "We expect corn imports to fall to around 2 million tonnes this year from 2.5 million last year and the plan remains flexible because some of the portion could be switched to cheaper wheat."
South Korean feed makers virtually stopped purchasing wheat between the second half of 2007 and late 2008 as prices of the grain soared to record highs on poor weather conditions in major producing countries such as Australia.
But wheat prices more than halved to $6.34 a bushel on Wednesday from a record high of $13.34-1/2 in February last year on bumper crop forecasts and the economic turmoil, forcing many feedmakers to switch to the grain from pricey corn.
Corn prices also turned lower in the second half of last year after hitting a record peak of $7.65 a bushel in June, sinking 44 percent to $4.26 on sluggish demand from an ailing US ethanol sector and the global financial strain. "The spread between corn and wheat has widened to around $40-$50 a tonne, and at this level many feed makers are increasing wheat purchases to lower production costs.
Domestic feed makers could increase wheat purchases quite significantly as they bought very little last year," Lee said. Feed wheat, which can be used as a substitute for corn in some grades of animal feed, is now trading at around $150 a tonne, sharply lower than the $205 a tonne quoted for feed-use corn.
CREDIT MARKET IMPROVES The spread of the global credit crisis late last year has forced South Korean banks to dramatically cut corporate credit lines, most of them linked to trade financing, as they struggled to raise dollars and roll over short-term foreign currency debt, hitting grain importers hard. "Credit market conditions have not completely recovered but are improving gradually following the government's foreign liquidity injections," Lee said.
The government has unveiled a series of measures to ease the crunch, including currency swaps, foreign currency liquidity supplies and state guarantees on banks' foreign borrowing. South Korea, the world's third-largest corn importer, purchased 6.9 million tonnes of feed corn in the first 11 months of last year, up 11 percent from a year ago, according to industry data.