Korea Turns to South Africa for Corn as U.S. Prices Double on Ethanol Use

South Korea, the biggest corn importer in Asia after Japan, is buying more from South Africa after U.S. prices doubled in the past year.

The country imported 401,070 metric tons of South African corn for livestock feed in the first four months, data on the website of the Korea International Trade Association show. That compares with the 208,866 tons shipped in all of 2010.

Corn in Chicago climbed in April to the highest level since the global food crisis in 2008 as demand for feed and ethanol outpaced production. That helped push world food costs to a record in February, the United Nations estimates, spurring conflict and riots in North Africa and Middle East and driving 44 million people into poverty. Rabobank International says U.S. predictions for the corn harvest this year are optimistic because of poor weather and planting conditions.

“Importers purchased South African corn because it was more competitive than U.S. grain in terms of price,” said Lee Young Il, a general manager at Nonghyup Feed Inc., the biggest feed-grain buyer. The U.S. is the world’s biggest producer and exporter.

Corn from South Africa was about $5 to $10 per ton cheaper than the U.S. variety earlier this year, Lee said, with the gap narrowing to about $3 a ton now.

Nonghyup bought two cargoes this year, Lee said. The Korea Feed Association, the largest grain-buying group, purchased 13 cargoes, or about 650,000 tons, since last year, according to data from the group.
Exports Quadruple

Yellow-corn exports from South Africa almost quadrupled to a 14-year high of 1.02 million tons in the year ended April 30 from 261,608 tons in the year-ago, data on the South African Grain Information Service’s website showed on May 4.

“We’d like to increase corn purchases from South Africa as long as price gaps remain around the $5 to $10 level as feed makers try to buy cheaper alternatives to expensive U.S. corn,” said Kim Chi Young, director for Korea Feed’s grain purchases.

The nation imported 6.53 million tons of feed-corn last year, of which about 92 percent was sourced from the U.S., according to data from the trade association. There were no purchases from South Africa in 2009, the data show.

Corn production in South Africa may climb to 12.3 million tons in the year that began May 1 from 11.4 million tons a year earlier, the Foreign Agricultural Service of the U.S. Department of Agriculture said in a report on May 11. Exports will be unchanged at 2 million tons, it said.

Corn advanced 0.6 percent to $7.3775 a bushel at 11:21 a.m. Seoul time today on the Chicago Board of Trade.

source: bloomberg