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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed


07 August 2013

USDA GAIN: Republic of Korea Grain and Feed Update July 2013USDA GAIN: Republic of Korea Grain and Feed Update July 2013

Wheat consumption in MY 2013/14 is expected to increase 0.2 million tons to 4.8 million due to greater demand in feed grade wheat, while MY 2012/13 consumption is estimated to reach 5.1 million tons due to greater demand in the milling and feed sectors. Similarly, wheat imports are up respectively. MY 2013/14 corn consumption is 8.9 million tons, up 0.9 million tons from the previous forecast due to greater demand for feed grade corn in an oversupplied swine sector. MY 2012/13 corn consumption is also revised to 8.9 million tons, up 0.8 million tons from the previous report to meet greater demand in the swine and cattle sectors. As well, MY 2013/14 total corn imports are revised to 9 million tons, up one million tons; and MY 2012/13 imports are expected to increase to 8.6 million tons from the previous estimated 8.1 million tons. Rice remains unchanged.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Post:

Seoul

Author Defined:

Commodities:

Wheat

Production:

The Korean government recently released official numbers for wheat production at 37,014 MT in MY2012, down 15 percent from the previous year due to a decrease in planting area caused by heavy rains in the fall of 2011. According to a governmental acreage survey conducted from May 16-30, 2013, wheat cultivated area in 2013declined to 7,373 hectares, down 22 percent or 2,094 hectares from the previous year due to winterkill last winter and an area shift to barley from wheat which requires a longer growing period than barley, hindering timely rice transplantation as a double crop after wheat cultivation. Additionally, wheat cooperatives did not increase the purchase price, resulting in decreased wheat area as well.

Consumption:

MY 2013/14 wheat consumption is expected to increase to 4.8 million tons, up 0.2 million tons from the previous forecast due to a greater demand of feed grade wheat caused by constant strong feed demand from the swine sector, which failed to reduce swine inventories.

In MY 2012/13, total wheat consumption is estimated to reach a record 5.1 million tons, an increase of 90,000 tons from the previous year due to greater demand for milling purpose. Milling wheat consumption for flour production is estimated at 2.3 million tons, up 7 percent or 150,000 tons from the previous year. Feed millers have continued using feed grade wheat to meet greater demand from the swine sector.

Trade:

MY 2013/14 wheat imports are revised up to 5 million tons, up 0.2 million tons from the initial forecast to meet a greater demand of feed grade wheat. Of total imports, 2.4 million tons are forecast for milling (including flour and pasta imports on a wheat equivalent basis) and 2.6 million tons for feed.

MY 2012/13 wheat imports reached 5.46 million tons, up 5 percent from the previous year due to greater imports of milling wheat because flour millers had raw materials delivered earlier to receive TRQ benefits in the first half of 2013. Feed grade wheat imports driven by Indian wheat reached 2.8 million tons, a similar level to the previous year, competitive with the international price of feed corn. India was a major supplier of feed wheat (55%), followed by Australia (25%), the United States (7%), Brazil (6%), Ukraine (4%) and Canada (2%).

Flour Trade:

MY2012/13 flour imports declined to 28,600 tons (39,125 tons wheat equivalent). Flour exports increased to 46,843 tons (52,457 tons wheat equivalent), up 4 percent from the previous year. Pasta imports and exports increased by 11 percent and 8 percent from the previous year’s trade respectively.

Commodities:

Corn

Production:

The Korean government recently released official numbers for corn production at 83,210 MT in MY2012, up 13 percent or 9,598 MT from the previous year.

Consumption:

MY 2013/14 corn consumption is revised up to 8.9 million tons, up 0.9 million tons from the previous forecast due to a greater demand of feed grade corn caused by strong feed demand from an oversupply of swine inventories that are expected to maintain for this marketing year.

MY 2012/13 corn consumption is also revised up to 8.9 million tons, up 0.8 million tons from the previous report at 8.1 million MT to meet greater demand from the swine and cattle sectors.

On the basis of the first eight months, compound feed production is expected to continue increasing to 18.9 million tons for both MY 2012/13 and MY 2012/13 due to greater feed requirements from an oversupply in of the swine and cattle sectors.

For the first eight monthsof MY 2012/13, swine compound feed production increased by 17 percent over the same period of the previous marketing year and cattle increased by 6 percent, respectively, while compound feed production for poultry and other animals declined slightly.

The corn inclusion rate in total compound feed production is expected to grow to 36 percent in MY 2012/13, up 4 percent from the previous year due to declining feed wheat use.

Trade:

MY 2013/14 total corn imports forecast is revised up to 9 million tons, increasing by one million tons from the post’s initial forecast of 8.0 million tons due to a greater demand in the swine sector with processing corn imports remaining unchanged at 2 million tons.

Based on the imports for the first nine months, corn imports for MY 2012/13 are expected to increase to 8.6 million tons from the previous estimated 8.1 million tons, up 0.5 million tons due to strong animal feed demand from the swine and cattle sectors. However, drought stricken US corn exports to Korea are expected to be the lowest since MY 2002/03 as a result of the StarLink issue.

As of July 15, 2013, Korean buyers have already completed corn contracts delivering in MY 2012/2013 (Oct/Sep), continuing to make new contracts for delivery in December under MY 2013/14 (Oct/Sep). Most of the contracted purchases to date are for South American (SOAM) origin and/or optional origin at seller’s option among the United States, South America, or Europe including the Black Sea.

Commodities:

Rice

Production:

Production remains unchanged from the previous report.

Consumption:

Consumption remains unchanged from the previous report.

Trade:

The aT, the government’s state trading arm, manages the purchasing of all imported rice through a tendering process and subsequent auctions of imported table rice.

2013 MMA Tendering Process:

The Korean government began purchasing 388,353 MT under the 2013 MMA since late December 2012. As of July 12, the aT, the state trading arm of the Korean government, has purchased 247,379 metric tons (milled), about 64 percent of the entire 2013 MMA import commitments with the remainder still being processed.

The United States was awarded 95,974 metric tons (milled) comprised of 62,291 metric tons of medium grain milled rice and 37,425 metric tons of medium grain brown rice (or 33,683, milled) for both CSQ and GQ. The Korean government has purchased milled rice for table purpose under the global quota (GQ) for the first time and the United State has been successful to date. Please refer to following tables for more details. Post expects the United States to sell more medium grain rice in addition to the established contracts through pending tendering processes for the remainder of the140,974 metric tons.

Auctions:

The aT sells table rice shipments through a public auction system. On the other hand, the Ministry of Food, Agriculture, Forestry, and Fisheries (MIFAFF) distribute processing rice to end-users such as food processors and alcoholic beverage producers at a set price throughout the year. The 2012 MMA shipments have arrived from May 2012 through May 2013. Approximately 110,401 MT of table rice has been delivered over this period while US table rice of 40,056 MT was delivered from April 2012 to February 2013, which is earlier than other origins in order to meet timely rice auctions for US milled rice.

The aT kicked off table rice auctions for 2012 CSQ US milled rice from August 2012 and completed selling in early May 2013. After a two month break, the aT started auctioning off US milled rice imported under the 2013 MMA to meet a greater demand of US milled rice. The progress of auctioning for other origins has been comparably slow. Auctions for Chinese milled rice are still pending under the 2012 MMA with Thai milled rice auctioning off under the 2011 MMA, respectively.

Tariffication:

Korea delayed tariffication on rice for ten years from 1995~2004 during the Uruguay Round(UR) agricultural negotiations of 1994, and later through the re-negotiations on rice in 2004, extended the grace period for 2005~2014 under the condition that Korea increase the minimum market access(MMA) volume by 20,347 tons each year.

To prepare for the expiry of delayed tariffication on rice next year, Korea launched a ‘Research Forum for Development of the Rice Industry (working name)’ with participation by former and incumbent officials from the government, national research institutes, farmers’ associations, consumer groups and academia with expertise in rice and trade at the end of June 2013 to begin discussions on core issues relating to rice tariffication.

The Forum is composed of three sections and one advisory committee. The Food Grain Policy Section is responsible for studying the history of rice policy from the 1970s to date seeking a future direction of rice policy. The Foreign Strategy Section is in charge of analyzing the impact on whether or not to convert to tariffication. The Internal Strategy Section is trying to find ways for future domestic rice policy in relationship to the policy direction of rice market liberalization. The advisory committee is mainly composed of farmers groups and consumer groups with a function to deliver various field opinions to the Forum, reflecting their concerns and suggestions in the studies.

In particular, the Forum is expected to spearhead efforts in setting the basic direction for the negotiation strategy and calculation of the tariff equivalent assuming Korea converts to rice tariffication, management of imported rice, projections on import prices for each country after tariffication, forecasts on supply and demand of domestic rice, and measures to stabilize supply and demand, among others. The Forum is slated to complete its activities by the end of the year.

Exports:

Korea’s rice exports have been slow for the first five months in CY 2013, with an expectation of slightly less than 2,000 MT. US imports of Korean rice are expected to remain stable for the period.

August 2013

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