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

05 April 2013

USDA GAIN: Republic of Korea Grain and Feed Annual 2013USDA GAIN: Republic of Korea Grain and Feed Annual 2013

MY 2012/13 wheat imports are expected to reach 5.2-5.4 million tons given higher than expected feed wheat imports while MY 2013/14 will be lower at 4.8 million tons due to current and expected continued higher feed wheat prices. Korean corn imports are expected to decrease 100,000 tons to 8 million MT due to a reduction in livestock inventories, while imports of US corn are forecast to rebound to 3 million MT assuming a normal crop year in the US. Rice planting area is expected to decline 0.7 percent to 843,000 HA but higher yield varieties will offset the lower acreage. MY 2013/14 rice production is forecast up 5 percent over 2012/13 to 4.2 MMT while consumption is down 2.5 percent to 4.5 MMT as consumption continues to decline due to a change in eating habits and the growing popularity of Western foods.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed




MY 2013/14 wheat production is forecast to rebound to 38,000 tons, up 19 percent from the previous year due to a return of a normal weather pattern during the planting season of October – November 2012. In MY 2012/13, heavy rains during the planting season hindered wheat farmers from maintaining the same acreage as before. However, weak end-user demand of local wheat has continued increasing stocks.


MY 2013/14 wheat consumption is forecast at 4.65 million tons, a decrease of nearly 350,000 tons from the current marketing year due to an anticipated decrease in the available supplies of competitively priced feed wheat. Since November 2012, arrival prices of feed grade wheat have been higher than corn prices.

MY 2013/14 milling wheat consumption including flour and pasta trade on a wheat basis is forecast at 2.2 million tons, remaining unchanged from the current marketing year.

In MY 2012/13, total wheat consumption is expected to stay around 5 million tons, remaining unchanged from the previous year due to maintaining greater demand for feed grade wheat. Feed millers are substituting competitively priced feed grade wheat previously purchased prior to November 2012 for corn. Milling wheat consumption is expected to be 2.2 million tons, remaining unchanged from the previous year.

CY 2012 per capita flour consumption increased to 34.1 kilograms, up 2 percent from the previous calendar year, though Korea’s wheat flour consumption has been hit by strong global wheat prices. Nearly 44.0 percent of flour consumption is used for local noodle manufacturing, followed by 14.5 percent for baking products and 8.2 percent for confectionary products. The remainder is used by the following: restaurants (8.1 percent), households (6.9 percent), pet food (5.1 percent), exports (3.8 percent), soy sauce (4.6 percent), brewery (1.1 percent), extruded traditional chewy cakes (0.7 percent), industrial use (0.8 percent) and others (2.2 percent). Flour is exported mostly to Japan.


MY 2013/14 wheat imports are projected at 4.8 million tons, of which 2.4 million tons are for milling (including flour and pasta imports on a wheat equivalent basis) and 2.4 million tons for feed. The import estimate hinges to a large extent on the continued availability of feed wheat. Local traders expect Korea to import between 2.2 million and 2.6 million tons of feed wheat depending on the 2013 crop situation in the traditional feed wheat exporting countries.

MY 2012/13 wheat imports are expected to reach 5.2 to 5.4 million tons given that imports for feed wheat were higher than expected during the first eight months of the current marketing year. Competitive international prices for feed wheat are driving imports. Declines in feed wheat imports from Australia and Canada were offset by increased feed wheat from India. Thus far in MY 2012/13 India is the major supplier of feed grade wheat, followed by Australia, the United States, Canada and Ukraine. Since January 2012, the US feed wheat exports to Korea have been trending higher but have fallen since January 2013. Imports of US wheat in MY 2012/13 are expected to reach around 1.5 million tons, which include 200,000 tons of US feed grade wheat, down 100,000 MT from the previous forecast based on import statistics for the first eight months and updated statistics of feed grade wheat contracts.


In late December 2012, the Ministry of Strategy and Finance (MOSF) released its adjusted tariffs and tariff rate quotas (TRQ) for CY 2013. A TRQ for milling wheat of one million metric tons was set at zero percent duty, down from the base rate of 1.8 percent, for the first half of CY 2013, remaining unchanged from the previous year. The out-of-quota duty remained fixed at 1.8 percent. Of note, the feed wheat TRQ and its corresponding duty were eliminated in 2007. Please refer to KS1310 for more details. The duty on US wheat has fallen to zero under the KORUS FTA since its implementation on March 15, 2012.

In CY 2013, the flour import tariff rate is applied at 4.2 percent of the local base rate. Under the KORUS FTA, import tariffs for US wheat flour (H.S. 1101.00.1000) is scheduled to eliminate over a 5 year phase out period while tariffs for meslin flour (H.S. 1101.00.2000), the mixture of rye and wheat four immediately fell to zero.

Flour Trade:

MY 2012/13 flour imports are expected to level off around 40-50,000 tons (wheat equivalent) because small-sized restaurants and noodle manufacturers continue being loyal users of cheaper priced flour. Pasta imports are expected to be 138,000 MT (wheat equivalent) based on the first seven months of imports. Annual flour exports have converged at around 60,000 tons (wheat equivalent) with pasta exports staying around 120-130,000 MT (wheat equivalent).




Corn production is negligible and accounts for less than one percent of total consumption. Planted area for MY 2013/14 is expected to remain steady at around 17,000 hectares, while production is forecast at 83,000 MT based on the preceding five-year average yield.

Statistics Korea (KOSTAT) recently released data on 2012 planting area at 17,001 hectares, up seven percent over the previous year due to increased local corn prices. Post estimates Korea’s corn production at about 84,000 metric tons based on the preceding five-year average yield. The government will release the 2012 official production figures mid-month April 2013.


MY 2013/14 corn consumption is forecast to decline to 8.1 million MT, down 0.1 million MT from the current marketing year estimate, due to an anticipated decrease in demand for feed corn as Korea’s animal inventories are expected to adjust down to cope with the surplus of meat that have made beef and pork prices bearish. Cattle and swine growers are expected to try to reduce their inventories to stabilize the domestic meat market in CY 2013. Please refer to KS 1316 (Livestock and Products Semi-Annual) for more details. Feed corn consumption is projected to decrease to 6 million MT, down 0.1 million MT from the estimated current marketing year level in large part due to an anticipated decrease in compound feed production for the swine sector. However, food, seed and industrial (FSI) corn consumption is expected to stay around 2.1 million MT to meet a constant demand for high fructose corn syrup (HFCS) and corn products from the Korean food industries.

MY 2012/13 corn consumption is expected to go up to 8.2 million MT, up approximately 0.4 million MT from the previous year mainly due to increasing consumption of feed corn to meet a greater demand of compound feed from the swine and cattle sectors. Processing corn is expected to stay around 2 million tons. FSI corn consumption will be at 2.1 million MT, remaining unchanged from the previous year.


Compound feed production is expected to continue increasing up to 18.1 million tons in MY 2012/13, but decline to 17.6 million tons in MY 2013/14 following animal growers’ efforts to reduce animal inventories for both beef cattle and swine throughout 2013. Feed corn had been the main ingredient used in compound feed, accounting for more than 40 percent of total ingredients prior to MY 2008. In MY 2011/12, the feed corn use ratio fall to 31.6 percent of total compound feed production (the lowest level since MY 1994) as feed grade wheat prices were much more competitive than corn. This ratio is projected to remain relatively constant for the foreseeable future based on the availability of global feed grade wheat.

Compound Feed Production for Swine Industry:

In Korea, the swine industry is the most important feed grain user. In MY 2011/12, compound feed production for the swine industry was 5.32 million tons, up 12.3 percent from the previous marketing year. The increase of compound feed production was attributed to the substantial inventory recovery from the damage caused by the foot and mouth disease (FMD) outbreak in 2010 and 2011. In MY 2012/13, compound feed production for swine is expected to increase to 5.5million tons, up 3 percent from the previous year to meet a greater demand from a highly inflated inventory in the swine sector. However, current low pork prices will force Korea swine growers to reduce their inventory voluntarily, resulting in a reduction of swine compound feed to 5.2 million tons, down 5.5 percent in MY 2013/14 from the current marketing year.


Corn processors continue using GM corn and non-biotech IP corn as well as traditional corn to produce corn starch, HFCS and corn flour. GM corn imported from the United States, South American countries and Ukraine has been used for starch and HFCS. Non-biotech IP corn imported from the United States and Brazil and traditional corn imported from Hungary, Serbia, Romania and South Africa have been used for corn starch, HFCS and corn flour. The perceived public concern over biotech continues to exert pressures on imported processing corn, especially biotech corn that is used to manufacture cooking oil and HFCS. Many food processing companies have been reluctant to use ingredients sourced from biotech corn. Some food processing companies utilizing corn starch products have sourced ingredients imported from China since these items are reportedly derived from non-biotech corn.


With livestock inventories expected to fall, MY 2013/14 total corn imports are projected to decrease to 8 million MT, down 100,000 tons from the current marketing year estimate, consisting of 6 million MT of feed corn to meet the demand for compound feed, and 2 million MT of processing corn to meet relatively stable demand for food processing.

MY 2013/14 US corn imports are forecast to rebound to 3 million MT or about 38 percent of total Korean corn imports, up from the estimated 7 percent of total Korean corn import for the current marketing year, assuming that the 2013 US corn crop will return to normal.

Corn imports for MY 2012/13 are expected to decrease to 8.1 million MT, down 0.5 million tons from the previous post’s forecast due to a lower demand for feed corn, spurred by the increased use of feed wheat. MY 2012/13 US corn imports are estimated to decline to 0.6 million tons based on the records of US corn imports for the first five months and corn trade statistics.

As of early March 2013, importers have contracted for 6.4 million MT of corn delivering from October 2012 to July 2013. Most of the contracted purchases to date are for South American corn and/or optional origin at seller’s option among South America, South Africa or Europe with a price range of $257-340 per metric ton CNF for feed corn. Meanwhile, corn processors have contracted for US No. 2 non-GM yellow corn and Eastern European conventional corn with a price range of $260-400 per metric ton CNF for the same period. Most recent buying contracts have been stabilized in the range of $308-311 per ton CNF for feed corn and $ 362-365 for processing corn.

In late December 2012, the Ministry of Strategy and Finance (MOSF) released its adjusted tariffs and tariff rate quotas (TRQ) for CY 2013. The autonomous TRQs cover a variety of agricultural products, including feed and processing corn. The TRQs for these commodities were expanded with feed corn set at 9 million MT for CY 2013 and processing corn at 1.25 million MT for the first half of CY 2013, respectively, with a zero percent duty. Please refer to KS1310 for more details. The out-of-quota duty for both feed and processing corn remained fixed at 328 percent.

Of the annual autonomous TRQs for feed corn, 9 million MT has been allocated to feed millers who are members of the Korean Feed Association (KFA) and Nonghyup Feed Inc. (NOFI). The Korea Corn Processing Industry Association (KOCPIA) is expected to manage the 2 million MT of processing corn TRQ.

Under KORUS FTA, effective March 15, 2012, the duty on US feed corn immediately fell to zero. If imports of US corn claim the KORUS preferential duty, those imports would not count against the global TRQ. Conversely, the duty free volumes for corn for food processing will grow each year with tariffs being completely phased out by 2019. For greater detail, please refer to Chapter 3, Annex 3-A of the trade agreement.


Rice, Milled


MY 2013/14 rice production is forecast to remain at 4.2 million tons (MMT) – up 5 percent from 4 MMT in 2012/13 – based on five year average yield. According to a recent Korea Rural Economic Institute (KREI) survey of 1,387 rice farmers from December 21 through 31, 2012, area planted is expected to decline to 843,000 HA, down about 0.7 percent from last year. However, high yield varieties will almost offset the lower acreage planted. Information about the 2012 rice crop is available in KS 1248 (Rice Production Revision).


Rice farmers prefer planting high yield varieties to maximize returns. Consequently, increased yields are expected to offset the effects of declining paddy land. The KREI forecasts rice average yields ranging from 491Kg/10a to 506Kg/10a depending on weather conditions.

KREI forecasts for the 2013 crop and Ministry of Food, Agriculture, Forestry and Fisheries (MIFAFF) historical data are shown in the following tables. (Note: Under a recent government reorganization, MIFAFF is now the Ministry of Agriculture, Food and Rural Affairs or MAFRA.)

Production Policy:

Rice farmers receive two types of income support payments under the Rice Income Compensation Act (RICA), an area payment and a deficiency payment. In CY 2012, combined support payments totaled 610 billion won ($541 million). An explanation of how these payments are calculated follows.

Area Payment: This payment is made on a ‘per hectare’ basis and is calculated using the average area of rice production during the base period 1998-2000. The 2012 area payment was 704,503 won ($625) on average per hectare. Paddy area covered under this support program declined to 866,000 hectare, down 2 percent from the previous year. The Korean government has raised the area payment for the 2013 crop and after to 800,000 Won ($710) per hectare.

Deficiency Payment: The deficiency payment is 85 percent of the difference between the national-average market price during the 2012 harvest season (2012 Oct.-2013 Jan.) and the 2012 target price, less the area payment. In 2012, the deficiency payment amounted to zero since the average harvest price of 2,172 won ($1.93) per kilogram (milled) was higher than the target price of 2,126 won ($1.89) per kilogram (milled). The area payment of 704,503 won per hectare is converted to a kilogram equivalent (144 won/Kg) by dividing it by the 1999-2003 Olympic average yields*.

Due to strong farm gate prices during the harvest season, farmers received no deficiency payments in 2012. The deficiency payment calculation is shown as below.

Note: *Olympic average yields: an average during a 5-year period, dropping the highest and lowest values.

Government Rice Purchase Program under the Public Rice Stockholding Program (PRSP):

The government purchases rice to ensure food security and price stability. Under the Public Rice Stockholding Program (PRSP), the Korean government procures domestic paddy rice during the harvest season (October-December) at the average market price and later sells it during the non-harvest periods at the prevailing domestic market price. For October - December 2012, the Korean government purchased 363,000 MT (milled basis) of paddy rice, or 9 percent of the 2012 rice production, under PRSP. The government procurements achieved the initial target of 370,000 MT, paying high enough prices to farmers thanks to bullish market trends under the program.


MY 2013/14 consumption is forecast at 4.5 million tons, down 2.5 percent from the estimates of the current marketing year. Imported rice constitutes about 9 percent of total consumption.

Korean consumers prefer short grain table rice and 84 percent of domestic production (all short grain) is consumed as table rice. Per capita table rice consumption continues declining as eating habits change due to rising incomes and the growing popularity of Western foods. Annual per capita table rice consumption reached its peak at 136.4 Kg in 1970 and has gradually declined. FAS/Seoul forecasts per capita table rice consumption at 67.2 Kg in MY 2013/14 based on declining consumption trends for table rice.

Although processing accounts for only about 12 percent of total rice domestic consumption, consumption of rice for processing has grown rapidly in the past few years. However, in MY 2013/14, Korea’s food processing industry is forecast to stabilize at about 500,000 tons of rice (milled) due to a sharp reduction in liquor processing use as the surplus of stocks were depleted. Alcohol will account for a much smaller share of the processing rice usage in the future, falling from nearly 40 percent to 10 percent. Consumption of food processing is expected to continue to grow in the coming years as the government continues its efforts to globalize Korean cuisine, which includes rice cakes and other rice-based snacks.


Korea imports rice as part of its WTO Minimum Market Access (MMA) agreement. Import volumes will continue to grow according to the predefined MMA schedule until the end of 2014. The government’s decision to import earlier under the 2013 MMA is to help stabilize domestic rice prices and meet its obligation of MMA rice imports within the concerned year. While tenders for MMA commitments are awarded in the MMA calendar year, actual MMA rice imports may occur in the following year.


MY 2013/14 rice imports are forecast at about 410,000 tons (milled). Under the 2014 MMA, Korea is scheduled to purchase 408,700 tons (milled) of rice, which will likely begin in the second half of 2013. Of the total committed purchase amount, approximately 120-140,000 MT (milled), or 29-34 percent of the 2014 MMA, will be US medium grain rice, under Country Specific Quota (CSQ) and Most Favored Nation (MFN) quota allocations.

MY 2012/13 rice imports are expected to reach 600,000 tons (milled) under both the 2012 and 2013 MMA commitments. As of the middle of December 2012, the Korean government started purchasing 388,353 MT under the 2013 MMA. The Korean government successfully acquired 368,006 MT under the 2012 MMA by the end of December 2012.

2013 MMA Rice Purchasing Plan:

Under the 2013 Minimum Market Access (MMA) purchasing plan, Korea will purchase 388,353 MT of rice, comprised of 183,125 MT under the global quota (GQ) and several country specific quotas (CSQ) totaling 205,228 MT. 84 percent of the US CSQ quota has been allocated to table rice this year, compared to 80 percent in 2012. The United States could feasibly sell 120-150,000 MT, or 30-39 percent of the total MMA taking into account the US CSQ of 50,076 MT and 37,498 MT of medium grain and 63,000 MT of optional varieties under the global quota. More details on the 2013 tendering plan are available in KS1305 (2013 Rice MMA Purchasing Plan).

2013 MMA Tendering Process:

Upon completion of purchasing 2012 MMA rice around the end of December 2012, Korea continued purchasing 2013 MMA rice. Under the 2013 MMA quota, Korea has bought 68,329 MT, or 17.6 percent of the total 2013 MMA, consisting of 30,229 MT from USA, 30,000 MT from India and 8,100 MT from Australia.

2012 MMA Rice Purchases Completed:

In late December 2012, the Korea Agro-Fisheries and Food Trade Corporation (aT) completed the tendering process for the 2012 Minimum Market Access (MMA) commitments for rice. Korea purchased a total of 368,006 metric tons (MT) of rice from the United States, China, Thailand, Australia, Vietnam, India and Myanmar. The US share was 27 percent, with contracts totaling 100,901 MT (milled) worth US$78 million. The bulk of the US contracts, roughly 67,605 MT, were for brown rice (equivalent to 60,845 MT on milled basis) with deliveries from June 2012 through April 2013, while the remaining 40,056 MT was for milled table rice with delivery dates from April 2012 through February 2013. More details on the tender results are available in KS 1308 (2012 MMA Tendering Results).


aT, the government’s state trading arm, has sold table rice to Korean wholesale and retail rice markets through its public auction system since 2006. On the other hand, the Ministry of Food, Agriculture, Forestry, and Fisheries (MIFAFF) has distributed processing rice to end-users such as food processors and alcoholic beverage producers at a government-set price throughout the year since 1996.

The 2011 MMA table rice of 104,297 MT was delivered from late 2011 until June 2012. aT began table rice auctions for US rice in December 2011 and sold out by the middle of August 2012, while Chinese table rice was auctioned from March 2012 through early January 2013, and Thai table rice is still auctioning since February 2012. Average auctioned prices for both US #1 and Chinese #1 were lower than #3 which belatedly started their auctions when the domestic rice market trended upward in 2012.

In response to much more favorable consumer confidence in US medium grain milled rice, aT has continued selling US medium grain rice for both #1 and #3 grades under the 2012 MMA quota of which the first batch of 20,000 metric tons was delivered to Korea in the first half of 2012 soon after completing the auctions of US table rice under the 2011 MMA quota in the middle of August 2012. Remaining portions of US table rice under the 2012 MMA quota were delivered by the end of February 2013. aT completed the auctions of US #3 table rice in early January 2013.


Korea has exported negligible amount of rice to other countries. In CY 2012, Korea exported 2,223 MT of milled rice with Australia importing 1,081 MT or 49 percent of total rice imports followed by 32 other countries. The US imported 90 MT of Korean rice for the period.


MY 2013/14 ending stocks (at the end of October 2014) are forecast to rebound to about 0.85 million tons or 19 percent of total consumption assuming that rice production returns to normal conditions. MY 2012/13 stocks (at the end of October 2013) are forecast at 0.7 million tons or 18 percent of domestic consumption.

Ending stocks of imported rice continue increasing as the government has encouraged the use of old domestic rice in food processing, coupled with importing more rice in CY 2013. Consequently, imported rice stocks for MY 2013/14 are forecast to reach 403,000 metric tons as of the end of October 2014.

April 2013

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