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


09 March 2012

USDA GAIN: Korea Oilseeds & Products Annual 2012USDA GAIN: Korea Oilseeds & Products Annual 2012

Soybean consumption in MY 2012/13 is forecast to remain steady at 1.3 million MT, of which 920,000 MT will go for crushing and 370,000 MT for food processing. MY 2012/13 soybean meal consumption is projected to expand 50,000 MT to 2.35 million MT as the local hog industry recovers from the effects from the earlier Foot & Mouth Disease (FMD) outbreaks. Imports of U.S. soybean meal are expected to double during this period to 200,000 MT. Meanwhile, soybean oil consumption in MY 2012/13 is forecast to grow 9 percent to 500,000 MT because of rising bio-diesel demand.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Oilseed, Soybean

Production:

Soybeans account for about 70 percent of Korea’s total oilseed production, while sesame and perilla combined make-up about 25 percent of the total. The remainder largely consists of rapeseed and peanuts.

The Korean Rural Economic Institute’s (KREI) conducted a nationwide planting intention survey of 649 soybean farmers from December 27, 2011-January 5, 2012. According to the survey results, MY 2012/13 soybean area is forecast to slightly decline to 77,234 hectares, down 615 hectares or 1 percent from the previous year’s actual plantings. This decline is in part due to strong domestic rice prices that are expected to cause some farmers who planted soybeans last year to switch back to rice. Using the KREI survey results as a benchmark, Post is forecasting MY 2012/13 soybean production to remain relatively unchanged from the previous year at 129,000 MT.

In MY 2011/12, soybean production climbed to 129,394 MT, up 24,040 MT or 23 percent from the previous year because of the increased plantings and favorable weather conditions late in the growing season. The increase in production has put downward pressure on local soybean prices since last fall. See price series table below.

In the future, soybean production is expected to hinge on the direction of the government’s rice reduction policy. In 2010, the government instituted a 3-year pilot rice reduction program (2011-13) to reduce the country’s oversupply of domestic rice by cutting annual production by 200,000 MT (40,000 HA). Under this program, farmers will be paid 3 million won ($2,600) per hectare for planting soybeans and other crops instead of rice. These farmers will also continue to receive the 700,000 won ($632) per hectare rice area payment. Of note, soybeans are considered the most suitable crop to grow in converted paddy lands and farmers.

In CY2011, government soybean purchases, which are made each year at a fixed price, stayed at zero for the second year in a row as farmers opted to sell their beans into commercial channels at higher prices. The government rate, which is unchanged since 2009, was set at 3,168 w/kg ($2.86), while the average wholesale soybean price during this period (Oct-Dec) was 5,700 w/kg ($5.15). The government has not hit its annual purchase target of 14,100 MT in years past since domestic prices have been so strong.

Consumption:

Soybeans account for the majority of oilseed consumption. Consumption in MY 2012/13 is forecast to remain unchanged from the current marketing year at 1.3 million MT, of which 920,000 MT will go for crushing and 370,000 MT for food processing use in items like tofu, soymilk and soy sauce. Future growth in overall soybean consumption is expected to be minimal given the maturity of the crushing and soy processing industries.

Meal, Soybean
Meal, Rapeseed

Production:

Almost all of the vegetable meal produced in Korea is made from imported soybeans. There is also a very small amount (<1,000 MT) of locally produced rapeseed meal.

MY 2012/13 demand for crushing soybeans will remain flat at 920,000 MT as crushing margins remain tight and demand steady. Demand is slightly below the country’s 1.0 million MT crushing capacity. Soybean meal production for MY 2012/13 is likewise forecast to hold steady at 730,000 MT with an extraction rate of 79.2 percent and crude protein content of 44 percent.

There are only two soybean crushers: CJ Corporation and Sajo O&F Co Ltd. In an effort to strengthen their competitiveness against imported meal from South America and India, these companies have started producing dehulled Hi-pro soybean meal with 47.0 percent protein content by blending U.S. and Brazilian meal. In CY 2011, production of dehulled Hi-pro soybean meal with 47 percent protein was up slightly, accounting for 23 percent of total soy meal production. Local crushers plan to expand dehulled hi-pro production in the future.

The breakdown of production by company and product follows. In CY 2011, CJ produced 47 percent protein dehulled meal and 45% protein meal in a ratio of 35:65, while Sajo produced 46 percent and 45 percent protein meal at a ratio of 50:50.

Consumption:

Nearly all imported and domestically produced soybean meal is used in compound feed production. Korean feed millers prefer soybean meal since it is more readily available than other oil meals. After corn and feed wheat, soybean meal is the third most widely used ingredient in compound feed production, accounting for about 12 percent of the total. While there is room to increase the soybean meal inclusion rate in animal feed rations, overall usage is expected to stay relatively flat for the foreseeable future given rising competition from alternative proteins, such as DDGS, and palm kernel and copra meals.

MY 2012/13 soybean meal consumption is forecast to increase 50,000 MT to 2.35 million MT as the local hog industry gradually recovers from the effects of the Foot & Mouth Disease (FMD) outbreaks in late 2010 and early 2011. Similarly, MY2011/12 soybean meal consumption is predicted to increase 70,000 MT to 2.3 million MT as the livestock sector continues to rebuild after the FMD crisis. The U.S market share of total soybean meal consumption is calculated at about 20 percent; this figure is based on the volume of meal produced from U.S. soybeans plus the amount of imported U.S. meal. U.S. market share is expected to increase in the future as the U.S. soybean industry continues to work with the local compound feed industry highlighting the benefits of U.S.de-hulled hi-pro meal. In fact, 34 feed mills used U.S. dehulled hi-pro meal in CY 2011. One constraint to future growth, though, is price. U.S. dehulled hi-pro soybean meal is about $10 per MT more expensive than South American meal.

Rapeseed meal consumption for MY 2012/13 is forecast to stay around 300,000 MT. MY2011/12 consumption is expected to increase 15,000 MT to 300,000 MT as the livestock industry continues to recover from FMD. Sizeable volumes of imported copra and palm kernel meals are also used in compound feed production depending on the size of import volume.

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