April 25 – What is the USDA Saying About South Korea’s Wheat Needs?

South Korea will be importing 4.6 million metric tonnes of wheat for 2018/19. Let’s dive into wheat demand in South Korea.

South Korea will be importing 4.6 million metric tonnes of wheat for 2018/19, to meet a projected consumption of 4.36 million metric tonnes. Let’s dive into wheat demand in South Korea. 

Milling-grade wheat

Most of South Korea’s wheat demand is for milling-grade wheat. Wheat flour consumption has been steady year-over-year, at around 2.4 million metric tonnes. Their consumption is mainly met through imports since there is little local wheat demand.

For 2017/18 (July-January), 1.5 million metric tonnes of milling-grade wheat have been imported. This is up from the 1.3 million metric tonnes of milling-grade wheat that were imported in 2016/17 (July-January).

774,000 metric tonnes of that imported milling-grade wheat for 2017/18 (July-January) was imported from the United States. 624,000 metric tonnes were imported from Australia and 122,000 metric tonnes were imported from Canada. 

Feed-grade wheat

Under half of South Korea’s wheat demand is for feed-grade wheat. Feed wheat consumption has declined from 2.1 million metric tonnes to 1.8 million metric tonnes in 2017/18 due to the competitive price of corn. However, it is projected to increase to 2.0 million metric tonnes in 2018/19. 

For 2017/18 (July-January), 937,000 metric tonnes of feed-grade wheat have been imported. This is down from the 1.4 million metric tonnes of feed-grade wheat that were imported in 2016/17 (July-January). 

651,000 metric tonnes of that imported feed-grade wheat for 2017/18 (July-January) was imported from Ukraine. 146,824 metric tonnes were imported from Russia and 99,000 metric tonnes were imported from the United States. 

The average price of feed-grade wheat imported into South Korea in 2017/18 was $194 USD / metric tonnes (or $5.28 USD / bushel and $6.80 CAD / bushel). 

Feed-grade wheat is finding a competitor in corn. Corn makes up about 41% of compound feed ingredients, while wheat makes up about 11%. The competitive price for corn may continue to affect feed-grade wheat demand moving forward. 

 

 

 

GAIN REPORT

Commodities:

Wheat

Production:

MY 2018/19 wheat production is forecast to stay around 32,000 tons, unchanged from the current marketing year’s estimate, based on a five-year average yield and acreage. The estimate for MY 2017/18 wheat production is expected to decline to 32,000 MT with wheat area reduced by the lack of demand for local wheat. The Korean government is not expected to release official numbers until the end of June 2018.

Consumption:

MY 2018/19 wheat consumption is forecast at 4.36 million metric tons (MMT), an increase of 200,000 metric tons (MT) from the estimated consumption in the current marketing year. Wheat flour consumption is projected to remain stagnant due to saturated market demand, while feewheat consumption will be increasing from the current marketing year due to international market dynamics (Table 2).

In MY 2017/18, wheat consumption is expected to decline to 4.16 MMT, down eight percent from the previous marketing year due mainly to lower demand for imported feed-grade wheat, which has had less competitive prices against corn during the marketing year based on price at estimated time of arrival (Table 8 & 25). Milling wheat consumption is expected to be almost unchanged from the previous year at around 2.4 MMT.

Trade:

MY 2018/19 wheat imports are forecast at 4.6 MMT, of which 2.6 MMT are expected to be used for milling (including flour and pasta imports on a wheat equivalent basis) and 2.0 MMT are expected to be used for feed. This import estimate hinges to a large extent on the continued availability of competitively-price feed wheat, with demand for milling wheat remaining steady.

MY 2017/18 wheat imports are expected to stay around 4.4 MMT, a number that includes flour and pasta imports on a wheat equivalent basis, down six percent from the previous marketing year due to anticipated smaller imports of feed grade wheat. During the first seven months of the current marketing year, imports for feed wheat were 35 percent lower than the previous year (Table 6) and pending feed-grade wheat contracts for the remaining five months are lower than last year (Table 8). In the first seven months of MY 2017/18, Ukraine has been the largest supplier of feed-grade wheat, followed by Russia, EU countries (such as France and Bulgaria), and Brazil. Meanwhile, milling wheat imports are expected to be higher than the previous year, based on projections incorporating the higher imports of milling wheat during the first seven months of this year.

Imports of U.S. wheat in MY 2017/18 are expected to stay around 1.3 MMT, including 100,000 MMT of feed grade wheat.

Tariffs

In late December 2017, the Ministry of Strategy and Finance (MOSF) released its adjusted tariffs and tariff rate quotas (TRQs) for CY 2018. MOSF continued to exclude milling wheat from the CY 2018 list of autonomous TRQs, leaving all milling wheat to be charged the out-of-quota duty rate that remains fixed at 1.8 percent. By comparison, the feed wheat TRQ and its corresponding duty were eliminated in 2007. However, the import duty on all U.S. wheat (including milling and feed wheat) is zero under the KORUS FTA.
In CY 2018, the general tariff rate on flour is 4.2 percent. However, under the KORUS FTA, import tariffs for U.S. wheat flour (H.S. 1101.00.1000) were phased out over a 5-year period, reaching zero in 2016. Meanwhile, tariffs for meslin flour (H.S. 1101.00.2000), a mixture of rye and wheat flour, immediately fell to zero in 2012.
Flour Trade:

MY 2017/18 flour imports are expected to decrease to close to 30,000 MT (wheat equivalent) to meet demand from small-sized restaurants and noodle manufacturers, loyal users of cheaply priced flour. Pasta imports are expected to be more than 150,000 MT (wheat equivalent) based on strong imports for the first eight months of the marketing year. Annual flour exports are approximately 50,000 MT (wheat equivalent), while pasta exports could sharply increase to more than 200,000 MT (wheat equivalent) for the year, based on flour trade for the first eight months. The situation is unlikely to change in MY 2018/19.

H/T: GAIN FAS USDA
About the Author
Lucia Larsen