S. Korean feed makers mull force majeure on Ukraine corn loss

Feed producers based in South Korea could be forced into declaring force majeure on some of their contracts in the coming weeks as the loss of corn exports from Ukrainian ports leaves a hard-to-fill gap in prompt supply.  

Ukrainian ports stopped their operations and spot prices jumped after Russia invaded Ukraine on February 24, with line up data suggesting some 300,000 mt of corn bound for South Korea faced being trapped in any prolonged conflict. 

With corn prices lagging behind those of wheat, some big players have ventured into the market to buy corn for deferred arrivals.

But the problem lies in prompt arriving corn - where the loss of pre-booked Black Sea supply will be hard to replace at such short notice. 

“They (end users) are coming back to market but in Asia it is mostly Korea, given their exposure to Black Sea nearby. Vietnam is coming, but it's shy,” one Singapore-based trader said.

“They (South Korean feed makers) will probably face a supply issue by April... For the time being, they need to buy as much as they can to replace that supply for April and May arrival and then think what next,” the trader said.

“There are many supply problems in South Korea also, some suppliers have declared force majeure now. Feed makers have big problems with supply chains now,” a local trader told Agricensus.

The Korea Feed Association (KFA) entered the market on Wednesday to buy 204,000 mt of corn for delivery between April 15-June 25, but ended up buying 134,000 mt of corn for May 5 and June 25 arrival.  

The average traded level was $61.92/mt higher than Major Feedmills Group (MFG) paid at its last tender, which closed on February 9, when it locked up 68,000 mt of corn from Sierentz for either May or June arrival.

Meanwhile, the list of supply options is severely limited for prompt windows - with only the US really standing ready to supply - particularly from the Asia-facing Pacific Northwest (PNW).

“Given the transit time ex-PNW... sellers are waiting for them,” the first trade source said, with US PNW and Gulf FOB cash basis jumping at the start of the week as buyers flocked in.

“KPCI traded $389/mt on Friday on the sell off and that was cheap,” the source said - referring to the heavy falls that US corn and wheat futures posted as the week drew to a close. 

South Korea imports Ukrainian corn mainly via its corn processing association Kocopia that mostly buys non-GMO corn fit for human consumption.

According to Ukrainian port lineups, 309,500 mt of corn was supposed to be loaded with destination South Korea as of February 22.

Feed corn imports come predominantly from Argentina, the US, Brazil and Russia, with total corn imports at 11.19 million mt in 2021, according to the Agricensus Export Dashboard.