Singapore — An outbreak of H5N8 avian influenza in South Korea's poultry sector has blunted demand for feed corn at a time when prices are at record highs, market sources said Jan. 28.
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Register NowSouth Korea has culled 23 million poultry since the outbreak was detected in November; Statistics Korea reported more than 173 million broilers, layers and ducks were raised in the third quarter of 2020.
New cases of the highly pathogenic bird flu have been reported in Gyeonggi province by the Ministry of Agriculture, Food and Rural Affairs, according to local media reports. Birds within a 3-kilometer radius of infected farms are being culled to contain the outbreak.
This comes at a time when feed costs like corn, which account for more than 50% of total production costs, are at record highs due to the rally in corn futures.
Corn prices have averaged $285/mt CFR Northeast Asia to date in January, up 9.5% from December and up a sharp 33.8% year on year, S&P Global Platts data showed. The CFR Northeast Asia corn price peaked at $286/mt on Jan. 15, the highest since Platts launched the assessment August 2016.
South Korea's corn import demand has been tepid at these prices and feedmillers are not expected to issue tenders seeking corn for several months as they have covered their positions until June, market sources said.
"The avian flu has impacted our plant severely and we are expecting a decrease in feed product consumption of about 10,000 mt so far," a poultry factory manager in South Korea said.
A trader said: "I expect the Asian animal feed consumption forecast to be adjusted lower this year because of the avian flu."
Corn futures on the Chicago Board have been bullish, with the Jan. 26 announcement of China's 1.36 million mt (53.5 million bushel) purchase of US-origin corn prompting corn futures to surge 20 cents on the day, and pushing the US national corn cash index up to $5.10/bu -- just a day after it traded at a two-week low of $4.75/bu, Platts Analytics reported.
A subsequent 680 million mt purchase by China on Jan. 27 helped to sustained the momentum.
The US Department of Agriculture cut 2 billion bushels from the expected corn supply for the second half of 2020 and raised its total US export forecast by 500 million bushels or 23% to 2.65 billion bushels in its January World Agricultural Supply and Demand Estimates report.
The increase in exports was due to China's strong demand, which saw a USDA forecast for corn imports of 7 million mt made in June rise to 17.5 million mt in the January report, an increase of 413.4 million bushels.
The trading community however expects China's corn imports to be far greater, at between 25 million-30 million in 2021, as hog recovery in China picks up speed after an outbreak of African Swine Fever in 2018 was contained.
China's hog production capacity is likely to reach 100% of the pre-ASF level by June, according to country's Ministry of Agriculture.
The Link LonkJanuary 28, 2021 at 05:40PM
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South Korea's avian flu outbreak cuts feed demand further as corn prices rise - S&P Global
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