Highlights

Korean ending stocks of rice are revised upward to 1.7 MMT and 1.8 MMT in MY 2015/16 and 2016/17, respectively. Stocks continue to grow as a result of continued decline in per capita rice consumption and another year of expected high production due to record yields. Corn imports for MY 2015/16 are revised downward to 10.1 MMT, based on stiff competition from Brazil and Argentina, and competitively-priced feed grade wheat from Argentina and the Black Sea region. Continued increased imports of feed grade wheat in MY2016/17 are expected to boost total wheat imports to 5.0 MMT, about 600 TMT above the previous marketing year.

WHEAT

Production

At the end of June 2016, the Korean government officially released data showing that wheat production in MY 2015 was 26,433 MT. Yield sharply declined to 2.62 MT per Hectare, due to unfavorable weather during both the planting and growing seasons. The official number for wheat area in MY 2016 was 10,702 HA. Official numbers for wheat area were released at the end of July 2016, with official production data becoming available next year.

Consumption

MY 2015/16 wheat consumption remains unchanged, at 4.13 million metric tons (MMT). This number increased by seven percent from a year earlier due to greater consumption of feed grade wheat.

The MY 2016/17 forecast for wheat consumption remains unchanged, at 4.9 MMT, due to an anticipated availability of feed grade wheat at prices competitive with feed corn. Milling wheat consumption will remain stable.

Trade

The MY 2016/17 wheat import forecast remains unchanged, about 5.06 MMT, which includes 2.56 MMT of wheat for milling purposes (including flour and pasta imports on a wheat equivalent basis) and 2.5 MMT of feed grade wheat. Milling wheat imports for local flour processing are expected to stay around 2.35 MMT, and originate mainly from the United States, Australia, and Canada. Korea is expected to import 2.5 MMT of feed grade wheat mainly from the Black Sea region, Argentina, and France. During the first three months of MY 2016/17, Korean feed millers made optional-origin contracts for 1.4 MMT of feed grade wheat. Under these contracts, suppliers have an option to declare the origin of feed wheat just prior to shipments.

MY 2015/16 wheat imports are revised up to 4.43 MMT, which is 116,000 MT more than previous estimates, due to strong imports for both milling wheat and feed grade wheat. Wheat imports have increased 12 percent from the year earlier, mainly due to a sharp increase in imports of feed grade wheat. Imports of U.S. wheat for locally processed flour in MY 2015/16 stayed at 1.1 MMT, or 47 percent of total milling wheat imported for this purpose.

Production, Supply and Demand Data Statistics:

Wheat

2014/2015

2015/2016

2016/2017

Market Begin Year

Jul 2014

Jul 2015

Jul 2016

Korea, Republic of

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

7

7

10

10

13

11

Beginning Stocks

1437

1437

1411

1363

1564

1468

Production

23

23

35

26

45

36

MY Imports

3942

3948

4420

4426

5000

5060

TY Imports

3942

3948

4420

4426

5000

5060

TY Imp. from U.S.

1179

1234

1120

1124

0

1300

Total Supply

5402

5408

5866

5815

6609

6564

MY Exports

153

196

177

213

150

210

TY Exports

153

196

177

213

150

210

Feed and Residual

1479

1490

1700

1728

2500

2500

FSI Consumption

2359

2359

2425

2406

2395

2386

Total Consumption

3838

3849

4125

4134

4895

4886

Ending Stocks

1411

1363

1564

1468

1564

1468

Total Distribution

5402

5408

5866

5815

6609

6564

CORN

Production

Corn production in MY 2015 was revised upward to 78,243 MT based on official ROK government numbers released at the end of June 2016.

Consumption

Corn consumption for MY 2016/17 remains unchanged from of the previous forecast of 9.9 MMT. Increased imports of feed grade wheat are expected to replace some portion of corn demand for compound feed production.

MY 2015/16 corn consumption is estimated at 10.1 MMT, consisting of 7.8 MMT for feed purposes and 2.3 million tons for food, seed and industrial (FSI) purposes. Based on records for the first eleven months, this consumption estimate is down 1.2 percent from a year earlier. Demand for feed corn is expected to be smaller than the previous year due to a greater global availability of feed grade wheat at competitive prices. Demand for processing corn is estimated to be five percent greater than the year earlier period due to higher demand for greater consumption of high fructose corn syrup (HFCS).

Comparing compound feed production for the first eleven months of MY 2014 and MY 2015 production for MY 2015/16 remains unchanged, at 19.4 MMT, a 2.1 percent increase in production from the year earlier. This is mainly due to continuing growth in poultry, swine and other livestock sectors, which is partly offsetting reduced demand from both beef and dairy cattle operations. Feed corn is expected to be the primary ingredient used in poultry and swine compound feed, accounting for about 40 percent of total ingredients for the current marketing year

Major corn processors have continued using conventional corn imported from Brazil, Russia, Hungary, Australia and France, and non-GM corn imported from the United States and Argentina for food purposes. Many Korean food processing companies are reluctant to use ingredients sourced from biotech corn.

Trade

MY 2016/17 imports remain unchanged from the previous forecast at 9.8 MMT, down three percent from the level imported in the previous year. Imports have decreased due to competition from comparatively cheaper feed grade wheat U.S. corn exports to Korea are expected to remain unchanged.

As of September 2016, most of the contracted purchases in MY 2016/17 were from suppliers including South America, Eastern Europe and the United States at the seller's option. In view of global corn prices, grain traders predict that most of the contracts will be shipped from the United States, South America, Eastern Europe or the Black Sea.

Corn imports in MY 2015/16 were revised down to 10.1 MMT, slightly lower than the previous year. In MY 2015/16, U.S. corn exports to Korea remain unchanged, about 2.9 million tons. Imports from the United States are down more than 1.1 MMT from the previous year due to strong competition with South American countries and Russia.

Corn

2014/2015

2015/2016

2016/2017

Market Begin Year

Oct 2014

Oct 2015

Oct 2016

Korea, Republic of

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

16

16

15

15

16

15

Beginning Stocks

1860

1860

1860

1860

1885

1936

Production

82

82

75

78

79

75

MY Imports

10168

10168

10300

10121

10000

9800

TY Imports

10168

10168

10300

10121

10000

9800

TY Imp. from U.S.

3656

4022

0

2908

0

3000

Total Supply

12110

12110

12235

12059

11964

11811

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Feed and Residual

8035

8035

8100

7800

7800

7600

FSI Consumption

2215

2215

2250

2323

2300

2300

Total Consumption

10250

10250

10350

10123

10100

9900

Ending Stocks

1860

1860

1885

1936

1864

1911

Total Distribution

12110

12110

12235

12059

11964

11811

RICE

PRODUCTION

Statistics Korea (KOSTAT) released their 2016 rice production estimate of 4.2 million metric tons (MMT) based on a nationwide survey of 6,500 rice fields conducted September 15 - 22, 2016.

The survey results show total harvested area at 778,734 HA, which is a 2.6 percent decline from the previous year. However, favorable weather at the critical filling stage resulted in higher yields and an outturn approaching last year's record crop. KOSTAT is expected to release its final production estimate shortly after the rice harvest is completed in mid-November.

Therefore, Post's forecast for rice production in MY 2016/17 is revised up to 4.2 million metric tons (MMT), an increase of five percent from the initial forecast of Korea's rice production.

Harvested Area

Rice area has continued to decrease annually – ranging from 5,000 HA to 38,000 HA every year since 2001. In 2016, area decreased 20,610 HA, down 2.6 percent from last year, in response to expanding demand from housing and building complexes and conversion of rice paddy land to more profitable cash crops.

Government Rice Purchase Program under the Public Food Grain Stockholding Program (PFSP)

The government also purchases rice for price stabilization purposes. Under the Public Food Grain Stockholding Program for Food Security, the Korean government will purchase domestic paddy rice during the harvest season (October-December) at the average market price and sell it during the rest of the year at the prevailing domestic market price.

Between October and December 2016, the Korean government plans to purchase 370,000 MT (milled basis) of paddy rice, representing around 9 percent of the estimated 2016 rice crop production. Additionally, the government plans to purchase 30,000 tons for the APTERR (ASEAN Plus Three Emergency Rice Reserve), which was established to provide member countries with rice in the event of natural disasters. The total amount of rice agreed upon in July 2013 by the 13 member countries and stored in reserve was targeted at 787,000 metric tons, including 150,000 metric tons promised by Korea.

In addition to government rice purchased under PFSP, the Korean government announced that it would buy more rice from farmers to stabilize rice markets. Markets have been depressed by overproduction estimated to be within the range of about 250,000 MT - 400,000 MT above the 3.8 MMT estimated as actual human consumption in MY 2016/17. The Korean government is expected to make a decision of the scale of additional purchases when the final estimate of rice production, based on the upcoming November 15 survey, is announced.

Government and NACF's Loan Programs

The Korean government is expected to provide loans for rice millers worth more than 1.4 trillion Korean Won (US$1.3 billion) with a special loan rate between 0 and 2 percent per annum this year. The National Agricultural Cooperative Federation (NACF), the national farmers group, also continues to provide about 1.6 trillion Korean Won (US$1.5 billion) worth of loans to rice farmers/millers at zero interest rate. The main goal of the loan programs is to encourage rice millers to purchase more rice from farmers, minimizing the downward pressure of harvest on prices. Another bumper crop has caused concerns among rice farmers over the collapsing farm gate price and anxiety over rice market liberalization that has taken effect since 2015.

Most rice purchased under the loan programs provided by the Korean government and the NACF will be released to the retail market through NACF's Rice Processing Complexes (RPCs) and independent RPCs throughout the 2016/17 (Nov/Oct) marketing year. Korean rice farmers expect these measures will help prop up prices during the rice harvest season.

Rice farmers are expected to sell approximately 2.2 MMT during the harvest season, including 390,000 MT of government direct purchases under the Public Food Grain Stockholding Program and APTERR (ASEAN Plus Three Emergency Rice Reserve), and 1.8 MMT of rice under loan programs.

CONSUMPTION

Rice consumption for MY 2016/17 is forecast at 4.48 MMT increasing at 150,000 MT. Korean government plans to expand rice consumption for animal feed up to 250,000 MT. In MY 2015/16, total domestic rice consumption is estimated at 4.37 MMT

TRADE

In 2015, during the period of special treatment agreed upon under the Minimum Market Access agreement (MMA) ending in December 31, 2014, Korea continued to import the mandatory volume of 408,700 metric tons from Most Favored Nation (MFN) countries at the duty level of 5 percent under the tariff rate quota (TRQ) regime. The aT (Korea Agro-Fisheries and Food Trade Corporation) , the government's state trading arm, manages the purchase of all imported rice through a tendering process. Imported table rice is then auctioned off, while processing rice is distributed to the rice processing industry by the government at a set price.

2016 TRQ Tendering Process

Under the 2016 Tariff Rate Quota (TRQ) purchasing plan, Korea will purchase 408,700 MT of rice (milled basis) under rice tariffication (effective since 2015). Under the 2016 TRQ thus far, Korea has bought 292,665 MT (milled basis) or 71.6 percent of total TRQ, which consists of 297,405 MT of brown rice (equivalent to 267,665 MT in milled) for processing purposes, and 25,000 MT of milled rice for table use. The remainder of 116,035 MT will be purchased by the end of the year.

The United States has sold 145,865 MT of medium grain rice (USD 99 million), or 36 percent of the total TRQ. China, Australia, Vietnam, Thailand and India have also sold rice to Korea under the TRQ this year. Korea purchased 25,000 MT of USDA No. 1 grade milled rice for table purposes, consisting of 20,000 MT of U.S. medium grain milled rice, 3,000 MT of Vietnamese short grain milled rice and 2,000 MT of Thai long grain milled rice, respectively. Korea is expected to hold rice tenders for the remaining 116,035 MT or 28 percent of 2016 TRQ in November and December 2016

Selling Auctions of Imported Rice

At sells imported table rice shipments to consumers through a public auction system, while the Ministry of Agriculture, Food and Rural Affairs (MAFRA) distributes processing rice to end-users, such as food processors and alcoholic beverage producers, at a set price throughout the year.

As of October 10, 2016, the Korean government has begun auctioning table rice imported under 2015 TRQ.

Korea imported 799,785 MT of milled rice for table purposes under the 2004-2014 MMA regime. Korea diverted 65,408 MT of imported table rice to be used for alcohol processing purposes during CY 2010-2012, when Korea suffered from higher rice ending stocks, which were mainly composed of Chinese and Thai origins. The United States sold 289,548 MT of milled rice for table use, or 36 percent of total MMA quota, during the ten years between 2005 and 2014. Since MY 2005, the Korea has distributed 280,285 MT of U.S. medium grain rice to Korean rice market, which was 42 percent of total imported rice market in Korea.

Exports

Korea's rice exports were 1,446 metric tons for the first eight months in CY 2016, with an expectation of slightly less than 2,000 MT for the year. U.S. CY 2016 imports of Korean rice are expected to be higher than the previous year.

Stocks

MY 2016/17 ending stocks (through the end of October 2017) are forecast to increase to about 1.8 MMT, or 41 percent of total anticipated consumption, as rice production in the past four years has been greater than actual demand. The continued decline in per capita consumption will only increase pressure on measures to address low producer prices. MY 2015/16 stocks (at the end of October 2016) are estimated at about 1.7 million tons, or 39 percent of total domestic consumption.

Rice, Milled

2014/2015

2015/2016

2016/2017

Market Begin Year

Nov 2014

Nov 2015

Nov 2016

Korea, Republic of

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

816

816

799

799

782

779

Beginning Stocks

899

899

1406

1406

1827

1697

Milled Production

4241

4241

4327

4327

4000

4200

Rough Production

5638

5638

5771

5771

5333

5601

Milling Rate (.9999)

7522

7522

7498

7498

7500

7498

MY Imports

465

465

350

340

410

410

TY Imports

372

372

380

350

410

410

TY Imp. from U.S.

143

143

0

120

0

140

Total Supply

5605

5605

6083

6073

6237

6307

MY Exports

2

2

2

2

2

2

TY Exports

2

2

2

2

2

2

Consumption and Residual

4197

4197

4254

4374

4334

4484

Ending Stocks

1406

1406

1827

1697

1901

1821

Total Distribution

5605

5605

6083

6073

6237

6307