S.Korea considers Kazakh wheat; imports seen limited

April 13. Reuters. SEOUL

By Cho Mee-young

* Milling wheat buyers considering Kazakhstan wheat-sources
* Low yield and other quality issues to limit imports-sources
* Korea in talks for 300,000T Kazakhstan wheat-Europe traders

S.Korea considers Kazakh wheat; imports seen limitedSouth Korean milling wheat buyers, major customers of U.S., Australian and Canadian, are considering wheat imports from Kazakhstan for the first time, industry sources said on Tuesday.

Imports of the grain from the Central Asian state, however, are expected to be capped due to its poor quality and additional processing costs over other origins, sources said.

Industry and government sources said the import deal was likely to be concluded by the time Kazakhstan president Nursultan Nazarbayev visits South Korea between April 21 and 23.

Some sources said the process had been designed to help improve ties between Asia’s fourth-largest economy, heavily dependent on energy imports and Kazakhstan, Central Asia’s top oil producer and the world’s No.1 uranium producer.

European traders said this month a South Korean buyer was in talks to purchase up to 300,000 tonnes of wheat from Kazakhstan, and a major South Korean conglomerate was believed to be seeking summer 2010 shipment.

In March, Deputy Prime Minister Umirzak Shukeyev said Central Asia’s top grain producer planned to break into new markets by starting shipments to South Korea, as a 600,000-tonne contract was being drafted with a Korean firm.

Kazakhstan said at the time the deal could be finalised when the country’s president visited S.Korea this month.

“Since last month, we have been studying Kazakhstan wheat in an effort to diversify the import origins,” a Seoul-based milling wheat buyer said, adding the request had been made via a wheat industry body from the ministry of foreign affairs and trade.

“I doubt we will import as much as 300,000 tonnes because of the grain’s quality issues, including high moisture and alien substances found in the test lot, which will lower production yields and raise costs,” said the source, who declined to be identified because of the sensitivity of the issues.

The foreign affairs ministry spokeswoman, however, denied the government had made such a request.


Another source said the low quality would force flour millers to mix Kazakhstan wheat with other origins in production as millers do with Russian or other eastern European origins. He said that meant millers need only a small volume to import.

Industry sources said Kazakhstan wheat would actually cost more than other milling wheat origins including U.S., Australian and Canadian if they consider the grain’s processing costs.

“We expect processing the grain to cost additional an $30-$40 per tonne, while the grain is offered at $20-$30 per tonne lower than other origins,” said a second source at a local wheat mill. U.S. milling wheat for June-July shipment was recently sold in Korea at $170-$175 per tonne on a free-on-board basis.

Some Seoul-based industry sources said the market talks that the South Korean conglomerate could be Samsung C&T, while a spokesman at the trading house denied it.

Samsung C&T and state-run Korea Electric Power Corp in March last year won a $2.5-billion power plant order from Kazakhstan, with the deal signed last May when South Korean President Lee Myung-bak visited the former Soviet republic.

South Korea imported 1.9 million tonnes of milling wheat in 2009, industry data showed. Of the total, 99 percent came from the United States, Australia and Canada, with the rest from Russia. For feed wheat, it imported 1.8 million tonnes last year, with 96 percent from Ukraine.