February 2, 2011

 

South Korea to take up to two years for FMD recovery

 

 

South Korea's swine sector could take one or two years to pick up from an FMD epidemic that has boosted meat purchases by one of the world's top pork importers.

 

A long-term boost to the country's pork imports, mainly from the US, could support US hog futures already at record highs partly on the back of potential Korean demand.

 

Pork shipments into Asia's No.4 economy may rise by 20-30% from last year's 290,000 tonnes after nearly a third of the pig herd was culled, and the country lowered tariffs on meat imports in an effort to contain food inflation.

 

"When one removes that many animals from their domestic herd, it would suggest that it's going to take, in the case of swine, a couple of years to come back," said Martin Rice, executive director of Canadian Pork Council.

 

"As the number of sows fell to 700,000-750,000 from last September's 980,000, it will be hard for hog population to rise by the end of 2011," Korea Rural Economic Institute said.

 

South Korea earlier this month dropped its 25% tariff on up to 60,000 tonnes of pork to be imported through June to ease supply and try contain prices that are at their highest since at least 2005.

 

On Tuesday (Feb 1), a finance ministry official said Korea may expand the volume of tariff-free port imports if prices continue to shoot up, as consumer inflation in January jumped to a higher-than-expected 4.1%, above the central banks inflation target.

 

Rich Nelson, an analyst at Allendale Inc in McHenry, Illinois, said: "We think we'll be trading good news from South Korea for the next two to three months. One thing we had been concerned about was that it would not be extended (the slashing of the tariff), and that the 60,000 tonnes might be it."

 

Korean swine farmers strongly opposed the government's tariff reduction, saying it threatened to destroy the domestic industry.

 

South Korea expects a surge in meat demand for the five-day Lunar New Year holidays starting on February 2, its biggest holiday.

 

The government keeps assuring consumers that meat from FMD infected animals is not harmful to humans.

 

But consumers increasingly opt for imports, which cost less and look cleaner as all local pigs and cattle have been vaccinated against FMD, industry sources and local media said.

 

While US January pork export results are not yet available, cash sources and traders said South Korea has likely bought 60,000 tonnes or more of US pork since the start of the year.

 

CME April lean hogs futures on Monday (Jan 31) touched a high of US$0.945 per lb, the highest price ever for a second position.

 

Tim McRae, an economist which oversees the Australian livestock industry, said US sales to South Korea had already been picking up because of the weak dollar and the shipment of select cuts into that market.