March 9, 2009

                                   
South Korean beef, pork imports decline
                               


In 2009, South Korea's total beef imports are expected to decline by 12 percent and total pork imports by 5 percent due to the economic situation and the depreciation of the Korean won versus the strong US dollar, according to a US Department of Agriculture attache report posted day on the Foreign Agricultural Services Web site.

 

However, US beef imports are expected to increase substantially in 2009 as more grocery stores and restaurants begin making it available for consumers. US pork imports will fall slightly due to the increased competition of US beef.

 

Much like the rest of the world, the outlook for the South Korean economy this coming year has grown increasingly bleak. However, unlike other Asian economies, the situation in South Korea has deteriorated faster than expected due to the collapse of the export market. Even during the 1997/98 Asian economic crisis there was still a healthy demand for Korean products, but exports have continued to decline by double digits.

 

In September 2008, the Korean economy was expected to grow in 2009 by about five to six percent; however, it is now expected to contract by two to four percent. Domestic consumption is also expected to decline. The future Consumption Sentiment Index (CSI) dropped to 91 in February 2009 from 106 in September 2008 indicating that more consumers are anticipating reducing their consumption in 2009. Sales of consumer goods are dropping to levels not seen since December 1998. As far as meat consumption is concerned, it is expected that consumers will shift to lower priced proteins, which are generally pork and poultry in Korea. However, the price of some imported beef cuts is not that much higher than the price of domestic pork.

 

Since the Lehman Brothers bankruptcy on September 12, 2008, the Korean won has depreciated by 36.7 percent (from 1,109.1 won to 1,516.3 won per US dollar.) Most analysts are now predicting that it will stabilize at around 1,500-1,600 won to the US dollar. This has caused the price of imported meat to rise to the point where importers are forced to sell at a loss. Industry sources state that the importers are losing 50-60 million won (US$33,000-US$40,000) for every 40 feet container of short ribs they sell due to the poor exchange rate. In Korea, 30 percent of meat is sold through retail outlets, 10 percent is used for processing and 60 percent is sold through the restaurant sector. A recent survey by the Korea Chamber of Commerce indicates that all consumers are reducing the amount of spending on dining out, but younger consumers in their 20s who tend to dine out more frequently have reduced their spending by 37.3 percent.

 

Importers are also facing a credit crunch that is hindering them from purchasing more products. Sales have been slow and inventories are high. As a result, the GSM program has been widely popular in Korea, but the current allocation of $600 million has been used and an additional allocation has not been forthcoming. It is very likely that many importers will go out of business in 2009 further consolidating meat import channels.

 

Per capita consumption of beef and pork has continued to increase in 2008, although both are expected to decline slightly in 2009 due to the economic climate. The graph below shows an increase in per capita consumption of beef in 2009, but post disagrees with the projection by the Korea Rural Economic Institute (KREI) as too optimistic.
                                                             

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