July 24, 2007

 

US beef may adversely affect South Korean pork prices

 

 

An analyst firm in Seoul said free trade agreement (FTA) between South Korea and the United States as well as swelling beef demand in Korean markets may cause a sharp drop in local pork prices.

 

The GS&J Institute in southern Seoul reported domestic pork prices could dive by 30 percent within the next decade.

 

According to the institute, which is led by former head of the state-run Korea Rural Economic Institute Lee Jung-hwan, the resumption of American beef imports which started in April could cause prices to fall 15 percent, while lowering the pork tariffs under the FTA could result to another 13 percent drop in prices.

 

The report added that plans to gradually lower duties on US beef entering the country under the FTA could push local pork prices down by an additional 2 percent.

 

In the April 2 agreement, Seoul vowed to lower current tariffs on US beef and pork in 15 years and 10 years, respectively.

 

The country now levies import duties of 40 percent on beef and 22.5 to 25 percent for pork.

 

The report said if beef imports rise 10 percent, local pork prices will fall by 2.9 percent.

 

This year's volume of imported beef including US meat could rise 52 percent from last year to 320,000 tonnes.

 

More than 1,500 tonnes of US beef have been imported in less than three months, and is expected to rise sharply with major discount outlets planning to sell the meat in August.

 

The institute said if import duties on pork are removed by 2017, the price for 1 kilogramme of American pork will fall to a little over 4,000 won from slightly more than 5,000 won at present.

 

The report said that even with current tariff rates, the US pork is still ahead from Canada and Chile, and the ratification of FTA will widen its lead.

 

The report is bad news for local farmers who raised 9.46 million pigs as of June. This was a 4.8 percent gain from a year earlier and reflected a rise in prices.

 

One hundred kilograms of pork cost 226,000 won in May, up from 205,000 in November 2006.

 

US$1 = 916.30 Korean won (as of July 24)