August 22, 2003
South Korea 2003 Feed Output May Fall 2%-3% On Weak Economy
South Korea's feed production could fall in 2003, at least marginally, as the domestic economic slowdown could take a toll on consumer spending and livestock consumption, said feed industry participants.
Going by the current trend, output could decline by around 2%-3% on year from 15.80 million metric tons in 2002, they said.
Some participants, however, forecast a sharper drop to around 15 million tons in 2003.
The feed output in 2002 was an increase of 5.5% from 2001's output of 14.97 million tons, according to an official from the Ministry of Agriculture and Forestry.
In the first seven months of 2003, however, feed output reached 8.82 million tons, down almost 2% from 8.99 million tons in the same period last year, said the official.
"The downtrend (in feed production) may prevail. The major reason is the Korean economy, which isn't doing too well now," said a Seoul-based official representing a foreign grain association in South Korea.
Although seasonally weak demand during the summer months had a part to play in depressing feed consumption recently, the weak economy may prevent any recovery for the remainder of the year, said participants.
This in turn will hurt grain imports into South Korea, they said. South Korea imports most of the raw materials it needs for the compound feed industry. Last year, consumption of the major components of corn, wheat, soymeal, rapeseed meal and cottonseed meal for compound feed reached almost 11 million tons, and more than 90% of that were imports, according to the Korea Feed Association.
"I think (feed) output could be just 15 million (tons in 2003). If people eat less meat, then feed demand will be affected," said an official from a major South Korean feed company.
"There are quite a bit of stocks at the ports like Incheon, Kunsan. There's no space in some warehouses. So shipment of some cargoes of corn or wheat (were) postponed. Otherwise, (to) wait to unload cargoes, the demurrage will be high," said the feed company official.
Still, government data showed that the heads of meat cattle, pigs and chickens were slightly higher in the second quarter of 2003 at 1.423 million, 9.051 million and 122.124 million, compared with 1.337 million, 9.027 million and 101.369 million heads in the first quarter, respectively.
Recovery Seen If Economy Improves
Participants said, however, feed output can remain stable if the economy recovers. South Korea's economy will likely come out of a recession in the third quarter, although the improvement will be moderate, a senior Bank of Korea official said Friday.
South Korea's gross domestic product was up 1.9% year-on-year in the second quarter, slower than a 3.7% rise in the first quarter. On a quarter-on-quarter basis, the economy contracted 0.7%, following a 0.4% decline in the first quarter, data from the central bank showed, confirming South Korea is in recession for the first time in five years after export growth failed to offset weakness in domestic demand.
Cho Sung-Jong, director general of the central bank's economic statistics division said, "We expect things to turn out better this quarter...but I can't tell for sure yet that the economy has hit the bottom."
Recently, a series of labor strikes cast a cloud over economic recovery, said participants.
"If (the strikes) get worse, it's no good for the economy and that will affect the feed market," said the official from the foreign grain association.
An ongoing strike by South Korea's unionized truck drivers has shut down the nation's cargo transportation system, but operations at major companies are continuing as the companies have sufficient inventory, officials at the Ministry of Commerce, Industry and Energy said Friday.
About 30,000 unionized truck drivers in South Korea began the strike Thursday to demand shipping companies and truck operators raise fees in line with increasing costs.
The truckers' strike in May caused exporters to incur more than $450 million in losses.
