September 25, 2006

 

South Korea refuses to back down on zero tolerance in US beef shipments

 

 

South Korea remains adamant in its position that it would destroy or send back shipments of US boneless beef and temporarily suspend exports from any US production facility whose shipments were found to contain small bone fragments or other problems, a US government official said Thursday (Sep 21).

 

Even though South Korea has eased its ban on US beef in early September to allow boneless beef from cattle under 30 months old, shipments have not begun as exporters fear their shipments might be returned if bone fragments were found.

 

South Korean officials meeting with US government officials refused to back down from their "zero tolerance" stance, said a US government official.

 

South Korea has said it would, at least initially, open for inspection all boxes of US beef sent to South Korea. 

 

Given the circumstances, the US government may protest formally to South Korea, doubting the "commercial viability" of the deal the countries have made, the official said.

 

Hong Kong, which halted beef imports from four US beef plants early this year, has since approved shipments from the affected plants. South Korea has initially asked for a plant-by-plant approval process, which was rejected by the USDA.

 

This was further complicated by the Korea Customs Service recent announcement it would require the country of origin mark to be labeled in the inner plastic bag as well as the boxes, the reason being to prevent meat dealers from throwing away the boxes and selling the meat as domestic product.  The US has appealed such change in policy.

 

The US can expect an uphill climb where growth in demand in US beef is concerned. On top of restrictive legislation, consumers have been switching from beef to pork in recent years on account of rising prices, a recent report from the USDA said.

 

Total imports in 2006 are expected to decline as importers refrain from stocking Australian and New Zealand beef in anticipation of the market opening for US beef during one of the peak beef consumption periods, the Korean Thanksgiving (Chusok), in the first week of October. 

 

Imports usually rise significantly during this period. This year, however, it is expected imports would be lower than usual, as importers hope for the dust to settle on negotiations so as to purchase US beef in time.

 

If the initial tight quarantine inspection process returns to the normal random testing process, and as more plants get approved for export to Korea, US beef exports to Korea are expected to increase in 2007, the USDA said.

 

Australian grain-fed beef is growing in popularity in South Korea as it contains more marbling than in the past. The entry of US beef into South Korea is expected to create a drop in Australian beef prices. However, this would increase Australia's share of the market, the USDA said.

 

Overall consumption of beef has declined since 2003 as the supply has been limited and prices high. The consumption of US beef in South Korea is not expected to regain its 2003 levels for the next few years, the USDA said. 

 

Korean Hanwoo beef producers are expected to reduce their inventory as the available supply increases and domestic prices drop.

 

For the past two years, Hanwoo farmers have enjoyed a windfall through high prices and have increased their herd size.  With the return of US beef, an increased slaughter rate is expected.  Inventory would drop, but not significantly as there would always be a market for the high-end, domestic beef, USDA said. 

 

Meanwhile, pork has enjoyed greater sales after the ban on US beef imports in December 2003 and South Korean swine producers have been expanding their inventory due to high demand.  The increase in domestic swine production and a campaign funded by a check-off programme have boosted consumption but lowered imports.

 

Pork imports are expected to continue to drop in 2007 as US beef imports enter the competition for the consumer dollar.

 

The lower demand for pork would force the domestic swine producers to reduce  herd size and thus increase slaughter in 2007.  This in turn would result in larger supplies and lower prices which would further reduce imports, the USDA said.