Measures to Increase Pork Belly Imports

A Lastest News about Swine, Pigs in South Korea

Last updated: 19 Aug 2011

On July 19, 2011, Korea introduced compensation measures designed to increase imports of fresh/chilled pork bellies in hopes of dampening rising prices due to ongoing shortages as a result of the November-April foot and mouth disease outbreaks.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Voluntary Public - Date: 8/2/2011 GAIN Report Number: KS1131 Korea - Republic of Post: Seoul Korea Announces Measures to Increase Chilled Pork Belly Imports Report Categories: Livestock and Products Approved By: M. Kathryn Ting Prepared By: Yong Keun Ban / Michael G. Francom Report Highlights: On July 19, 2011, Korea introduced compensation measures designed to increase imports of fresh/chilled pork bellies in hopes of dampening rising prices due to ongoing shortages as a result of the November-April foot and mouth disease outbreaks. These incentives are effective through August 20, 2011. However, these measures are expected to have a limited impact on increasing imports of fresh/chilled belly meat due to tight international supplies. General Information: The price of pork belly meat ?the most popular pork cut in Korea ? has gone through the roof in recent months due to local shortages resulting from the country?s devastating outbreak of foot and mouth disease (FMD) when more than 3 million pigs, equal to one-third of total inventory, were culled. For example, the average retail price for domestic fresh bellies in July 2011 is 23,730 won/kg, up 43 percent from November of last year just before the FMD outbreak. In response, the Ministry of Strategy & Finance, which is leading the interagency charge to curb rising consumer inflation, has cut the duties on 260,000 MT of imported bellies and other pork cuts on several occasions to help stem the pain at the register. With the current duty reduction, imported belly meat is currently selling at less than half the price of domestic bellies at 11,500 won/kg for fresh and 8,500 won/kg for frozen. Nevertheless, retail belly prices remain at historic highs. Duty Free Quota Announcements on Imported Pork Quota Dat Quota Must be e Product HS Number Accumulative imported by allocated quota Frozen pork bellies 0203.29.1000 10,000 10,000 Jan. Frozen pork for 28 0203.29.9000 50,000 60,000 processing Mar. Jun. 30, 2011 Frozen pork bellies 0203.29.1000 50,000 a/ 110,000 7 May Other chilled pork 0203.19.0000 20,000 130,000 11 Jun. Pork 0203 130,000 260,000 Dec. 31, 2011 27 a/ The combined quota for frozen pork bellies was 60,000 MT from January to June. Average Monthly Retail Price for Domestic Pork Bellies (won/kg) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg 200 13,73 13,62 13,28 14,73 16,91 19,50 18,96 19,39 19,02 17,79 17,29 17,32 16,82 8 0 6 2 6 6 0 6 8 8 2 8 4 2 200 17,06 17,00 18,08 20,12 17,98 18,29 18,92 19,66 19,13 17,88 16,88 17,40 18,23 9 6 6 2 8 2 2 2 2 0 8 8 8 6 201 15,89 15,21 14,63 16,41 17,13 16,77 17,58 18,26 17,88 17,19 16,62 16,07 16,63 0 4 8 4 4 2 0 8 4 6 8 2 6 0 201 17,80 21,31 18,99 19,58 21,38 24,60 23,73 21,01 - - - - - 1 4 6 8 8 2 0 0 6 Source: aT In addition to the above-mentioned tariff cuts, the Ministry for Food, Agriculture, Forestry & Fisheries (MIFAFF) announced on July 19, 2011 support measures to jump start imports of fresh and chilled belly meat in hopes of lowering domestic prices. A translation of this announcement follows below. The MIFAFF measure is focused on fresh/chilled belly meat for two main reasons. First, Korean consumers prefer fresh bellies over frozen, especially during the summer grilling season. Second, importers are reportedly having a tough time securing bellies on the international market. The measure contains five main pillars to help lower fresh/chilled belly meat prices: (1) price support incentives; (2) incentives for contracting under the emergency government purchase of 10,000 MT; (3) the domestic selling price on the government-purchased meat would be cut by about 10 percent; (4) support payment to offset air freight expenses for imports outside the emergency government purchase; and (5) request to consumers to eat other pork cuts and local beef. These incentives are effective through August 20, 2011. With respect to price support incentives, the Korea Agro-Fisheries Trading Corporation (aT), which is the government-run state trading entity, will temporarily act as middleman in the transaction between the importer and customer. In particular, aT will pay the importer the contracted price and will then sell the meat at a discount to the customer depending on prevailing domestic prices and when the product arrives in Korea. On July 21, aT opened an emergency tender for 10,000 MT of chilled belly meat, which will more or less be a consolidated purchase on behalf of the local importers. The tender closed on July 26. The product will be sold at about a 10 percent discount to local buyers, depending on the prevailing market price when the product is released into the market. There are a couple reasons for making the purchase in this fashion. First, the government wants to publicly demonstrate its deep-seated resolve to fight inflation by making such a large purchase. Second, some importers were reportedly worried about customers, who knowing that the product had a limited shelf life, were holding out for a discount. According to local trade sources, only a portion of the 10,000 MT tender will likely be filled because of the limited exportable supplies of fresh belly meat in the United States, Canada and Chile. Producers in these countries make more money by producing bacon and spare ribs from the belly. Please refer to pork import statistics at the end of this report for more details. The measure urges Korean consumers to eat other pork cuts, like Boston Butt and tenderloins. It also calls for consumers to eat more beef to help prop up sagging cattle prices due to the record cattle inventories. However, changing dietary patterns even when prices are high takes time. Major Points of the Measure to Lower Price on Chilled Pork Imports ? The government will provide an incentive in the government procurement prices for imported chilled pork bellies for shipments that arrive up to August 20th. This measure is being implemented in order to enhance the import of chilled pork bellies prior to the peak consumption season. (Embassy Comment: The procurement price will be based on CIF cost + Cost occurred in the container yard + inland transportation costs after arrival in Korea + Storage costs prior to being handled over to aT + loading and unloading costs + incentive ) ? A different procurement price will be applied for products that arrive early, depending on the arrival period. ? An emergency bidding for purchase of 10,000 MT of imported chilled pork belly will be conducted. (Embassy Comment: Up until now, aT has been tendering for small amounts, such as 1,000 MT. By enlarging the tender amount to 10,000 MT, Korea hopes to send out the signal that it is willing to purchase chilled pork bellies as much as the suppliers can offer. aT is reluctant to publicize the amount of incentive that has been provided to the importers that contracted under this tender.) ? The date for arrival in Korea: Shipments must arrive in Korea by August 20th (A different price will be applied, depending on the arrival period). (Embassy Comment: Please note that this arrival date is the cut-off date for providing incentives. The zero duty TRQ for 130,000 MT of pork imports for the second half of 2011 is valid until December 31, 2011. ) ? Support will be provided for air freight expenses when private importers import the products via air up to August 20th. * Incentive: Products arriving before the end of July will receive an additional 20% incentive on top of the basic support price. Products arriving up to August 10th will receive an additional 10% incentive on top of the basic support price. ? aT will lower the domestic selling price for imported chilled pork bellies. (Embassy Comment: aT will sell the imported chilled pork bellies at a discount of about 10 percent lower than the procurement prices.) ? The government will ask the consumers to adopt a balanced consumption pattern by increasing the consumption of low-fat cuts, such as Boston butts, tenderloins and bulgogi cuts that are relatively cheaper than pork bellies, and enhance health while reducing expenditures. ? Recommend increased beef consumption to help farmers that are suffering from drop in cattle prices. Detailed Measure ? The Ministry for Food, Agriculture, Forestry & Fisheries announced that it was implementing measures to largely increase the procurement and sales of imported chilled pork bellies to stabilize the domestic prices during the peak pork belly consumption period. ? First, the government will procure imported chilled pork bellies that arrive in Korea prior to August 20th. An incentive will be provided during the procurement process. - The incentive will be differentiated depending upon the arrival time of the products. Different incentives will be provided for products arriving before the end of July, products arriving up to August 10th and those arriving up to August 20th. ? Second, Korea will open an emergency procurement tender for 10,000 MT of imported chilled pork bellies. - The procurement tender will be for those that arrive in Korea up to August 20th. The different incentives, depending on the arrival period, will also be applicable for these products. ? Third, support will be provided to private importers that bring in chilled pork bellies via air up to August 20th. There will be an additional incentive of 20% of the basic incentive amount for products that arrive before the end of July. As for the products that arrive up to August 10th shall receive an additional incentive of 10% on top of the basic incentive amount. ? Fourth, aT shall drop its release price of imported chilled pork bellies to domestic companies. ? The Ministry for Food, Agriculture, Forestry & Fisheries (MIFAFF) announced that the cause for the sudden increase in pork belly prices were due to the Korean consumers? preference for fatty pork bellies. ? The Government asked the general public to reduce the consumption of pork bellies for the sake of achieving a healthy dietary pattern. It emphasized that increased consumption of low-fat cuts such as cheap tenderloins and Bulgogi cuts, etc., will not only be healthy but also will contribute to reducing the household expenditures. It asked the people to seek a balanced consumption. ? In addition, in order to reduce the burden of cattle farmers that are facing difficulty due to the drop in cattle prices, it stated that increased consumption of beef could be a recommendable choice. ? It asked the consumers to aggressively use the discounted sale for Hanwoo beef that producer organizations, such as the National Agricultural Cooperative Federation were conducting. ? According to an official from the Ministry, the government hoped that this measure to increase the purchase and supply of imported chilled pork bellies will contribute to the stabilization of the product prices for the lower income families by stabilizing the high pork belly prices at an early date. ? It won?t be good for the domestic swine industry either if the domestic pork prices remain at a high level. Therefore an immediate stabilization of the prices is needed to seek a sound development of the swine industry. Comparison of Retail Prices of Major Livestock Products (As of July 18, 2011) (Unit: Won / kg.) Product Cut Country of Origin Price Percentage of domestic pork belly prices Dom 1 estic 23,714 100.0 Pork bellies Imported chilled2 11,500 48.5 Pork Imported frozen2 8,500 35.8 Bulgogi (P 2icnic) Domestic 21,000 88.6 Tenderloin 2 Domestic 19,500 82.2 Hanwoo (Grade #1 ) 54,776 231.0 1 R ib eye Imported (Australia) 32,800 138.3 1 B eef Hanwoo (Grade #1 ) 28,384 119.7 Bulgogi (Chuck 1 roll) Imported (Aust ralia) 17,878 75.4 1 Chi 1cken Domestic 5,954 25.1 Duck 2 Domestic 20,834 87.9 1. Price from aT survey 2. Price from Lotte Mart Korea: Pork Imports 2010 Total Jan-Jun, 2011 Product HS Number Country Value Volume Value Volume $000 MT $000 MT U.S.A. 12,941 2,768 12,219 2,234 Canada 17,228 3,835 17,348 3,145 Chile 3,196 742 3,637 750 Austria - - - - France - - - - Netherland - - 180 28 Spain - - 3 1 Chilled pork belly 0203.19.1000 Belgium - - - - Germany - - - - Denmark - - - - Hungary - - - - Poland - - - - Mexico 711 173 2,676 539 Others - - - - Total 34,076 7,518 36,063 6,697 U.S.A. 5,687 1,851 4,385 1,218 Canada 1,145 280 1,756 374 Chile 66,904 19,198 28,600 7,817 Austria 42,442 12,233 39,438 10,694 France 26,719 8,851 22,131 7,015 Netherland 42,257 12,189 32,426 9,140 Spain 10,030 3,417 10,163 2,961 Frozen pork belly 0203.29.1000 Belgium 40,747 12,804 27,867 8,167 Germany 12,411 3,735 25,028 7,171 Denmark 3,701 874 10,628 3,008 Hungary 5,566 1,684 6,300 1,682 Poland 5,184 1,862 8,880 2,795 Mexico 7,984 2,737 4,097 1,218 Others 11,757 3,588 8,099 2,629 Total 282,534 85,303 229,798 65,889 U.S.A. 143,866 70,743 241,437 82,820 Canada 75,729 50,600 92,501 40,448 Chile 41,377 23,503 23,278 11,836 Austria 3,519 2,161 5,178 2,241 Other pork cuts N/A France 19,799 5,156 13,387 3,510 Netherland 2,406 1,193 2,731 1,696 Spain 22,103 15,128 24,574 12,224 Belgium 1,483 1,009 2,258 1,134 Germany 877 844 2,393 1,116 Denmark 8,639 8,501 16,401 8,036 Hungary 7,833 3,857 10,738 4,149 Poland 5,241 3,979 6,796 4,154 Mexico 10,252 5,235 8,045 2,975 Others 4,580 4,480 9,364 5,712 Total 347,704 196,389 459,081 182,051 U.S.A. 162,494 75,362 258,041 86,272 Canada 94,102 54,715 111,605 43,967 Chile 111,477 43,443 55,515 20,403 Austria 45,961 14,394 44,616 12,935 France 46,518 14,007 35,518 10,525 Netherland 44,663 13,382 35,337 10,864 Spain 32,133 18,545 34,740 15,186 Total Pork 0203 Belgium 42,230 13,813 30,125 9,301 Germany 13,288 4,579 27,421 8,287 Denmark 12,340 9,375 27,029 11,044 Hungary 13,399 5,541 17,038 5,831 Poland 10,425 5,841 15,676 6,949 Mexico 18,947 8,145 14,818 4,732 Others 16,337 8,068 17,463 8,341 Total 664,314 289,210 724,942 254,637 Source: KITA
Posted: 19 August 2011, last updated 19 August 2011

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