Poultry and Products Annual

An Expert's View about Agriculture and Animal Husbandry in South Korea

Last updated: 29 Sep 2011

Although local supplies of domestic pork are expected to recover, broiler meat production in 2012 is forecast to continue its upward trend in response to strong consumer demand, reaching a record 720,000 MT. In response to growing broiler production figures, the 2012 chicken import estimate is forecast to dip slightly to 90,000MT, with imports from the United States accounting for 55,000MT of the total.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 9/8/2011 GAIN Report Number: KS1136 Korea - Republic of Poultry and Products Annual Annual Approved By: Michael Francom Prepared By: Sun Young Choi / Michael Francom Report Highlights: Although local supplies of domestic pork are expected to recover, broiler meat production in 2012 is forecast to continue its upward trend in response to strong consumer demand, reaching a record 720,000 MT. In response to growing broiler production figures, the 2012 chicken import estimate is forecast to dip slightly to 90,000MT, with imports from the United States accounting for 55,000MT of the total. Production: The Korean poultry industry was hit by a series of outbreaks of highly pathogenic avian influenza (HPAI) from December 2010 to May of this year. Nearly 1 million broilers were culled to stem the spread of the disease. However, these wide spread HPAI outbreaks did not have a noticeable impact on 2011 production since the disease affected less than one percent of the country?s total inventories. See KS1120 for more details. In fact, broiler inventories as of June 2011 actually grew to a record 110 million on the back of strong farm gate prices due to increased consumer demand resulting from the shortage of local pork and fears about fishery products being contaminated by radiation from the nuclear power plant meltdown in Japan. While feed accounts for 60 percent of production costs, rising grain prices have not had a noticeable impact on broiler production since farm gate prices are hovering at record highs. From Jan-Jun of this year, farm gate prices, which are found at the end of this report, hit a record 1,971 won/kg ($1.84/kg). Average compound feed prices during the month of July were 536 won/kg ($ 0.49/kg), up about 15 percent from the 2010 average of 468 won/kg ($ 0.38/kg). In response to growing consumer demand, farmers are expected to continue to build stocks this year and into next year. The 2011 broiler production forecast is accordingly raised to 686,000 MT. The anticipated return of domestic pork to the market in 2012 is not expected to dampen prospects for broiler meat production next year as consumer demand is expected to remain strong. The 2012 production estimate is therefore forecast to hit a record 720,000 MT, an increase of 5 percent from the previous year?s estimate. Korea: Broiler Inventories as of June (1,000 birds) Year Farms Birds 2008 1,807 77,853 2009 2,249 99,983 2010 2,238 101,690 2011 2,268 110,122 Source: National Agriculture Quality Service, Ministry of Agriculture & Forestry Consumption: The HPAI outbreaks last winter did little to impact consumption since consumers have already weathered past outbreaks and understand that the virus, if present in the meat, would be destroyed through cooking. Broiler meat consumption during 2011 is expected to grow more than originally forecast because increased demand resulting from the shortage of local pork and fears about radiation-contaminated fishery products from areas affected by the nuclear meltdown in Japan. Demand is also up since broiler meat is a relatively cheap source of protein and is also considered to be a health-conscious alternative to red meat. The consumption estimate is accordingly revised upward to 775,000 MT. In July, the Korea Rural Economic Institute (KREI), a local agricultural think-tank, conducted a consumer survey to see what consumers were buying since local pork supplies were scarce. Of the 745 individuals surveyed, about 83 percent had replaced some of their pork consumption with other meat. The top choice was chicken, selected by 36 percent of consumers. See table below for breakdown for other substitutes. Consumers? preferred substitute for domestic pork Unit: Percent Survey Period Chicken Hanwoo beef Duck Imported beef Imported pork Eggs Fish May, 2011 21.3 11.0 15.5 10.0 10.2 16.3 15.7 July, 2011 36.0 17.9 16.0 15.1 11.9 3.1 N/A Source: KREI Note: KREI did not provide ?fish? as an alternative to domestic pork in its survey conducted in July 2011. Starting in August 2010, local fried chicken delivery services had to start carrying the origin of the meat on their menus. Anecdotal evidence suggests that this new labeling requirement has resulted in a slight uptick in demand for domestic chilled meat in place of imported frozen chicken. However, the overall impact of this labeling requirement on consumption of imported meat is expected to be negligible for a couple of reasons. First, imported chicken is cheaper than domestic broiler meat. Second, 60-70 percent of all imported chicken goes for processing, while almost all the rest is for restaurant use. Of note, imported chicken, which is almost always frozen, is not normally sold through retail or wholesale outlets as consumers prefer fresh chicken meat. Based on 2010 import statistics, roughly 85 percent of imported chicken cuts were leg quarters, while the remaining 15 percent was more or less divided evenly between breast meat and wings. As noted above, the majority of the imported meat goes for processing into items such as nuggets, popcorn chicken and sandwich meat. The remainder is used at restaurants in barbeque chicken dishes that are growing in popularity. On the processed side, heat-treated products from Thailand and China are warmed on skewers and sold by roadside vendors. In 2012, consumption is projected to increase 3 percent to a record 798,000 MT as local production increases to respond to growing demand from health conscious consumers. The return of domestic pork to the market is not expected to have a sizeable impact since per capita consumption, which is currently at 16 kg/person, still has room to keep growing. The local industry is hoping to see this figure grow to 20 kg/person over the next few years. In comparison, per capita consumption in Japan is slightly higher at 16.5 kg/person, while that of the United States is three times higher at 44.5 kg/person. Beyond 2012, demand for chicken cuts is expected to continue growing, especially amongst the younger generation. According to local industry estimates, 35 percent of total chicken consumption in 2011 was made-up of cuts rather than whole birds, which still account for the bulk of consumption. The share of cuts is expected to continue climbing upward in the future. Trade: Korea imported 73,381 tons of frozen broiler meat from Jan-Jun 2011, up 46 percent from the same period from the previous year. The increase was largely attributed to the replacement demand for pork as well as the 50,000 MT zero-duty TRQ for frozen chicken meat to help mitigate against rising food inflation (see KS1122). The quota was announced in May and was reportedly filled by July. While imports were up significantly from Jan-Jun, the pace of imports is expected to slacken during the second half of this year because of an abundance of chicken already on the market. The broiler meat import estimate for 2011 has therefore been trimmed slightly to 100,000 MT, of which roughly 90 percent is made-up chicken cuts. The import forecast for U.S. chicken is revised upward to 62,000 MT in part because it is more competitively priced than Brazilian broiler meat. As noted above, the implementation of the country of origin labeling requirements for fried chicken delivery services will likely result in some restaurant owners opting for local broiler meat. However, in the long-run this practice is not expected to have much of an impact for a couple of reasons. First, U.S. chicken legs and wings are on average 70-80 percent cheaper than the same locally produced cuts. See price comparison table below. Second, while consumers prefer domestic chicken, they are willing to eat imported meat. Price Comparison (Unit: Korean Won per Kilogram) 1/ C Domestic Imports 3/ uts 2/ U.S. Brazil 4/ Denmark Leg 6,626 1,488 3,278 1,818 Wing 7,808 2,292 3,108 2,777 Breast 7,508 5,874 3,152 - Source: Korea Chicken Council & Korea Customs Service 1/ Average exchange rate (1$=1102.05 Korean won) for January ? June 2011 period 2/ Chilled products, average retail price for January 1 ? June 30, 2011 period 3/ Average CIF prices between January1 through June 30, 2011 4/ Mostly frozen trimmed bone-less products The United States and Brazil are the first and second largest chicken suppliers to the Korean market. Thailand is third and China is fourth. Each country has a different portfolio of products depending on their respective competitive advantages and disease restrictions. When breaking it down by product, the United States ships the most frozen leg quarters, and Brazil the most frozen wings and breast meat. China and Thailand ship heat-treated product given the two country?s poultry disease status. See import trade matrix at end of report for more details. The implementation of the Korea-EU FTA on July 1, 2011, is expected to give Denmark ? the fifth largest overall supplier and the second largest supplier of wings ? a slight price advantage on frozen wings since the 20 percent duty has now been cut to 18.5 percent. The duty on EU-origin frozen wings will be phased-out over 14 years, whereas the tariff on U.S. frozen wings will be reduced over 12 years under the KOR-US FTA. In 2012, Korea?s broiler imports are forecast to decrease to 90,000 tons, down 10 percent from the previous year due to the anticipated increase in local production. The U.S. chicken import estimate is scaled back to 55,000 MT. Korea?s chicken exports in 2011 are forecast to hold relatively steady at 11,000 MT. In 2012, the export volume is forecast climb slightly to 12,000 MT. The top destinations for Korean chicken are Vietnam and Japan. Korea ships around 10,000 MT of spent hen meat to Vietnam, and 2,000-3000 MT of processed meat products to Japan, like the traditional chicken ginseng soup dish. See export trade matrix at end of report for details. Production, Supply and Demand Data Statistics: Poultry, Meat, Broiler Korea, R 2010 2011 2012 epublic of Market Year Begin: Jan 2010 Market Year Begin: Jan 2011 Market Year Begin: Jan 2012 USDA Official New Post USDA Official New Post USDA Official New Post Inventory 78 76 80 80 84 (MIL HEAD) (Reference) Slaughter 725 725 740 750 780 (MIL HEAD) (Reference) Beginning 5 5 0 9 S 9 (1000 MT) tocks Production 647 653 660 686 720 (1000 MT) Whole, Imports 0 0 0 0 0 (1000 MT) Parts, Imports 106 106 110 100 90 (1000 MT) Intra-EU Imports 0 3 0 3 3 (1000 MT) Other Imports 0 0 0 0 0 (1000 MT) Total Imports 106 106 110 100 90 (1000 MT) Total Supply 758 764 770 795 819 (1000 MT) Whole, Exports 1 2 1 1 1 (1000 MT) Parts, Exports 15 14 14 10 11 (1000 MT) Intra EU Exports 0 0 0 0 0 (1000 MT) Other Exports 0 0 0 0 0 (1000 MT) Total Exports 16 16 15 11 12 (1000 MT) Human 742 741 755 775 C 798 (1000 MT) onsumption Other Use, 0 0 0 0 0 (1000 MT) Losses Total Dom. 742 741 755 775 C 798 (1000 MT) onsumption Total Use 758 757 770 786 810 (1000 MT) Ending Stocks 0 9 0 9 10 (1000 MT) Total Distribution 758 766 770 795 820 (1000 MT) CY Imp. from 30 55 0 62 U 55 (1000 MT) .S. CY Exp. to U.S. 0 0 0 0 0 (1000 MT) Balance 0 2 0 0 1 (1000 MT) Inventory -5 4 0 0 B 1 (1000 MT) alance Production 6 6 2 5 (PERCENT) C 5 hange Import Change 49 49 4 -6 -10 (PERCENT) Export Change 45 45 -6 -31 9 (PERCENT) Trade Balance -90 -90 -95 -89 -78 (1000 MT) Consumption 9 9 2 5 (PERCENT) C 3 hange Population 48,636,068 48,636,068 48,754,657 48,636,068 48,636,068 (PEOPLE) Per Capita 15 15 16 16 C 16 (KG) onsumption Frozen Chicken Cut Imports by Country Country CY 2010 CY 2011 (January- June) Volume Value (US$1,000) Volume Value (US$1,000) (MT) (MT) U.S. 52,148 65,433 49,655 66,907 Brazil 23,355 54,801 7,467 21,822 Denmark 342 550 82 136 Chile 176 477 134 450 Sub Total 76,021 121,261 57,338 89,315 U.S. 0 0 96 199 Brazil 4,657 12,039 2,741 7,717 Denmark 2,009 4,823 1,771 4,470 Hungary 94 185 199 445 Sub Total 6,760 17,047 4,807 12,831 U.S. 48 248 40 213 Brazil 5,411 14,966 3,215 9,209 Japan 320 305 0 0 Denmark 0 2 0 0 Sub Total 5,779 15,521 3,255 9,422 U.S. 52,196 65,681 49,791 67,319 Brazil 33,423 81,806 13,423 38,748 Denmark 2,351 5,375 1,853 4,606 Japan 320 305 0 0 Chile 176 477 134 450 Hungary 94 185 199 445 Total 88,560 153,829 65,400 111,568 Source: Korea Customs Service (KCS) Processed Chicken Imports by Country Country CY 2010 CY 2011 (January- June) Volume Value (US$1,000) Volume Value (US$1,000) (MT) (MT) China 4,246 14,170 1,985 6,481 Thailand 8,829 32,022 5,175 19,342 United States 161 656 87 376 Total 13,236 46,849 7,247 26,200 Source: Korea Customs Service (KCS) Countries that are currently allowed to export to Korea are as follows: Approved Suppliers Items United Kingdom, Australia, New Zealand, Taiwan, Denmark, France, Spain, Poultry birds, hatching Germany, Netherlands, Canada, Hungary, Poland and United States eggs, day old chicks United Kingdom, France, Chile, Denmark, Taiwan, Australia, Brazil, Fresh, chilled, or frozen Netherlands, Hungary, Canada, Poland and United States poultry meat United Kingdom, France, Chile, Denmark, Taiwan, Australia, Brazil, Japan, Heat-treated poultry United States, Thailand, Netherlands, Hungary, China, Poland and Canada meat Source: The Ministry for Food, Agriculture, Forestry and Fisheries (MIFAFF) Korea: Production Costs of Broilers 1/ (Korean Won per Kilogram in Live Weight) Year Operating Cost Production Cost Farm Price 2002 951 1,010 1,155 2003 943 1,003 938 2004 1,026 1,085 1,415 2005 953 1,008 1,440 2006 954 1,001 1,195 2007 881 930 1,118 2008 1,049 1,097 1,567 2009 1,255 1,311 1,936 2010 1,292 1,342 1,913 Source: National Agriculture Quality Service, Ministry of Agriculture & Forestry Korea: Monthly Average Foreign Exchange Rate (Unit: Korean Won / 1U$) Month 2009 2010 2011 Jan. 1346.10 1138.82 1120.07 Feb. 1429.46 1157.08 1118.14 Mar. 1461.98 1137.64 1122.45 Apr. 1341.90 1117.11 1086.84 May 1258.71 1163.11 1083.54 Jun. 1261.35 1212.33 1081.27 Jul. 1263.97 1207.30 - Aug. 1238.40 1179.92 - Sep. 1219.15 1167.01 - Oct. 1175.25 1123.45 - Nov. 1164.23 1126.20 - Dec. 1166.45 1147.55 - Source: Industrial Bank of Korea Korea: Production Cost of Broilers (Korean Won per Kilogram in Live Weight) Y 2009 CY 2010 Item C Average Cost Component Ratio (%) Average Cost Component Ratio (%) Feed 771 59 796 59 Chicks 320 24 334 25 Family Labor 46 4 39 3 Vet & Medicine 29 2 28 2 Water, Power, etc. 27 2 31 2 Other 117 9 113 8 Total 1,310 100 1,341 100 By Product 1 - 1 - Cost Total 1,311 - 1,342 - Source: National Agriculture Quality Service, Ministry of Agriculture & Forestry PRICE TABLES Korea: Year Average Broiler Prices (Korean Won/Kg, boneless basis) Year 2007 2008 2009 2010 2011 1/ Farm Price 1,118 1,567 1,936 1,913 1,971 Wholesale Price 2,030 2,739 3,431 3,529 3,626 Consumer Price 3,627 4,259 5,335 5,708 6,212 1/ Average price, January through June 2011 Source: National Agricultural Cooperative Federation Korea: Farm Price for Chicken Meat C icken Meat, Farm Price omm Chodity Unit: Korean Won per Kilogram Year Mont 2009 2010 2011 % Change comparing to previous year h Jan. 2,245 2,305 1,874 -19 Feb. 1,904 2,213 2,128 -4 Mar. 1,954 2,355 2,414 3 Apr. 1,976 2,167 2,478 14 May 2,105 1,703 1,544 -9 Jun. 1,939 1,933 1,389 -28 Jul. 2,100 2,043 - -3 Aug. 1,838 1,783 - 3 Sep. 1,510 1,637 - 8 Oct. 1,679 1,647 - -2 Nov. 1,994 1,608 - -19 Dec. 2,029 1,564 - -23 Source: National Agricultural Cooperative Federation (NACF) and Agricultural & Fishery Marketing Corporation Korea: Wholesale Price for Chicken Meat C cken Meat, Wholesale Price omm Chiodity Unit: Korean Won per Kilogram Year Mont 2009 2010 2011 % Change comparing to previous year h Jan. 3,716 4,066 3,444 -15 Feb. 3,372 3,905 3,764 -4 Mar. 3,432 4,171 4,092 -2 Apr. 3,445 3,879 4,127 6 May 3,656 3,260 3,268 0 Jun. 3,372 3,610 3,061 -15 Jul. 3,646 3,644 - 0 Aug. 3,223 3,329 - 3 Sep. 2,814 3,144 - 12 Oct. 3,205 3,106 - -3 Nov. 3,640 3,144 - -14 Dec. 3,698 3,088 - -16 Source: National Agricultural Cooperative Federation (NACF) and Agricultural & Fishery Marketing Corporation Korea: Consumer Price for Chicken Meat C Chicken Meat, Consumer Price ommodity Unit: Korean Won per Kilogram Year Mont 2009 2010 2011 % Change comparing to previous year h Jan. 5,061 5,550 5,518 -1 Feb. 5,191 5,594 6,612 18 Mar. 5,269 5,915 6,983 18 Apr. 5,145 6,246 6,911 11 May 5,547 5,984 6,004 0 Jun. 5,501 5,811 5,242 -10 Jul. 5,636 6,210 - 10 Aug. 5,690 5,909 - 4 Sep. 5,303 5,681 - 7 Oct. 4,836 5,263 - 9 Nov. 5,313 5,080 - -4 Dec. 5,507 5,250 - -5 Source: National Agricultural Cooperative Federation and Agricultural & Fishery Marketing Corporation TRADE MATRIX Korea: Import Matrix for Chicken Meat 1/ Import Trade Matrix Country: Korea Commodity: Chicken Meat Unit: MT & U$1,000, RTC Basis .-Jun. Jan.-Jun. 2009 CY Jan 2010 Imports fo CYr 2010 2011 Country Vol Val Vol Val Vol Val Vol Val U.S. 29,423 38,363 54,745 69,539 24,956 32,071 49,958 67,876 Others Thailand 5,341 18,318 8,829 32,022 3,679 13,174 5,175 19,342 P.R.C. 3,516 12,377 4,246 14,170 2,043 6,804 1,985 6,481 Canada 0 0 0 0 0 0 0 0 Denmark 2,065 4,457 3,339 6,755 1,406 2,787 2,461 5,442 France 0 0 0 0 0 0 0 0 U.K. 0 0 0 0 0 0 0 0 Chile 0 0 176 478 0 0 134 450 Japan 96 177 26 28 277 260 11 12 Brazil 30,161 61,603 34,025 83,179 17,933 39,804 13,423 38,748 Australia 0 5 0 0 0 0 0 0 Other 23 59 417 493 23 33 234 493 Total for Others 41,202 96,996 51,058 137,125 25,361 62,862 23,423 70,968 Grand Total 70,625 135,359 105,803 206,664 50,317 94,933 73,381 138,844 1/ HS 0207.1X.XXXX plus HS 1602.32.XXXX Source: Korea Customs Service Korea: Export Matrix for Chicken Meat 1/ Export Trade Matrix Country: Korea Commodity: Chicken Meat Unit: MT & U$1,000, RTC Basis Y Jan.-Jun. Jan.-Jun. 2010 Imports fo CY 2009 Cr 2010 2011 Country Vol Val Vol Val Vol Val Vol Val U.S. 1 29 0 1 0 1 0 0 Others Hong Kong 548 870 946 1,445 312 530 130 340 Japan 867 4,298 1,350 6,920 464 2,300 857 4,392 P.R.C. 0 1 4 44 1 7 0 0 Taiwan 407 1,470 394 1,373 186 654 153 597 Thailand 0 2 1 3 0 0 0 0 Vietnam 9612 10,690 13,261 16,714 5,987 7,337 5,239 7,816 Iraq 0 0 0 0 0 0 0 0 Turkey 0 0 0 0 0 0 0 0 Australia 9 65 13 61 9 36 11 58 Russia 0 0 0 0 0 0 0 0 Other 28 261 22 110 4 28 46 105 Total for Others 11,471 17,657 15,991 26,670 6,963 10,892 6,436 13,308 Grand Total 11,472 17,686 15,991 26,671 6,963 10,893 6,436 13,308 1/ HS 0207.1X.XXXX plus HS 1602.32.XXXX Source: Korea Customs Service
Posted: 29 September 2011, last updated 29 September 2011

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