Livestock and Products Annual 2012

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

Posted on: 21 Sep 2012

Korean beef cattle farmers have begun to respond to low prices and government efforts to reduce inventory.

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: 9/10/2012 GAIN Report Number: KS1243 Korea - Republic of Livestock and Products Annual Annual Approved By: M. Kathryn Ting Prepared By: Yong Keun Ban / Stephen L. Wixom Report Highlights: Korean beef cattle farmers have begun to respond to low prices and government efforts to reduce inventory. As a result of the surge in slaughter numbers, total 2012 beef production is projected to increase by 19.3 percent over the 2011 level, but to drop in 2013. Due to the increase in domestic beef production, beef imports in 2012 are estimated to be down slightly. The Korean swine industry, hardest hit by the 2010/2011 FMD outbreak, has recovered about six months sooner than experts predicted. By June 2012, the number of sows had reached the same level that existed prior to the FMD outbreak. Estimated 2012 pork production is revised up. Pork imports, which reached a record 640 thousand CWE MT in 2012, will be lower in 2012. Commodities: Animal Numbers, Cattle CATTLE Production Korean beef cattle farmers have begun to show signs of reducing stocks as calf and cattle prices continue to come down after overcoming the shock from the FMD outbreak that broke out in late 2010. Total beef cattle inventory continued to increase up until June, 2012, as the result of higher insemination numbers that continued through July, 2011, showed up in the market. However, as the calf and cattle prices continued to drop throughout 2011 and even further in 2012, farmers have drastically cut down on semen purchases since August 2011, which will have an impact on overall inventory numbers for the second half of 2012 and into 2013. Semen sales continued to drop by 16.1 percent during the first seven months of 2012, compared to the same period in 2011. Signs of a drop in cattle inventory can also be seen in the increase in farmers’ intentions to reduce herd size. In a survey conducted in September 2012 by the Korea Rural Economic Institute (KREI), 7.1 percent of farmers replied that they were planning to reduce herd size, which is at a historically high level. Such downsizing will be reflected in the market in 2013, as calf production drops and ending inventories also drop. The Korean government and National Agricultural Cooperative Federations continued to carry out price discount promotions to boost consumption of domestic Hanwoo beef in 2012. Although, such efforts increased consumption and somewhat slowed the decline in live cattle prices, prices were still far from recovering to the price level prior to FMD. The main reason for the drop in live cattle prices is due to a surplus in local cattle inventories. The domestic herd size increased 70 percent over the past decade. Hanwoo Semen Sales (Unit: Thousand straws) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total 2008 116 151 146 156 174 177 220 212 170 170 148 118 1,958 2009 119 140 138 162 177 216 238 270 207 185 143 135 2,130 2010 146 131 145 248 154 216 271 240 223 181 144 134 2,233 2011 5 0 303 215 274 279 304 225 215 168 129 136 2,253 2012 88 110 178 161 178 214 Note: The jump in semen sales in March 2011 is due to a rush to inseminate cows after being banned from moving animal related products, due to the FMD outbreak in Nov., 2010. Source: GS&J In order to reduce the total cattle inventory, the Korean government has announced a program to promote the slaughtering of cows that typically do not sell as well. The government is providing a subsidy (30 billion won in 2012) for farmers that slaughter lower-performing cows, such as heifers that have different hair color and tend to receive lower prices, cows that have given birth to calves that are of low quality, etc. The government’s target is to reduce the number of such cows by 100,000 head in 2012 and another 100,000 head in 2013. Such efforts are slowly showing results in the market as the ratio of cow slaughter has gradually increased from 42.7 percent in January 2012 to 52.0 percent in June 2012. This trend in increased slaughter of cows is projected to continue during the second half of 2012 as farmers continue to send lower performing cows to the market in order to receive the subsidy. In addition to the increased slaughter of cows, farmers that raise cows are switching the use of cows for breeding purposes to feeder cattle. A low insemination rate and a smaller number of breeding cows will all contribute in lowering the number of beef cow beginning stocks and calf production in 2013. A combination of government efforts to reduce the cow numbers and farmers’ moves to lower their inventory by reducing the semen purchases will bring down the total ending inventory in 2013. As the continued increase in cattle inventory is showing symptoms of turning to a downward trend, some research institutes, such as the GS&J, are pointing out that it is time for the government to discontinue its policy of reducing total inventory and switch over to a policy that dissuades farmers from getting cold feet over increasing the breeding number and total herd size. As the total inventory comes down in 2013, overall slaughter numbers are projected to drop as well. Such reduction in total inventory and slaughter should help boost the low calf and cattle prices during the second half of 2013 and mitigate the ratio of cow slaughter as farmers begin to retain their breeding stock. Monthly Cattle Slaughter Trend Ye Cow Bull/steers Total ar Month He Percent of Percent of Sub- Percent of ads Heads total total total annual Jan 32,820 42.4 44,588 57.6 77,408 10.3 Feb 31,065 47.5 34,384 52.5 65,449 8.7 Mar 25,785 46.2 30,025 53.8 55,810 7.4 Apr 24,625 45.9 29,026 54.1 53,651 7.1 May 23,300 45.8 27,608 54.2 50,908 6.8 Jun 23,480 45.7 27,888 54.3 51,368 6.8 2010 Jul 25,553 48.7 26,920 51.3 52,473 7.0 Aug 30,698 45.1 37,305 54.9 68,003 9.0 Sep 41,003 47.1 45,977 52.9 86,980 11.6 Oct 26,598 46.4 30,765 53.6 57,363 7.6 Nov 29,018 44.2 36,686 55.8 65,704 8.7 Dec 27,332 40.6 39,977 59.4 67,309 8.9 Total 341,277 45.4 411,149 54.6 752,426 100.0 Jan 32,297 37.8 53,045 62.2 85,342 10.0 Feb 11,047 33.3 22,078 66.7 33,125 3.9 2011 Mar 24,217 43.6 31,310 56.4 55,527 6.5 Apr 24,752 41.4 35,090 58.6 59,842 7.0 May 26,947 40.0 40,349 60.0 67,296 7.9 Jun 28,691 40.8 41,617 59.2 70,308 8.2 Jul 28,130 42.8 37,663 57.2 65,793 7.7 Aug 41,113 39.7 62,487 60.3 103,600 12.1 Sep 34,732 44.5 43,296 55.5 78,028 9.2 Oct 26,890 40.4 39,681 59.6 66,571 7.8 Nov 31,289 41.0 45,112 59.0 76,401 9.0 Dec 37,341 41.1 53,572 58.9 90,913 10.7 Total 347,446 40.7 505,300 59.3 852,746 100.0 Jan 48,267 42.7 64,780 57.3 113,047 25.0 Feb 27,740 43.6 35,823 56.4 63,563 14.1 Mar 31,498 45.4 37,869 54.6 69,367 15.3 2012 Apr 32,712 47.5 36,165 52.5 68,877 15.2 May 35,189 50.2 34,977 49.8 70,166 15.5 Jun 34,938 52.0 32,249 48.0 67,187 14.9 Total 210,344 46.5 241,863 53.5 452,207 100.0 Source: Quarantine Inspection Agency The survey of farmers’ intentions to maintain or reduce its herd size shows that more farmers are looking at reducing herd size as cattle prices drop. As can be seen from the following table, all of the numbers from the survey conducted in September 2012 are showing that farmers are less inclined to increase herd size or even maintain the same level but are heading more towards a reduction in herd size. Cattle Industry Survey of Intention 2010 2011 2012 Farmers’ Plan Mar. Jun. Sep. Dec. Mar. Jun. Sep. Dec. Mar. Jun. Sep. Maintain the same 94.3 95.8 95.5 90.9 95.7 94.8 93.8 95.5 93.2 96.1 91.6 level Will increase herd 5.2 3.9 4.1 8.7 4.3 3.5 2.5 1.6 3.1 2.2 1.3 size Will reduce herd 0.4 0.3 0.5 0.4 0.0 1.7 3.7 2.8 3.8 1.7 7.1 size Source: KREI 2011 Farm Income per Head of Beef Cattle (Estimate based on 600 Kg. cattle) Unit: 000 won, percent De Carcass grade scription 1++ 1+ 1 2 3 Gross Income (A) 6,002 5,254 4,751 3,752 2,818 Expenses (B) 4,582 4,582 4,582 4,582 4,582 Calf price 1,969 1,969 1,969 1,969 1,969 Feed 2,169 2,169 2,169 2,169 2,169 Other expenses 444 444 444 444 444 Income [(A)-(B)] - 1,420 672 169 -830 1,764 2011 total 9.2 22.6 30.6 25.5 11.6 Percent of carcasses that fall under each Jan. – Jul., grade 8.9 20.2 28.9 26.9 14.5 2012 Source: KREI and Korea Institute of Animal Products Quality Evaluation According to data released by the Korea Rural Economic Institute and the Korea Institute of Animal Products Quality Evaluation, about 37 percent of all cattle that were slaughtered in 2011 resulted in a loss to farmers. This percent increased to over 41 percent during the period running from January-July, 2012, as farmers sent lower quality cows to slaughter plants due to high feed prices and low cattle prices. Korea: Live Beef Cattle Prices (000 won/head) Mont Hanwoo calf h Hanwoo cow Hanwoo steer Female Male Jan., 2009 1,370 1,514 4,602 3,659 Feb., 2009 1,482 1,618 4,584 3,694 Mar., 2009 1,509 1,669 4,597 3,699 Apr., 2009 1,629 1,852 4,670 3,688 May, 2009 1,718 1,989 4,698 3,702 Jun., 2009 1,869 2,121 4,751 3,808 Jul., 2009 1,930 2,176 4,831 3,949 Aug., 2009 2,032 2,312 5,089 4,870 Sept., 2009 2,125 2,411 5,405 5,167 Oct., 2009 2,054 2,324 5,510 5,405 Nov., 2009 2,048 2,302 5,754 5,729 Dec., 2009 2,081 2,292 5,904 5,789 Jan., 2010 2,080 2,344 5,911 5,846 Feb., 2010 N/A N/A N/A N/A Mar., 2010 2,272 2,434 5,714 5,495 Apr., 2010 2,331 2,598 5,659 5,433 May, 2010 N/A N/A N/A N/A Jun., 2010 2,337 2,554 5,326 5,081 Jul., 2010 2,259 2,475 5,066 4,942 Aug., 2010 2,151 2,391 5,012 5,044 Sep., 2010 2,074 2,387 4,850 5,069 Oct., 2010 2,092 2,327 4,877 5,073 Nov., 2010 1,939 2,041 4,824 4,889 Dec., 2010 N/A N/A N/A N/A Jan., 2011 N/A N/A N/A N/A Feb., 2011 N/A N/A N/A N/A Mar., 2011 N/A N/A N/A N/A Apr., 2011 1,956 1,924 4.383 3,668 May, 2011 1,796 1,817 4,106 3,804 Jun., 2011 1,643 1,743 3,774 3,203 Jul., 2011 1,591 1,713 3,813 3,211 Aug., 2011 1,534 1,785 3,758 3,116 Sep., 2011 1,446 1,785 3,752 3,125 Oct., 2011 1,386 1,845 3,682 3,159 Nov., 2011 1,248 1,484 3,773 3,219 Dec., 2011 921 1,226 3,622 3,082 Jan., 2012 935 1,354 3,689 3,155 Feb., 2012 1,134 1,477 3,924 3,379 Mar., 2012 1,176 1,601 3,910 3,460 Apr., 2012 1,192 1,712 3,723 3,424 May, 2012 1,157 1,832 3,726 3,408 Jun., 2012 1,088 1,668 3,655 3,395 Jul., 2012 998 1,604 3,406 3,287 Source: National Agricultural Cooperative Federation, NACF (Exchange rate: US$1 = 1,131.7 won) Note: Live beef cattle prices are not available during the period Dec., 2010~Mar., 2011, as the live cattle market was closed during this period, due to the FMD outbreak. Production, Supply and Demand Data Statistics: Animal Numbers, Cattle Korea, Republic of 2011 2012 2013 Market Year Begin: Jan 2011 Market Year Begin: Jan 2012 Market Year Begin: Jan 2013 USDA Official New Post USDA Official New Post USDA Official New Post Total Cattle Beg. Stks 3,278 3,278 3,354 3,354 3,338 Dairy Cows Beg. Stocks 278 278 283 283 290 Beef Cows Beg. Stocks 1,147 1,147 1,249 1,249 1,150 Production (Calf Crop) 1,010 1,010 980 1,034 900 Total Imports 0 0 0 0 0 Total Supply 4,288 4,288 4,334 4,388 4,238 Total Exports 0 0 0 0 0 Cow Slaughter 348 348 500 520 400 Calf Slaughter 0 0 0 0 0 Other Slaughter 505 505 560 520 538 Total Slaughter 853 853 1,060 1,040 938 Loss 81 81 10 10 10 Ending Inventories 3,354 3,354 3,264 3,338 3,290 Total Distribution 4,288 4,288 4,334 4,388 4,238 1000 HEAD, PERCENT Commodities: Meat, Beef and Veal Production: The Government’s policy to reduce the total cattle inventory by enhancing cow slaughter, coupled with high beginning stocks in 2012, allowed the total number of cattle slaughtered during the first half of 2012 to jump by 21.7 percent to 452, 207 head over the same period in 2011. This rush to slaughter more cattle is projected to continue during the second half of 2012 as the government’s plan to encourage the slaughtering of cows continues and as farmers try to mitigate the profit loss coming from a continued drop in live cattle prices and higher feed prices. As a result of the surge in slaughter numbers, total 2012 beef production is projected to increase by 19.3 percent over the 2011 level. However, as total inventory drops due to lower calf production in 2013, slaughter numbers will also drop, resulting in lower beef production for 2013. Increased demand coming from discount programs of both the agricultural cooperatives and major hypermarkets will somewhat offset the price drop but may not be sufficient in increasing live cattle prices to get farmers to hold onto their herd. The increased slaughter is largely due to falling prices coming from high inventory numbers. The initial farmers’ fears for the worst, associated with the resumption of Canadian beef imports and the implementation of the KORUS FTA, has not materialized. The actual impact coming from the KORUS FTA will be minimal as the duty will only drop to 37.3 percent from the current 40 percent. High live cattle future market prices for U.S. beef in 2012 seem to be more than enough in offsetting the drop in import duties, as can be seen by the drop in beef imports during the first half of 2012, compared to the same period in 2011. Consumption: An abundant supply of domestic Hanwoo beef and continued beef promotional activities by Korean farmer groups and hypermarkets is projected to increase consumption further by over five percent in 2012. The consumption is projected to continue to increase in 2013 at a slower pace until the market starts to raise the price of Hanwoo beef with tighter supplies due to smaller inventories. The shortage in domestic beef supply will be filled by imported beef and to some extent by abundant pork supplies. Prospects for U.S. beef consumption remain high as the percentage of consumers that have tried U.S. beef continues to go up from 22 percent in 2010 to 52 percent in 2012. Most importers have viewed the television advertisements that USMEF has been carrying on major television programs for two and half months since December 15, 2011. Such promotional activities and consumers’ experience in purchasing U.S. beef will enable the consumption of U.S. beef to gradually increase in this market. Thanks to such promotional activity and due to consumers’ BSE experience from the previous three cases, the impact of the 4th BSE case found in California on April 24, 2012, had minimal impact on the consumption of U.S. beef. Although, a few stores suspended selling U.S. beef after the news for a short period, most of the major stores continued to sell U.S. beef. Consumers’ confidence level on the safety of U.S. beef has increased drastically in the past decade, with over 40 percent of consumers saying that U.S. beef is safe or normal, even right after the 4th BSE case found in California on April 24, 2012. Change in consumers’ perception of safety of U.S. beef Unit: Percent Survey period U.S. beef is unsafe U.S. beef is safe Normal 2003 87.4 4.2 8.4 2008 85.5 1.4 13.0 2012 57.5 7.1 35.4 The surveys were conducted in January 2004 (right after the first BSE case), January 2008 (prior to resumption of U.S. beef imports) and April 2012 (After the BSE case in California). Source: KREI During the survey conducted in April, 2012, after the California BSE case was reported, 69 percent of the consumers surveyed replied that they would reduce the consumption of U.S. beef, whereas, 30 percent of those surveyed replied that their consumption would not change and only 1 percent replied that they would increase the consumption of U.S. beef. As for the product that they would substitute in place of U.S. beef, 28 percent replied that they would purchase Australian beef. Consumers’ intention for substituting other meat when reducing consumption of U.S. beef Substitute Australian Hanwoo Only reduce U.S. beef Pork Chicken Duck product beef beef consumption Percentage 28 24 20 8 8 12 Source: KREI The price gap between imported beef and Hanwoo beef is bigger at restaurants than at retail stores. Such a huge price gap between Hanwoo beef and imported beef has encouraged consumers to choose more imported beef than Hanwoo beef when dining out. Consumers’ choice of beef when dining out Unit: Percent De Only eat Usually eat Usually eat Only eat No scription Ha Total nwoo Hanwoo imported beef imported beef reply Percent 16.2 44.2 38.5 0.9 0.2 100.0 Source: GS&J Retail prices (2009 – 2012) Unit: Won per 500 gram Hanwoo beef Loin Australian Beef Loin Australian Beef Loin Domestic Month (Top grade) (Chilled) (Frozen) Pork Jan., 32,614 22,106 6,300 8,533 2009 Feb., 32,109 20,484 6,263 8,503 2009 Mar., 32,434 20,345 6,167 9,041 2009 Apr., 31,732 20,233 6,167 10,064 2009 May, 33,354 19,735 6,167 8,991 2009 Jun., 33,754 14,960 6,167 9,146 2009 Jul., 34,497 17,781 6,167 9,461 2009 Aug., 35,620 18,389 6,167 9,831 2009 Sept., 36,685 18,836 6,250 9,565 2009 Oct., 38,181 21,386 6,333 8,944 2009 Nov., 38,393 20,967 6,333 8,444 2009 Dec., 37,902 18,511 6,333 8,704 2009 Jan., 36,116 N/A 6,333 7,947 2010 Feb., 38,102 N/A 6,333 7,609 2010 Mar., 36,548 N/A 6,333 7,317 2010 Apr., 37,325 16,117 6,462 8,207 2010 May, 37,389 N/A 6,500 8,566 2010 Jun., 35,727 N/A 6,500 8,385 2010 Jul., 34,836 20,416 6,606 8,794 2010 Aug., 35,282 21,313 6,833 9,132 2010 Sept., 38,603 21,892 6,640 8,943 2010 Oct., 39,273 21,104 6,500 8,599 2010 Nov., 36,335 19,903 6,401 8,311 2010 Dec., 35,850 20,328 6,333 8,038 2010 Jan., 34,062 22,794 6,333 8,902 2011 Feb., 31,460 21,939 6,333 10,658 2011 Mar., 31,632 19,629 6.220 9,499 2011 Apr., 28,573 18,940 6,167 9,794 2011 May, 27,532 18,525 6,396 10,691 2011 Jun., 28,209 16,083 6,429 12,300 2011 Jul., 28,360 16,587 5,976 11,798 2011 Aug., 29,550 17,645 5,785 10,759 2011 Sept., 32,515 19,555 6,000 9,722 2011 Oct., 31,350 19,295 6,000 8,688 2011 Nov., 31,515 18,695 6,000 8,571 2011 Dec., 30,680 19,180 5,905 9,985 2011 Jan., 30,075 20,280 6,000 9,235 2012 Feb., 28,010 19,330 6,125 8,315 2012 Mar., 25,455 21,710 6,125 8,160 2012 Apr., 26,940 20,290 6,090 7,950 2012 May, 27,700 19,765 6,050 8,395 2012 Jun., 28,515 20,520 6,050 9,430 2012 Jul., 30,910 19,870 6,050 9,400 2012 Source: National Agricultural Cooperative Federation, NACF (Exchange rate: US$1 = 1,131.70 won) Retail Prices for Beef Short Ribs (2010 – 2012) Unit: Won per 500 gram M Domestic Hanwoo (chilled) U.S. A. Australia onth #1 Grade #3 Grade Chilled Frozen Chilled Frozen Jan., 2010 36,881 19,210 N/A N/A 9,991 8,080 Feb., 2010 37,450 20,911 N/A N/A 10,993 8,488 Mar., 2010 37,450 21,030 N/A N/A 9,611 8,315 Apr., 2010 36,911 21,057 N/A N/A 9,032 8,849 May, 2010 36,032 21,230 N/A N/A 8,504 9,025 Jun., 2010 34,138 21,230 N/A N/A 8,647 8,828 Jul., 2010 34,819 21,230 13,455 9,617 8,321 8,414 Aug., 2010 34,337 21,230 13,762 9,814 7,834 8,779 Sept., 2010 35,027 21,462 12,979 9,699 10,654 8,614 Oct., 2010 35,000 21,630 12,724 9,500 9,982 8,500 Nov., 2010 35,000 21,630 13,863 9,500 9,193 8,500 Dec., 2010 35,000 21,143 13,674 9,500 8,711 8,210 Jan., 2011 34,475 20,830 13,281 9,500 10,424 8,167 Feb., 2011 33,547 20,830 13,803 9,500 12,386 8,167 Mar., 2011 31,336 21,130 13,431 10,455 10,770 8,053 Apr., 2011 28,811 21,430 13,388 10,500 9,002 8,167 May, 2011 23,439 20,295 13,150 9,818 8,739 7,834 Jun., 2011 23,212 18,333 14,352 9,234 9,108 7,667 Jul., 2011 23,566 18,333 14,515 8,412 8,819 7,238 Aug., 2011 23,248 19,795 14,855 7,577 9,134 6,534 Sept., 2011 23,134 18,500 14,500 7,732 10,676 6,750 Oct., 2011 22,080 13,625 11,900 8,090 9,224 6,750 Nov., 2011 21,835 12,000 12,885 8,184 8,720 6,750 Dec., 2011 21,655 11,810 12,950 8,170 9,215 6,645 Jan., 2012 22,200 12,000 11,900 8,270 10,695 7,185 Feb., 2012 20,065 12,060 11,335 8,570 9,355 7,205 Mar., 2012 20,165 12,000 10,905 8,480 9,205 7,195 Apr., 2012 20,125 12,000 11,695 8,455 8,775 7,150 May, 2012 20,460 12,000 11,610 8,420 8,125 7,150 Jun., 2012 20,570 12,000 12,365 8,485 8,785 7,195 Jul., 2012 20,630 12,000 13,700 8,510 8,585 7,150 Source: National Agricultural Cooperative Federation, NACF (Exchange rate: US$1 = 1,131.7 won) Trade: Due to the increase in domestic beef production in 2012, beef imports for this year have dropped slightly. As earlier explained, the impact on beef imports coming from the KORUS FTA will be minimal. The resumption of Canadian beef imports has not had a major impact, given the reluctance of consumers to purchase over fear of BSE. However, as the domestic beef production drops in 2013 due to a low cattle inventory, beef imports are projected to increase to make up for the gap in beef supply. The impact of the 4th BSE case found in California on April 24, 2012, had minimal impact on the import of U.S. beef. Although, a few stores suspended selling U.S. beef for a short period following news of the event, most of the major stores continued to sell U.S. beef. Korea: Beef Imports ($000 and Metric Tons) Coun Annual 2011 Jan. – Jun., 2011 Jan. – Jun., 2012 try Value Volume Value Volume Value Volume Australia 770,061 152,739 368,136 72,645 301,178 61,915 United States 599,145 115,342 283,592 54,262 238,340 47,121 New Zealand 137,613 34,357 76,549 18,520 51,676 13,843 Mexico 16,449 5,236 5,976 2,163 5,949 2,014 Canada 0 0 0 0 2,476 452 Others 423 130 0 0 55 172 Total 1,523,691 307,804 734,253 147,590 599,674 125,517 Source: KITA Product Weight Equivalent basis Includes HS 0201 (fresh/chilled), HS 0202 (frozen), HS 021020 and 160250 (processed beef products) Production, Supply and Demand Data Statistics: Meat, Beef and Veal Korea, Republic of 2011 2012 2013 Market Year Begin: Jan 2011 Market Year Begin: Jan 2012 Market Year Begin: Jan 2013 USDA Official New Post USDA Official New Post USDA Official New Post Slaughter (Reference) 853 853 1,060 1,040 938 Beginning Stocks 49 49 80 80 96 Production 280 280 340 334 301 Total Imports 431 431 390 385 415 Total Supply 760 760 810 799 812 Total Exports 3 3 3 1 1 Human Dom. Consumption 677 677 702 702 730 Other Use, Losses 0 0 0 0 0 Total Dom. Consumption 677 677 702 702 730 Ending Stocks 80 80 105 96 81 Total Distribution 760 760 810 799 812 1000 HEAD, 1000 MT CWE, PERCENT, PEOPLE, KG Commodities: Animal Numbers, Swine Production: The swine and pork industry was hit hardest by the 2010/2011 FMD outbreaks with over 3.4 million head (or one-third of the total inventory) culled; but has recovered about six months sooner than what most experts predicted. By June 1, 2012, the number of sows had reached the same level that existed prior to the FMD outbreak. Such rapid recovery was made possible through government issuance of a tariff rate quota (TRQ) in 2011 of 31,000 head for breeding stock and another 5,000 head for the first half of 2012. This policy assisted the swine industry in repopulating herds. In addition to the TRQ, about 30 percent of farmers are reportedly using non-purebred, second filial generation (F2) sows for reproduction. Although it has helped to shorten the time taken to repopulate the swine inventory, the downside of this move is that the F2 sows tend to produce lower quality piglets. F2 sow productivity is generally 85 percent of that of F1 sows. As can be seen from the following table, the sow inventory reached about 99.3 percent of the level prior to the FMD outbreak. Number of sows and swine over 6 months of age (000 heads) Age Dec. 1, Mar. 1, June 1, Sept. 1, De Mar., c., 1, Jun.,1 1 2010 2/ 2011 2011 2011 2011 2012 2012 6-8 months 108 85 115 117 119 144 144 Over 8 mont 911 688 724 756 821 862 890 hs Sows 1/ 976 732 793 835 903 950 969 1/ Swine over eight months are sows and part of the swine that are 6-8 months old are sows. 2/ This sow number, based on Dec. 1, does not match with PS&D sow numbers, which are based on Dec. 31. The number of piglets has been adjusted to reflect the reduced mortality rate among piglets. About one- third of the pig farms were hit by FMD and these farms were required to fully disinfect their facilities prior to repopulating. The disinfection process has allowed for the Maximum Sustainable Yield (MSY) rate to improve as well as lower the mortality rate of piglets. The increased piglet production in 2012 reflects the increase in MSY, the lower mortality rate, and also an ongoing increase in sow numbers of over seven percent during the first half of 2012. However, the use of F2 sows that are less productive then F1 sows will result in a drop in piglet production in 2013. Also, once the swine farmers have replenished the herd size, they are expected to focus on improving the quality of their swine and gradually replace the F2 sows with F1 sows. The following table reflects the intention of swine farmers to continue to increase herd size into the second half of 2012. This should help replenish the ending inventory to 9.7 million head in 2012. However, high inventory numbers in 2013 are projected to lower swine prices and with record high feed corn prices, the surge in inventory numbers is projected to level off in 2013. Also, the F2 sows with their lower productivity will have an impact on overall piglet production in 2013, resulting in a drop in piglet numbers. Index of Farmers’ Intention to Increase Herd Size March April May June July August 101.7 104.1 105.4 107.7 110.3 111.5 Source: KREI The above index showing swine farmers’ plans for their herd size for each month was derived using the total swine inventory in December 2011 as 100. The survey was conducted during the period February 6~15, 2012. Other factors that will have a dampening effect on further increases in swine populations in 2013 are as follows: 1. The provincial government’s designation of areas restricted for raising livestock. According to the recommendation made to provincial governments by the Ministry of Environment; swine farms cannot be located within 500 meters of residential areas. The farms that were in place prior to the law were exempt, but when repopulating, the farms will be subject to the minimum distance law. 2. The Korean government has increased minimum requirements for barn space per swine in order to prevent intensive breeding of swine and the spread of livestock diseases. This will allow for fewer animals to be housed in the existing barn space. In order to raise the same number of animals, producers will have to further invest in barn construction. The minimum space for sows is set at 1.4 square meters and 0.8 square meters for porkers. 3. Beginning on January 1, 2012, disposal of livestock manure in the open sea was prohibited, increasing the cost of manure disposal. 4. Large sized farms (50 heads of cattle or 1,000 head of swine) must pay 50 percent of the cost for FMD vaccination. The government will continue to pay for the smaller sized farms. However, aside from the cost of vaccination, farms will be subject to a penalty if over 60 percent of their herd does not have an antibody against FMD. According to a survey conducted on a sample of farms, only half of the farms met this requirement 5. Korea also plans to run a trial traceability program for swine and pork in October, 2012. The farms subject to the trial program will have to be equipped to meet the requirements of the traceability system, which will likely be expanded and in the future eventually apply to all swine farms. 6. As of the end of 2012, all breeding farms, semen collection farms and large livestock farms (9,000 farms) will be required to receive a business permit. Also, small sized farms, regardless of size, will also have to register their operation and receive mandatory training. The early recovery of the swine inventory has resulted in higher slaughter numbers for 2012. The number of slaughters for the first half of 2012 jumped by 23 percent over the same period in 2011 and this trend is expected to continue into the second half of 2012, resulting in higher slaughter numbers than previously projected. A high level of slaughter is projected to continue in 2013 as swine farms adjust to prior FMD levels. Monthly swine slaughter Unit: Heads and percent Comparison Year Month Slaughter Percent of total annual slaughter Percent of monthly slaughter in 2010 Jan 1,200,864 8.2 Feb 1,139,094 7.8 Mar 1,329,078 9.1 Apr 1,227,418 8.4 May 1,170,277 8.0 N/A Jun 1,170,586 8.0 2010 Jul 1,145,063 7.8 Aug 1,178,342 8.1 Sep 1,128,558 7.7 Oct 1,293,212 8.8 Nov 1,372,827 9.4 Dec 1,274,060 8.7 Total 14,629,379 100.0 Jan 962,309 8.9 80.1 Feb 791,005 7.3 69.4 Mar 947,299 8.8 71.3 Apr 906,443 8.4 73.8 May 870,793 8.0 74.4 Jun 780,913 7.2 66.7 2011 Jul 723,992 6.7 63.2 Aug 885,102 8.2 75.1 Sep 883,949 8.2 78.3 Oct 1,026,885 9.5 79.4 Nov 1,072,233 9.9 78.1 Dec 966,926 8.9 75.9 Total 10,817,849 100.0 73.8 Jan 956,645 79.7 Feb 1,099,850 96.6 Mar 1,181,805 88.9 2012 Apr 1,043,265 N/A 85.0 May 1,146,628 98.0 Jun 1,049,726 89.7 Total 6,477,919 89.5 Source: QIA Swine Carcass Prices Carcass price Month 2009 2010 2011 2012 Won per Kilogram January 4,487 3,859 6,342 4,725 February 4,225 3,920 6,372 4,451 March 5,031 3,989 6,565 4,401 April 4,955 4,325 5,786 4,309 May 4,245 4,272 7,200 4,873 June 4,531 4,647 7,675 4,971 July 4,826 4,663 6,572 4,600 August 4,967 4,802 6,322 September 4,475 4,535 5,384 October 3,672 3,817 4,495 November 4,021 3,963 5,619 December 4,128 4,344 6,336 Source: NACF (Exchange rate: US$1 = 1,131.70won) Production, Supply and Demand Data Statistics: Animal Numbers, Swine Korea, Republic of 2011 2012 2013 Market Year Begin: Jan 2011 Market Year Begin: Jan 2012 Market Year Begin: Jan 2013 USDA Official New Post USDA Official New Post USDA Official New Post Total Beginning Stocks 8,449 8,449 8,171 8,171 9,700 Sow Beginning Stocks 920 920 903 903 975 Production (Pig Crop) 13,308 13,308 13,900 15,856 15,070 Total Imports 16 7 5 10 10 Total Supply 21,773 21,764 22,076 24,037 24,780 Total Exports 0 0 0 0 0 Sow Slaughter 0 0 0 0 0 Other Slaughter 10,817 10,817 12,942 13,787 14,500 Total Slaughter 10,817 10,817 12,942 13,787 14,500 Loss 2,785 2,776 500 550 550 Ending Inventories 8,171 8,171 8,634 9,700 9,730 Total Distribution 21,773 21,764 22,076 24,037 24,780 1000 HEAD, PERCENT Commodities: Meat, Swine Production: The pork production forecasted in 2012 has been revised upward to reflect the rapid recovery in swine inventory as well as increased average carcass weight from 114 kg. in 2011 to 115 kg. for the first six months of 2012. If the Korean swine industry returns to pre-FMD levels before the end of 2012, and young piglets that were replenished in the second half of 2012 come into the market in 2013, domestic pork production will increase for the year. Consumption: Pork consumption in 2012 has been adjusted to reflect the slight increase in consumption. The increased supply of domestic pork, coupled with low pork prices, has encouraged greater domestic pork consumption. An increased supply of domestic pork would have driven pork consumption even higher but low-priced Hanwoo beef and massive promotion of Hanwoo in support of Hanwoo farms limited pork from increasing any further. According to a survey conducted by KREI in June, 2012, a full 89 percent of consumers surveyed replied that domestic pork prices were too expensive. Such survey results are an indication that, unless the pork prices come down further, there will be constraints on boosting further consumption. As more swine comes into the market in 2013, the price is projected to come down further and should help consumption of pork pick up. Consumers’ preference for substitute meat for domestic pork Unit: Percent Survey Period Chicken Duck Hanwoo beef Imported pork Imported beef Other Aug., 2011 36.0 16.0 17.9 11.9 15.1 3.1 Jun., 2012 40.3 26.8 12.7 9.3 6.8 4.1 Source: KREI The following table shows that the average household has increased the purchase amount of pork products in 2012 over 2011, when pork prices were at a record high, but is still short of the consumption level in 2010. Average household pork purchase amount per 4 weeks Unit: Kilogram 2009 2010 2011 2012 Single ribbed belly 1.37 1.49 1.41 1.44 Pork ribs 1.93 2.04 1.96 2.11 Collar butt 1.14 1.18 1.09 1.05 Picnic / ham 2.39 2.49 2.18 2.20 Loin / tenderloin 1.53 1.52 1.24 1.23 Average 2.00 2.18 1.94 1.99 Source: Kantar World panel Korea/ KREI Note: The data is based on the purchase made up to the second week of July each year. Trade: During the first half of 2012, the Korean government announced a zero duty tariff-rate-quota (TRQ) for 70,000 MT of pork imports for the year. Of that amount, 50,000 MT were allocated for single-rib bellies and 20,000 MT for other cuts. The Korean government announced an additional TRQ of 50,000 MT of single-rib bellies for the second half of 2012. However, this is less than half of the 260,000 MT of TRQ that was announced for imports in 2011. Imports during the first half of 2012 dropped by 14 percent over the same period in 2011 due to the lower level of TRQ allotted in addition to the increased supply of domestic pork. A continued increase in domestic pork supply will keep the import level in 2013 at the same level as 2012. USMEF has begun to aggressively promoting U.S. pork through radio announcements from May 1 to August 31, 2012. It is too early to see actual results from the promotion but should help increase consumers’ awareness of U.S. pork. Korea: Pork Imports ($1000 and Metric Tons) Annual 2011 Jan. - Jun., 2011 Jan. - Jun., 2012 Country Value Volume Value Volume Value Volume $000 MT $000 MT $000 MT United States 472,812 152,152 263,622 87,316 222,110 73,094 Canada 208,867 80,237 111,605 43,967 77,709 31,654 Chile 116,363 40,496 55,515 20,403 65,653 18,704 Austria 79,409 22,358 44,616 12,935 33,154 8,333 France 63,146 17,882 35,518 10,525 31,368 8,009 Netherlands 113,788 20,799 74,632 10,889 36,141 8,565 Spain 73,666 31,331 34,896 15,193 31,051 13,415 Belgium 53,982 15,774 30,125 9,301 25,880 6,412 Germany 106,486 31,429 27,421 9,287 89,422 22,867 Denmark 75,362 27,956 31,033 12,086 21,164 8,004 Hungary 32,038 10,436 17,038 5,831 10,411 3,058 Poland 41,106 17,263 15,779 6,968 32,138 10,527 Mexico 33,522 10,180 14,818 4,732 15,006 4,445 Others 30,729 13,669 17,964 7,486 11,067 4,618 Total 1,501,276 491,962 774,582 256,919 702,274 221,705 Source: KITA Product Weight Equivalent basis Includes: HS 020311, 020312, 020319 (fresh/chilled), HS 020321, 020322, 020329 (frozen), 021011, 021012, 021019, 160241, 160242, and 160249 (processed pork products) Production, Supply and Demand Data Statistics: Meat, Swine Korea, Republic of 2011 2012 2013 Market Year Begin: Jan 2011 Market Year Begin: Jan 2012 Market Year Begin: Jan 2013 USDA Official New Post USDA Official New Post USDA Official New Post Slaughter (Reference) 10,817 10,817 12,942 13,787 14,500 Beginning Stocks 60 60 50 50 73 Production 837 837 982 1,067 1,120 Total Imports 640 640 550 550 552 Total Supply 1,537 1,537 1,582 1,667 1,745 Total Exports 0 0 0 0 0 Human Dom. Consumption 1,487 1,487 1,530 1,594 1,670 Other Use, Losses 0 0 0 0 0 Total Dom. Consumption 1,487 1,487 1,530 1,594 1,670 Ending Stocks 50 50 52 73 75 Total Distribution 1,537 1,537 1,582 1,667 1,745 1000 HEAD, 1000 MT CWE, PERCENT, PEOPLE, KG
Posted: 21 September 2012

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