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USDA GAIN: Poultry and Products


12 September 2012

USDA GAIN: South Korea Poultry and Products AnnualUSDA GAIN: South Korea Poultry and Products Annual

Post forecasts broiler meat production will reach 740,000 tons in 2013, up 2 percent from 2012 production. The reduced growth rate in 2013 compared to 2012 (6 percent) is largely attributed to an expected domestic feed price hike resulting from the current surge in world grain price and increased ending stocks resulting from an oversupply of domestic broiler meat production since 2010. Meanwhile, the import of frozen broiler meat is forecast to decrease to 110,000 tons, down 4 percent from the previous year at 115,000 tons due to an expected continued weakness of the Korean won and reduced broiler production in exporting countries like the United States and Brazil.

USDA GAIN: Poultry and Products

Production:

Broiler production is forecast to reach 740,000 tons in 2013, up 2 percent from the previous year. The reduced growth rate in 2013 compared to 2012 (6 percent) is largely attributed to the expected domestic feed price hike resulting from surging world grain prices from 2012 and an increased ending stock as a result of the oversupply of domestic broiler meat production since 2010.

In 2012, broiler meat production is estimated at 726,000 tons, up 6 percent from year 2011 because of greater demand for fast food chicken delivery in Korea during the Olympic Games. The broiler inventories in June 2012 actually decreased to 97.7 million birds, down 11.2 percent from the previous year. However, inventories in July 2012 rose again to 126 million birds, up 5.2 percent from the previous year because of the expected demand during the Olympic Games in July and August.

Korea: Broiler Inventories as of June (Unit: 1,000 birds)
Year Farms Birds
2009 2,249 99,983
2010 2,238 101,690
2011 2,266 110,122
2012 2,058 97,750
Source: National Agriculture Quality Service, Ministry of Agriculture & Forestry

In general, the Korean broiler industry prepares enough inventories in June for the peak season in July and August (the hottest period of summer – from mid July to mid August).

The inventory of grand parental stock (GPS) has been increased as well since 2010 and it led a significant increase of PS inventories, chick production and broiler inventories accordingly. In 2012, many integrated broiler companies are increasing production capacity through renovation and establishment of new facilities, spurring the increase of domestic broiler production for the next couple of years.

Frozen broiler meat stock increased since 2010 resulting from ample domestic production. The average grow-out period decreased from 32.2 days in 2011 to 31.8 days in 2012. Conversely, the average weight of the bird when marketed increased from 1.52kg in 2011 to 1.54kg in 2012.

Consumption:

In 2013, broiler meat consumption is forecast at 840,000 tons, up 3 percent from 2012 due to ample supply and competitive pricing compared to red meat products. With the growing number of franchise chicken chain stores over the past 4 to 5 years, the consumption pattern for chicken meat, which used to be most intensive during the hottest period in summer (7/20 - 8/20), is shifting to all year-round consumption.

Broiler meat consumption in 2012 is expected to be 818,000 tons, up 3 percent from the previous year because of the increased demand in the fast food chicken delivery sector during the Olympic Games and many sunny days during July and August. Although the domestic consumption increased in 2012, the growth rate will be lower than the 7 percent growth in 2011 mainly due to the low demand as a result of the economic downturn throughout 2012, and the resumption of domestic pork production.

The import of frozen broiler meat and the demand of broiler meat surged in 2011 in the wake of food and mouth disease (FMD) outbreak in December 2010 and the fear of seafood following the radioactivity crisis in Japan in spring 2011. However, there was no additional substitute demand following reports of the 4th case of BSE in the U.S. in April 2012.

Korea: Per Capita Consumption of Livestock Products (Unit: Kilogram, boneless basis)
Year Total Meat Beef Pork Chicken Egg
2010 38.7 8.8 19.2 10.7 11.8
2011 41.1 10.7 19.2 11.2 11.7
2012 1/ 42 11.4 19.3 11.3 12.1
1/ Preliminary forecast by the Korea Rural Economic Institute
Source: Ministry of Agriculture & Forestry

For the past 4 to 5 years, the chicken consumption pattern showed changes from a typical diet of soup and stew menus (ginseng chicken soup or spicy chicken stew) to various snack menus for school students. The “Chicken Gangjeong” is one example of a popular snack for students. The chicken gangjeong is deep fried and coated with sweet and spicy sauces and shaped bigger than chicken popcorn, which was popular several years ago.

Price:

Recently, the imported broiler meat sector is growing consistently as a result of various inexpensive menu options at restaurants. Although Korea has implemented country of origin labeling for chicken on menus since December 2008, many restaurants and delivery services are increasing demand for imported frozen broiler meat due to competitive prices. Domestic broiler prices are still about 3 times more expensive than imported.

In 2012, farm, wholesale, and consumer prices for broiler meat were lower. Due to the oversupply of domestic broiler meat, the average farm price during January – June 2012 was 1,740 won/kg, 12 percent lower than the same period in 2011 (1,971 won/kg). The significant farm price decline in 2012 is attributed to the growing shares of imported chicken meat in the franchise chicken business and the increased production capacity of domestic broiler integrated companies. However, prices in 2013 are expected to increase marginally due to an expected increased domestic feed price resulting from increased world grain prices.

Trade:

In 2013, broiler meat imports are forecast to decrease marginally to 110,000 tons, about 4 percent down from 2012 due to an expected reduction in broiler production and higher prices in the United States and Brazil in the wake of increasing world grain prices. The United States and Brazil are the first and second largest chicken meat exporters to the Korean market.

In 2011, Korea imported a record high of 130,950 tons; up 24 percent from 2010 (105,803 tons) in the wake of an FMD outbreak in December 2010 and the fear of seafood consumption resulted from the radioactivity crisis in Japan. Among the total import of 130,950 tons, 50,000 tons were imported with zero duty under the ROKG’s policy on consumer price stabilization measurement throughout 2011. In 2011, imported frozen broiler meat covered about 16.5 percent of 795,000 tons of total domestic consumption.

However, 2012 imports are estimated to decrease by 12 percent to 115,000 tons from the previous year due to increased import price and less favorable exchange rate. The average import price for frozen chicken leg quarter from the U.S. during January – June period increased from 1,488won/kg to 1,922won/kg, up 29 percent from the previous year. Additionally, the average exchange rate also increased by 39 won/USD during the same period. The frozen broiler meat imports during January – June 2012 period was down by 11.6 percent at 65,762 tons from the previous year (73,380 tons).

Price Comparison (Unit: Korean Won per Kilogram) 4/
Cuts Domestic
1/
Imports 2/
U.S. Brazil 3/ Denmark
Leg 6,015 1,922 2,339 1,871
Wing 7,079 - 3,228 3,026
Breast 6,809 3,784 3,334 -
1/ Chilled products, average retail price for January 1 – June 30, 2012 period
2/ Average CIF prices for January 1 - June 30, 2012 period
3/ Frozen Trimmed bone-less products (Mostly)
4/ Average exchange rate (1$=1141.7 Korean won) for January – June 2012 period
Source: Korea Chicken Council & Korea Customs Service

The recent increase of frozen broiler meat imports for 2010 and 2011 were attributed to the growing number of chicken franchise chains since 2 to 3 years ago and the various chicken menu options for the young generation. Particularly, “chicken gangjeong”, which is deep fried and smaller pieces than regular fried chicken but bigger than chicken popcorn, coated with sweet and spicy sauce is very popular among school students since last year. Most of the “chicken gangjeong” stores mainly use imported frozen chicken meat to reduce the cost.

Korea’s chicken exports in 2012 are forecast to increase to 18,000 tons helped by the increase of chicken ginseng soup exports to Japan, Hong Kong, and spent hen meat exports to Vietnam as a result of an increased natural replacement rate. However, the 2013 export volume is forecast to decrease slightly to 16,000 tons due to the normal ratio of replacement for spent hens.

Tariff Phase-Out Schedule under KORUS FTA:

Korea’s 20-percent tariff on imports in the dominant frozen leg quarter category will be phased out by 2021, while tariffs on frozen breasts and wings will be eliminated by 2023. The 18- percent tariff on frozen turkey cuts will be eliminated by 2018.

HSK 10 Description Base Rate Current Rate 2013 2014 2015
0207141010 Frozen Chicken Legs 20% 18% 16% 14% 12%
0207141020 Frozen Chicken Breast 20% 18.3.% 16.6% 15% 13.3%
0207141030 Frozen Chicken Wing 20% 18.3% 16.6% 15% 13.3%
0207141090 Other Frozen Chicken 20% 18% 16% 14% 12%
0207271000 Frozen Turkey Cuts 18% 15.4% 12.8% 10.2% 7.7%

September 2012

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