Report Highlights

Due to the continued oversupply of domestic broiler meat the import forecast for 2007 and 2008 has been reduced to 61,000 MT, down 15 percent from earlier estimates. The reduction in imports has hit U.S. suppliers the hardest. In fact, given the current market conditions and the strong competition from Brazil, imports of U.S. poultry meat for 2008 are forecast at 18,000 MT, down more than 50 percent from 2006.

Data included in this report is not official USDA data. Official USDA data is available at
http://www.fas.usda.gov/psdonlineonline.

Production

Production statistics submitted for 2005 and 2006 in last year’s annual report had inadvertently included imports. The necessary corrections have been made in this report.

Production continues at a record level for a third straight year, resulting in an oversupply of domestic broiler meat. Production was largely unaffected due to several isolated incidents of highly pathogenic avian influenza (HPAI) earlier in the year. The oversupply of broiler meat is attributed to strong farm gate prices during 2004 and 2005. During those two-years, the farm gate price averaged 1,400 won per kilogram (~$1.40), up by more than 50 percent from 2003. Farm gate prices have subsequently fallen in response to the oversupply.

Production for 2008 is expected to decrease slightly as the Korean poultry industry begins to adjust to current supply situation and high international feed grain prices. In fact, broiler slaughter for 2008 is forecast at 634 million head, down 13 million from the previous year. Production during this same period is likewise expected to decrease by 10,000 MT.

Exports

Korean broiler meat exports range between 1,000 to 3,000 metric tons over the last decade. About 80 percent of total exports are frozen wings, and the remainder is heat-treated processed products such as the traditional chicken soup dish known as “Samgyetang.”

Korea reported several cases of highly pathogenic in late 2006 and early 2007. The country subsequently declared itself to the World Health Organization (OIE) as HPAI-free in June 2007. The notice to the OIE is available at: http://www.oie.int/South Korea HPAI Notice

In response to these findings, Japan and several other markets suspended shipments of nonheat treated poultry products. Nevertheless, exports were largely unaffected since exports to Vietnam grew more than enough to offset the gap that had resulted from being shut-out of the Japanese market for about 6-months. In fact, exports for 2007 are on track to reach a record of 5,000 MT.

Exports for 2008 are expected to remain unchanged at 5,000 MT as demand is expected to remain strong in Asian markets. Exports could climb slightly higher after Korea becomes eligible to export Samgyetang and other heat-treated processed poultry products to the United States. According to domestic industry sourc es, the U.S. market could be twice as large as the Japanese market, with exports reaching upwards of 1,200 MT.

Imports

About 80 percent of total imports are frozen broiler legs and wings, while the remainder is heat-treated meat. The United States and Brazil are the two primary suppliers of broiler cuts, while China is the largest supplier of heat-treated meat.

The 2007 import estimate has been lowered to 61,000 MT, in part due to the ongoing oversupply of domestically produced broiler meat and high U.S. broiler meat prices, which are nearly 6 percent higher than last year. These current market conditions have contributed to a 50 percent drop in imports of U.S. broiler meat during the first half of the 2007. The import forecast for U.S. broiler meat has been reduced accordingly, down to 20,000 MT.

Although broiler production is expected dip slightly next year, the oversupply is expected to continue. Additionally, imports of U.S. beef are forecast to increase next year, which will keep broiler meat consumption from growing. Given these anticipated market conditions, 2008 imports of broiler meat are forecast to remain unchanged from the previous year at 61,000 MT. Meanwhile, imports of U.S. broiler meat for 2008 are forecast slightly lower at 18,000 MT.

Imports of U.S. broiler meat will continue to face stiff competition from Brazilian products, especially de-boned leg meat. However, the United States will maintain its price competitive edge in the bone-in chicken thigh and drumstick market.

Brazilian product has made sizeable advances since entering the market in early 2005 and now has a 35 percent market share. This rapid growth is largely attributed to the domestic industry’s preference for Brazilian de-boned leg meat, which requires less processing than bone-in leg meat from the United States. Brazilian product also has a very strong reputation for its quality, attractive packaging and packaging size.

In addition to its strong market reputation, the approval of additional establishments will also contribute to increased imports of Brazilian broiler meat in 2008. There are currently eight Brazilian establishments that are approved to export to Korea, with two more awaiting approval before the end of 2007.

The bulk of imported heat-treated meat is from China, with only a small fraction originating from Thailand. Imports of heat-treated well-trimmed boneless meat from China are used in traditional skewered meat dishes. Consumption of this particular dish is expected to remain strong in the coming year. Accordingly, imports of heat-treated meat from China are expected to increase slightly in 2008.

Poultry Price Comparisons by Country (Korean Won per Kilogram) 1/
Cuts	Domestic 2/	Imports 3/
		U.S.	Brazil 4/	Denmark
Leg	4,168	902	1,618	-
Wing	4,876	1,758	2,240	1,973
Breast	4,696	4,335	2,020	-
Source: Korea Chicken Council & Korea Customs Service 1/ Exchange rate (1$=934 Korean won) 2/ Average retail price for chilled products, July 2007 3/ Average CIF prices Jan-Jun 2007 4/ Mainly frozen trimmed bone-less products

Countries Approved to Export Poultry & Poultry Products to Korea
Countries	Products
United Kingdom, Australia, New Zealand, Taiwan, Denmark, France, Japan, Canada, and United States	Poultry birds, hatching eggs, day old chicks
United Kingdom, France, Chile, Denmark, Taiwan, Australia, Brazil, Japan, Canada, and United States	Fresh, chilled, or frozen poultry meat
United Kingdom, France, Chile, Denmark, Taiwan, Australia, Brazil, Japan, United States, Thailand, China, and Canada	Heat-treated poultry meat

2007 Chicken Imports Based on Quarantine Inspection Basis (Unit: MT)
Parts		Country	Jan. –Jun.	Jul. 1 -20	Jan – Jul 20
Chilled	No imports.
Frozen	Breast	U.S.	0	0	0
		Brazil	170.77	0	170.77
		Australia	0	0	0
	Wings	U.S.	146.24	0	146.24
		Denmark	933.72	0	933.72
		Brazil	3,403.57	68.90	3,472.47
	Legs	U.S.	7,090.94	508.49	7,599.42
		Denmark	0	20.50	20.50
		Brazil	6,308.94	164.07	6473
	Whole	U.S.	13.76	0	13.76
		Brazil	24.01	0	24.01
Total (Jan – Jul. 20, 2007)		U.S.	7,759.42
		Denmark	954.22
		Brazil	10,140.25
		Australia	0
		Total	18,853.89
Source: National Veterinary Research & Quarantine Service

Consumption

Imported chicken cuts are primarily used in the food and processed service sector in the manufacturing of seasoned chicken dishes, chicken nuggets, seasoned wings, patties, etc. In contrast, local chicken is primarily sold as chilled whole birds with a smaller amount as cuts to both the food service sector and retail markets.

According to industry sources, whole chicken consumption has decreased in recent years from 90 percent to 75 percent of consumption. Of total chicken sales in Korea, fresh chicken meat accounts for 70 percent of sales, while processed and frozen meat products account for 20 and 10 percent, respectively.

Meat derived from domestic spent hens is mostly used as raw ingredients in further processed products such as sausages and hams. The Korean poultry association estimates that 20 million spent hens are used annually in the production of processed products. This figure is included in the PSD statistics.

Consumption of locally produced broiler meat and poultry products was not shaken by several domestic HPAI earlier this year largely since the government and poultry producer groups had conducted educational campaigns regarding the safety of properly cooked poultry products.

Total domestic consumption is expected to remain relatively unchanged from the previous year at 557,000 MT in part due to the expected increase of imports of U.S. beef. Similarly, per capita broiler meat consumption is expected to stay around 8 kg in 2008. However, over the long term, the domestic poultry industry expects that the consumption of poultry meat will continue to increase as has been the case in the United States and Japan, while red meat consumption has declined.

Sanitary Issues

In June, after conducting a thorough stamping out policy after several isolated detections of HPAI in late 2006 and early 2007 MAF declared itself free of HPAI. The notice to the OIE is available at the following link: http://www.oie.int/wahid-prod/reports/

In July, 2007, MAF notified the World Trade Organization (WTO) that it would no longer suspend imports of poultry and poultry products due to findings of HPAI in wild birds. This action is consistent with OIE recommendations.

Korea’s maximum residue levels maximum residue limits (MRL) for veterinary drugs and pesticides in poultry meat and other livestock products are established by the Korean Food & Drug Administration (KFDA). Detections of unapproved compounds or findings above the specified MRL will result in rejection of the entire cargo. A listing of the current MRLs can be found at the following links:

http://www.kfda.go.kr/MRLs for Pesticides in Foods
http://www.kfda.go.kr/MRLs for Veterinary Drugs

On April 1, 2008, the Ministry of Agriculture & Forestry (MAF) will reduce the number of permitted feed additives from 25 to 18 in order to decrease the overuse of antibiotics in livestock compound feed. This new regulation only applies to the use of these veterinary drugs in domestic and imported compound feed. This change is part of a larger government plan to reduce overall levels of antibiotic residues in meat and poultry.

Veterinary Drug Usage in Compound Animal Feed
Drugs Currently Approved	Drugs Discontinued April 1, 2008
Chlortetracycline Oxytetracycline Bacitracin Zn Bacitracin methylene disalicylate Enramycin Tylosin Colistin sulfate Neomycin sulfate Salinomycin Monensin sodium Virginiamycin Lincomycin Hcl Lasalocid sodium Penicillin Bambermycin Tiamulin Narasin Maduramycin ammonium Apramycin Avilamycin Semduramycin Clopidol Sulfathiazole Fenbendazole Diclazuril	Chlortetracycline Oxytetracycline Colistin Sulfate Neomycin Sulfate Penicillin Lincomycin HC1 Bacitracin methylene disalicylate
Ministry of Agriculture and Forestry (MAF)

Korea’s certification requirements for imports of U.S. poultry meat and other meat products are available at the following website, maintained by USDA’s Food Safety Inspection Service (FSIS):
http://www.fsis.usda.gov/Regulations_&_Policies/Republic_of_Korea_Requirements/index.asp

Korea’s certification requirements for imports of day-old chicks and hatching eggs from the United States are available at the following website, maintained by USDA’s Animal Plant Health Inspection Service (APHIS):
http://www.aphis.usda.gov/NCIE/iregs/animals/ks.html

Further Reading

- You can view the full report, including tables by clicking here.

List of Articles in this series

To view our complete list of 2007 Poultry and Products Annual reports, please click here

October 2007