Report Highlights:

In 2007, local broiler production is expected to increase slightly compared to 2006 due to increase broiler chicken production and a sharp increase of imports of grand parental stocks. Competition from Brazil will be a major obstacle for U.S. chicken in maintaining leadership in the Korean chicken import market as Brazilian chicken receives a positive response from traders. The suspension of import inspection of U.S. poultry meat was lifted on August 29, 2006. To date, all U.S. live poultry and poultry meat products (both chilled and frozen) are allowed for importation.

Situation and Outlook: Local Situation

In 2007, broiler production is expected to increase slightly compared to 2006 due to increased broiler chick production and a sharp increase of imports of grand parental stocks. An increase in broiler chick production resulted from strong farm gate prices in 2005 and that has continued in 2006. Consequently, there is concern about the excessive local production of broilers and the potential drop in farm gate prices in 2007.

Brazilian chicken imports, particularly de-boned chicken leg meat, are receiving favorable market response. Although the prices are higher than U.S. chicken legs, Brazilian chicken is quickly displacing frozen chicken imports from Thailand and China, and has become the main U.S. competitor in the Korean market.

On June 6, 2006, the Ministry of Agriculture & Forestry (MAF) announced a proposed revision to the Presidential Decree and the Ministerial Ordinance to the Livestock Products Processing Treatment Act to ensure “Farm to Table” safety of livestock products. The proposals include 1) extension of HACCP to animal production plants (currently HACCP is mandatory for slaughter plants and voluntary for processing plants, livestock packing facilities, storages, and sellers), 2) mandatory requirements for poultry meat sold in the market to be packaged (slaughtering plants, meat packers, seller, and importers will be subject to this requirement) 3) an introduction of risk assessments for livestock products. Mandatory packaging requirements for poultry products will be enforced first for slaughtering plants whose daily capacity is over 80,000 birds starting January 1, 2007 and full enforcement will start from January 1, 2008.

MAF introduced a voluntary HACCP Certific ation program to animal feed plants beginning January 1, 2005. This is to ensure sanitary conditions and the safety of livestock products by eliminating any potential hazard from entering into animal feed. MAF wants feed that is free from 11 types of heavy metals and fungus, 27 kinds of agricultural chemicals, and 25 kinds of antibiotics that it regulates. MAF aims to expand HACCP certification to 50 plants by the end of 2006.

Local broiler associations plan to introduce a check off program but little progress is evident because of disagreements among interested groups. Along with progress of on-going Korea- US Free Trade Agreement negotiations and potential concerns with highly pathogenic avian influenza (HPAI), there is strong need for a check off program if the broiler industry is to achieve long term and stable development.

The Korean government and local poultry associations have continued with consumer education and extensive promotional efforts to reduce consumers’ concerns about the safety of chicken meat due to the HPAI outbreaks.

Use of Antibiotics, Growth Hormones, Feed Additives, Etc.

Korea allows the use of veterinary drugs such as antibiotics and feed additives. Beginning May 1, 2005, however, the Ministry of Agriculture & Forestry (MAF) enforced a new requirement that reduced the number of feed additives permitted for use in mixed animal feed from 53 to 25 in order to improve the safety of livestock products. Veterinary drugs that are banned for use in Korea should not be detected in any meat products, including imported meat. Criteria and permitted levels of harmful substances in animal feed are established by MAF. Details can be found on MAF’s website at www.maf.go.kr.

The Korea Food & Drug Administration (KFDA) establishes maximum residue levels (MRLs) of antibiotics and pesticides in poultry products. Details can be found on KFDA’s website at www.kfda.go.kr.

Exports

In 2007 exports will increase slightly. Currently, Korean chicken exports have increased although the total export volume is not significant (around 736 MT in 2004, 2,478 MT in 2005 and 1,413 MT through June 2006). Exports between January and June 2006 showed 37 percent increase compared to the same period of the previous year. Continued efforts to promote exports of whole chicken ginseng soup called “Samgyetang” in Japan and other Asian markets including Hong Kong and Taiwan contributed to Korea’s expansion of chicken exports. Marketing efforts led by the Korean Poultry Industry Association will continue to expand Korean export markets in Asia taking advantage of HPAI concerns that have blocked exports from China and Thailand. In addition to Asian exports, Korea has been working together with the U.S. government to allow for exports of chicken ginseng soup to the United States.

Imports & Competitors

Because of the likelihood of over production of domestic chicken meat coupled with the resumption of U.S. beef imports to Korea, imports of chicken meat in 2007 are forecast only to increase slightly compared to the level in 2006, to 70 thousand metric tons. Competition from Brazil will be a major obstacle for U.S. chicken in maintaining leadership in the Korean chicken import market.

Imports of Brazilian chicken have been well received by traders. According to traders, Brazilian chicken parts, mainly bone-less chicken leg meat and wings meet their expectations for quality, specifications, size, packaging, etc. Therefore, Brazilian imports are quickly replacing market share once held by Thailand, which was the top supplier of well-trimmed bone-less chicken leg parts before the HPAI outbreaks in 2003. In May 2006, Korea approved three more Brazilian poultry plants for export to Korea. Currently, seven plants are eligible to export poultry products to Korea. According to industry sources, Brazil is interested in obtaining approval of additional poultry plants for Korean exports.

As more Brazilian poultry plants are approved for export, the United States will face severe competition in exporting chicken products to Korea. Traders believe the future of Brazilian chicken products are quite promising as they satisfy Korean demand although U.S. chicken produces are more price competitive than Brazilian products. Unless prices offered by the United States are significantly lower than those offered by Brazil, traders would remain interested in Brazilian products that do not require additional labor in order to meet the market demand. Exports from Brazil are expected to increase in 2007.

Since the outbreak o f HPAI in China, exports of Chinese fresh, chilled, frozen chicken products have been banned. However, China can export heat-treated well-trimmed boneless chicken meat, which is used for skewed chicken dishes. This well trimmed chicken meat is competing with U.S. chicken legs as meeting Korean demand.

Imports from the United States in 2007, mainly frozen bone-in leg products, are expected to remain at the previous year level or slightly decrease as a result of imports of quality chicken products from Brazil and China. However, the United States is expected to remain a leading supplier of bone-in leg products with its price competitiveness.

Imports from Denmark, which was the second largest exporter in 2005, have been banned since May 2006 due to the outbreak of HPAI. However, Denmark is likely to apply for approval of resumption of chicken imports to Korea as soon as they are recognized as a HPAI free country. Denmark was a major supplier of leg and wing parts to Korean chicken restaurants.

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List of Articles in this series

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September 2006