Highlights

Broiler meat production is forecast to climb two per cent to 660,000 tons in 2011 in response to strong consumer demand and to a lesser extent country of origin labelling (COOL) at restaurants. Consumption is expected to continue its upward climb for the third straight year to 737,000 tons. Meanwhile, imports during 2011 are forecast to remain steady at 90,000 tons, half of which will be from the United States.

Production

Broiler production is forecast to reach 660,000 tons in 2011, up two per cent from the previous year. According to the local industry, this rise in production is largely attributed to a growing number of health conscious consumers who are eating more chicken and to a lesser extent country of origin labelling (COOL) at restaurants.

The 2010 production estimate is revised upward to 647,000 tons, up 5.5 per cent from the past year because of greater demand for fast food chicken during the soccer World Cup. Stronger consumer demand and high, but stable feed costs have in turn put upward pressure on prices. For example, the average retail price from January to July of this year was 5,901 won (KRW) per kilogram, up almost 11 per cent from last year’s average.

Feed is the biggest production expense and accounts for about 60 per cent of total costs. Feed prices for January to July of this year have remained stable, but higher than historical averages. These higher feed costs, however, have had little impact on production since most of the cost is passed directly to consumers.

Consumption

Korea’s broiler meat consumption is expected to climb for the third straight year reaching 737,000 tons, up two per cent from the previous year. According to industry sources, this increase is smaller compared to the past two years because of rising retail prices. In addition, the absence of a large extended sporting event like the World Cup where people are ordering home deliver fast food chicken is also expected to slow growth.

The forecast for broiler meat consumption in 2010 is revised upward to 721,000 tons, which is an increase of nearly seven per cent over the previous year. Per-capita consumption for this same period is estimated at 10.2 kilograms (boneless basis), up slightly more than six per cent. The jump in consumption this year is linked to a combination of factors including the trend in healthy eating, the explosive growth in the franchise chicken delivery service, and increased demand during the soccer World Cup. Country of origin labelling has also played a role over the last few years in bumping up demand for domestic broiler meat. Meanwhile, the outbreaks of foot and mouth disease (FMD) reported earlier this spring in cattle and swine had a negligible impact on broiler meat consumption.

During the World Cup, many Korean soccer fans stayed at home to watch the games and ordered fast-food delivery, such as fried chicken. The fast food delivery businesses accounts for an astounding 50 per cent of total broiler meat consumption, according to the Korea Chicken Council (KCC). Moreover, chicken ranked as the top snack food to be consumed with beer, according to an internet poll taken during the World Cup event.

Korean consumers are also very health-conscious and many have started eating more chicken, like breast meat, because it is high in protein and low in fat. In the past, whole chickens were consumed in traditional dishes during the summer season. However, dietary patterns have gradually changed due to rising incomes, greater availability of international foods and healthy-eating trends. As a result, consumers are eating more chicken, including white meat, in a variety of dishes throughout the year.

The demand for chicken cuts is also growing since cuts are easier to cook compared to a whole bird. However, there is still plenty of room for growth in the cuts market since whole birds still account for nearly 60 per cent of consumption.

According to the local industry, mandatory country of origin labelling (COOL) at restaurants has also helped spur consumption of domestic broiler meat since it was first introduced back in December 2008. At that time, though, fast-food delivery businesses were exempt from this requirement. The COOL regulation has since been extended to include these delivery establishments as of 11 August 2010. Again, the domestic broiler industry, anticipates that this change in labelling will contribute to increased demand in the coming years.

The local industry’s optimism regarding COOL is supported by a recent survey done by the Consumers Union of Korea (CUK) this past June, where they found that more than 80 per cent of consumers identified country of origin as their top priority when buying chicken.

Another notable policy development is the Ministry for Food, Agriculture, Forest and Fisheries (MIFAFF) expansion of mandatory packaging requirements for broiler meat to all slaughter establishments and retail shops beginning 1 January 2011. This latest revision is intended to further improve sanitation and safety. Previously, only slaughter establishments handling 50,000 birds a day were subject to this requirement. This regulation is not expected to have an impact on trade as the bulk of imported product is used in the processing sector.

Trade

Broiler meat imports in 2011 are forecast to remain steady at 90,000 tons. The expected decline in demand resulting from the new COOL requirement for chicken delivery businesses will be offset by strong demand from the local processing sector and a stable currency. Imports of US broiler meat during this period are expected to soften somewhat ending the year at 45,000 tons.

Broiler meat imports, particularly chicken leg quarters, shot up nearly 70 per cent during the first half of this year, reaching roughly 37,000 tons. A steady exchange rate combined with increased availability of US chicken meat due to the temporary closure of the Russian market helped boost imports during this six-month period. In light of these factors, imports of US broiler meat are expected to almost double from the previous year reaching 55,000 tons.

About half of the import market is made up of chicken leg quarters (CLQ), which are used for processing or restaurant delivery service. The United States is the leading CLQ supplier to Korea at roughly 23,400 tons followed by Brazil at nearly 13,000 tons from January to June 2010. The average CIF price for US and Brazilian CLQs are KRW1,474and KRW2,432 per kilo, respectively. Brazilian CLQs are a bit more expensive since they are trimmed boneless. In comparison, domestic CLQs are approximately three to five times more expensive. Breast meat imports also surged during this period in large part due to the healthy diet trend.

Further Reading

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September 2010