International Egg and Poultry Review - By the USDA's Agricultural Marketing Service - This is a weekly report looking at international developments concerning the poultry industry, this week looking at South Korea.

South Korea

In the first part of the last century chicken meat consumption was slow to grow in South Korea due in part to a relative lack of recipes using chicken in the diet. As a result, because beef was in short supply and expensive, pork became the leading meat. The introduction of fast food and fried chicken franchises in 1980s and 1990s brought about increased broiler consumption. On July 1, 1997 imports of poultry were liberalized. Tariffs, the only formal barrier on poultry, were gradually reduced until reaching 20 percent in 2004. Chilled poultry meat was already free from quotas and has a lower tariff rate, 18 percent.

Poultry is produced intensively in South Korea primarily using imported feed stuffs with production concentrated in the province surrounding Seoul. Even though the broiler industry has not seen the wild swings in price and production as other livestock industries have, there has been a steady growth in flock size due to cost advantages. Broiler production is now mostly on farms with 10,000 or more birds. Along with the increase in flock size, slaughter weights have also increased.

All imported chicken meat is frozen meat (predominantly leg and wing parts). Korea consumes imported chicken cuts in the food service sector (e.g. seasoned chicken dishes, chicken nuggets, patties, etc.) and in the processed food sector producing further processed products for retail distribution. Domestic chicken is usually marketed as chilled whole birds and cuts for the food service sectors (e.g. fried chicken) and retail markets for home use. Chicken meat derived from layers is mostly used as a raw ingredient in further processed products such as sausages, hams, etc. According to the poultry association, 20 million layers are used for further processed products annually. The domestic chicken industry also uses imported chicken cuts for further processed products taking advantage of the lower prices for imported product and constant supply compared to domestic cuts.

In late 2003 and 2004 South Korea’s livestock and poultry markets went through some major changes. South Korea, a major United States (U.S) beef importer, banned imports of beef in late 2003 due to the discovery of BSE in the U.S. U.S. beef had accounted for almost half of South Korea’s beef consumption and two thirds of South Korea’s beef imports. South Korea than banned poultry imports from the U.S. after the discovery of bird flu at chicken farm in Delaware and also from 12 other countries due to confirmed bird flu out breaks. The ban was partially lifted in October, 2004 when the Food Safety and Inspection Service (FSIS) released requirements for the import of cooked poultry. Technical discussions continue to reopen the market to uncooked, mainly frozen, U.S. poultry meat. In 2003 U.S. poultry meat exports (mainly leg quarters) to South Korea had grown 26% and South Korea was the sixth largest market for U.S. broilers.

Meanwhile, South Korea had discovered in December, 2003 a nonlethal strain of avian influenza. Between December, 2003 and March, 2004 outbreaks were confirmed at 19 farms or cases and nearly 5 million poultry were destroyed. In December, 2004 bird flu was discovered for the first time in a duck hatchery and 9,000 ducks were destroyed as a result. Poultry exports to Japan had been stopped due to the bird flu out breaks and are expected to resume in March, 2005. South Korea in 2004 was estimated to have total poultry stocks of 108 The slow economy, the discovery of mad cow disease in the U.S. and outbreaks of avian flu in the U.S., South Korea and other parts of Asia changed consumers’ purchasing patterns. The slow economy has stagnated the growth of fast food restaurants. Consumers also became increasing health conscious and than concerns developed about BSE and bird flu which also negatively affected fast food restaurants. Fast food restaurants had previously been credited with increasing chicken consumption in South Korea. Meanwhile, demand for pork, seafood and vegetarian items increased.

Due to concerns about bird flu chicken meat prices fell almost 40% 611 won ($.522) per kg but recovered to 1,669 won per kg due to tight supplies as a result of mass poultry slaughter and import bans. Predictions for 2004 were that chicken demand would fall 11.1% due to bird flu concerns and beef around 10% due to mad cow. However, as the year progressed the government and the poultry industry conducted an educational and promotion campaign which resulted in restored confidence in chicken meat consumption.

With Thailand, China and the U.S. out of the market, importers switched to European poultry meat suppliers. The primary suppliers from Europe were Denmark, France and the United Kingdom. However, traders criticized the irregular quality and high prices of poultry meat from Europe. On August 4, 2004, the Ministry of Agriculture and Forestry (MAF) announced health requirements for importation of poultry meat from Brazil. The new requirements mandate MAFF visit and designate poultry plants that will be allowed to export poultry meat Korea. It is expected 2-3 Brazilian plants will be approved for export to South Korea and exports would begin in October or November, 2004 at the earliest. It is anticipated the Brazilian meat will replace product from China and Thailand since they supplied South Korea with well-trimmed boneless-meat products. When U.S. exports resume to South Korea it is expected they will reclaim the spot of preferred provider of bone-in leg and wing parts. Of interest, South Korea recently approved the import of 100 tons chicken and duck meat from North Korea to be used by food processing companies before being sold for retail.

In 2005 it is expected the economy will slowly recover and the fear of avian influenza will decline resulting in increased consumption of poultry. Also of note is that an increasing number of sandwich shops are serving turkey meat in turkey sandwiches, some expect more restaurants to switch to processed egg products from shell egg products in the near future and prepared processed food such as fully cooked chicken meat is gradually improving as more restaurants understand the benefit and quality of prepared products. The South Korean government recently announced new packaging and licensing policies as well as Expanded HACCP Guidelines.

Beginning in 2007 for slaughterhouses capable of processing more than 80,000 birds and in 2008 for smaller processors (including street markets and small meat shops). All uncooked poultry sold in South Korea will have to be wrapped to prevent contamination by germs and bacteria and labeled with point of origin to distinguish imported meat from local produce. Antibiotics in feed will be strictly controlled and traces of medicine in meat will incur fines and penalties on the producer.
Sources: USDA/FAS, USDA/ERS, various new

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Source: USDA's Agricultural Marketing Service - 1st March 2005