Large domestic supplies and sluggish consumption continue to make South Korea a difficult market for imported beef and pork, as import activity remained slow through August.
Korea’s August beef/beef variety meat imports were down 9 percent from a year ago to 26,957 mt. Volumes were down from all suppliers except Australia (which posted a 1 percent gain to 14,578 mt) and new entrant Chile (40 mt). Imports were lower from the United States (9,863 mt, -13 percent), New Zealand (2,304 mt, -29 percent), Canada (148 mt, -21 percent) and Mexico (20 mt, -89 percent).
For the first eight months of the year, Korea’s imports were down 2 percent to 193,584 mt, including lower volumes from the U.S. (66,545 mt, -9 percent), New Zealand (21,438, -5 percent) and Mexico (191 mt, -93 percent). Imports were higher from Australia (103,463 mt, +6 percent), due in part to the recent weakening of the Australian dollar against the Korean won (see exchange rate chart below). Imports were also larger from Canada (1,562 mt, +90 percent), but it is important to note that Canada did not reenter the Korean market until March 2012, which partially explains the large year-over-year increase.
Korea’s domestic beef carcass prices showed some upward momentum in August, reaching KRW 17,026 per kg on Aug. 31. This was a 5 percent increase over the mid-August price and 6.5 percent higher than the 2013 low posted in February.
Despite the slow overall numbers, some bright spots are emerging for U.S. beef in Korea. Export sales reporting suggests an upward trend will take hold in the fourth quarter, especially for U.S. bone-in short ribs. Korean wholesale prices for U.S. short ribs are 50 percent above year-ago levels and about one-third higher than Australian short ribs. Some narrowing of this price gap is expected in coming weeks.
Costco Wholesale, which has traditionally been conservative in its offerings of U.S. beef, conducted successful test sales of Prime-grade, chilled U.S. chuck eye roll in late August. USMEF-Korea continues to look for other opportunities to expand the range of chilled U.S. beef items offered in Korea’s retail and foodservice sectors.
Korea’s pork/pork variety meat imports in August were down 15 percent to 24,761 mt, with only the EU posting a year-over-year increase (11,457 mt, +10 percent). Volumes were lower from the U.S. (7,463 mt, -24 percent), Canada (27,659 mt, -40 percent), Chile (2,411 mt, -28 percent) and Mexico (604 mt, -33 percent).
For January through August, imports from the United States were down 12 percent to 85,143 mt. U.S. market share actually increased, however, as total imports fell 22 percent to 223,678 mt. Volumes were lower from all major suppliers, including the EU (83,879 mt, -28 percent), Canada (27,659 mt, -34 percent), Chile (21,963 mt, -14 percent) and Mexico (4,884 mt, -22 percent).
According to the Korea Rural Economic Institute (KREI), Korea’s domestic hog inventory is expected to reach 10.2 million to 10.3 million head this month, with the increase attributed to higher per-litter productivity. However, KREI projects that the December inventory will slip back below 10 million head, due to low conception rates this summer.
The average domestic hog carcass price in September is expected to remain between KRW 3,100 and KRW 3,300 per kilogram, which equates to about $1.28 to $1.36 per pound. This is 10 percent to 15 percent lower than a year ago, which is attributed to high inventories and weak consumer spending as the late-September Thanksgiving holiday season approaches.
Even with U.S. export activity slumping, a recent observation from the market underscores the importance of the Korea-U.S. Free Trade Agreement in keeping U.S. pork competitively priced. Canadian pork belly and collar butt are quickly losing market share to the United States, Chile and the EU because Canada lacks an FTA with Korea. According to January-July customs clearance data, Canadian pork imports ranked No. 2 to the U.S. in import volume, but only No. 4 (behind the U.S., Chile and Germany) in value. Due to the weakened price competitiveness of Canadian pork belly and collar butt, lower-priced items such as neck bone and back bone are making up a larger share of Korea’s imports from Canada and greatly reducing their overall value.