South Korea-The meat market forecast for 2009.
SOUTH KOREA-IMPORTS DECLINE.
In 2009, South Korea’s total beef imports are expected to decline by 12
percent and total pork imports by 5 percent due to the economic situation and
the depreciation of the Korean won versus the strong U.S. dollar, according to
a U.S. Department of Agriculture attache report posted day on the Foreign
Agricultural Services Web site.
However, U.S. beef imports are expected to increase substantially in 2009 as
more grocery stores and restaurants begin making it available for consumers.
U.S. pork imports will fall slightly due to the increased competition of U..S.
beef.
Situation and Outlook
Much like the rest of the world, the outlook for the South Korean economy
this coming year has grown increasingly bleak. However, unlike other Asian
economies, the situation in South Korea has deteriorated faster than expected
due to the collapse of the export market. Even during the 1997/98 Asian
economic crisis there was still a healthy demand for Korean products, but
exports have continued to decline by double digits.
In September 2008, the Korean economy was expected to grow in 2009 by about
five to six percent; however, it is now expected to contract by two to four
percent. Domestic consumption is also expected to decline. The future
Consumption Sentiment Index (CSI) dropped to 91 in February 2009 from 106 in
September 2008 indicating that more consumers are anticipating reducing their
consumption in 2009. Sales of consumer goods are dropping to levels not seen
since December 1998. As far as meat consumption is concerned, it is expected
that consumers will shift to lower priced proteins, which are generally pork
and poultry in Korea. However, as can be seen by the chart below, the price of
some imported beef cuts is not that much higher than the price of domestic
pork.
Since the Lehman Brothers bankruptcy on September 12, 2008, the Korean won
has depreciated by 36.7 percent (from 1,109.1 won to 1,516.3 won per U.S.
dollar.) Most analysts are now predicting that it will stabilize at around
1,500-1,600 won to the U.S. dollar. This has caused the price of imported meat
to rise to the point where importers are forced to sell at a loss. Industry
sources state that the importers are loosing 50-60 million won
($33,000-$40,000) for every 40 feet container of short ribs they sell due to
the poor exchange rate. In Korea, 30 percent of meat is sold through retail
outlets, 10 percent is used for processing and 60 percent is sold through the
restaurant sector. A recent survey by the Korea Chamber of Commerce indicates
that all consumers are reducing the amount of spending on dining out, but
younger consumers in their 20s who tend to dine out more frequently have
reduced their spending by 37.3 percent.
Importers are also facing a credit crunch that is hindering them from
purchasing more products. Sales have been slow and inventories are high. As a
result, the GSM program has been widely popular in Korea, but the current
allocation of $600 million has been used and an additional allocation has not
been forthcoming. It is very likely that many importers will go out of
business in 2009 further consolidating meat import channels.
Per capita consumption of beef and pork has continued to increase in 2008,
although both are expected to decline slightly in 2009 due to the economic
climate. The graph below shows an increase in per capita consumption of beef
in 2009, but post disagrees with the projection by the Korea Rural Economic
Institute (KREI) as too optimistic.
