United States-The reality of the Korean market as opposed to the media hype and spin.
UNITES STATES-Exports of U.S. beef were strong when the market opened in 2008, but demand was lower than had been anticipated by many Korean traders. USDA data indicate that beef exports to Korea reached 16,640 metric tons in September but then fell to 5,940 metric tons in November. A number of events have combined to create a challenging market environment that is suppressing demand for U.S. beef over the short term.Mainly flooding Korean cold stores with unsold beef to try and corner the market. This may work on a rising market but never on a falling trade.
As U.S. and Korean negotiators worked toward an agreement to reopen the Korean market in 2008, worsening global and domestic economic conditions became an important factor in the Korean government’s decision to lift the ban on U.S. beef. The value of the won was falling dramatically against world currencies such as the U.S. dollar, Japanese yen, and Chinese yuan, making it increasingly difficult for the Korean government to justify banning a lower-cost alternative to domestic beef and pork. An agreement was reached on April 21, and U.S. beef officially re-entered the market on June 26.
The won continued to weaken and by November 24 had reached its lowest level against the U.S. dollar during 2008, with a value of 1,520 won per U.S. dollar compared to about 935 won per U.S. dollar in mid-January 2008. This low value coincided with the reintroduction of U.S. beef by Korea’s three major discount retail chains on November 25. All three chains put U..S. beef in all their outlets, a combined total of 295 stores. Initial sales figures were strong, but Korean consumers were much less able to afford beef than they had been the year before.
Another major factor affecting sales of U.S. beef has been public resistance in the form of boycotts and protests. Before and after the market reopened in 2008, protesters organized massive demonstrations against U.S. beef, and the issue brought an early end to the terms of several government officials. For many Koreans, the protests had at least as much to do with nationalism, negative attitudes toward the current government, social conflict, and anti-U.S. sentiment as they had to do with concerns about U.S. beef and food safety. U.S. beef became a focal point for the discontent created by many unrelated issues. The protests made restaurants and retailers reluctant to carry or advertise U.S. beef for fear of becoming targets. And although the number and size of these protests have subsided, they continue to take place in smaller cities and to affect U.S. beef sales. Retailers generally choose to remove U.S. beef from the shelves rather than incite the protestors and inconvenience customers more than absolutely necessary, and many restaurant owners still have not returned U.S. beef to their menus.
Although the reasons for protests were not limited to food safety, genuine concern about food safety has certainly been a factor in consumer decisions about purchasing U.S. beef. In addition to the BSE issue, unrelated food safety problems often raise the level of concern, especially about imported products, which are considered less safe than domestic products. News of problems such as dioxin in Chilean pork and concerns about food imports from China tend to create a ripple effect on sales of imported products.
Although the agreement to reopen the market is consistent with recommendations of the World Organization for Animal Health (OIE) regarding beef animal age, U.S. beef exporters and Korean importers have agreed to a commercial understanding that only beef from cattle less than 30 months of age will be imported into Korea to help build consumer confidence in U.S. beef. Some differences remain between the United States and South Korea concerning specified risk materials, and Korean importers are choosing not to import some variety meats until those differences are resolved.
Finally, many Korean traders greatly overestimated the demand for U.S. beef when the market opened and were forced to place beef into frozen storage as they waited for orders. Storing the beef allowed the importers to delay clearing product through customs and paying import tariffs, but the storage fees, the need to pay letters of credit on stored product, and difficulty in obtaining bank credit created great financial difficulties for many importers, forcing many out of business. Others will stop purchasing U.S. beef until it is profitable to do so.
