Emerging Markets / September 29, 2016

Cattle Raising and Meat Markets in Korea

Cattle Raising and Meat Markets in Korea

The Republic of (South) Korea has historically produced substantial amounts of beef and meat for its domestic market. However, over the last three years, there has been a consistent decrease in production throughout the country. Furthermore, this decrease is expected to continue during the coming years. The decrease in meat and beef production is due to several internal and external factors. Firstly, the fact that Korean demographics show a trend of depopulation which ultimately reduces the domestic market in the mid- and long-terms. Likewise, this low fertility rate, because it means that there are fewer children in Korea, has particularly affected the cow milk sector, which is experiencing a significant reduction in size. Also related to demographic trends, is the fact that large amounts of cattle farmers are retiring and are not being replaced by younger generations.

These dynamics have created a market trend that is leading to the decrease of cattle raising and an increase in the price of meat goods. Because high meat and beef prices currently dominate the market, some farmers are increasing their output. However, given the prevailing uncertainty and the expected decrease of future prices, famers are not replacing or replenishing the head of cattle in their respective farms. In turn, the decrease in domestic production and the increase in prices within the domestic market has opened the door to the import of substitute meats from countries like the United States and Australia.

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The main reason behind the uncertainty of future prices in the South Korean market is new legislation. Nationally, most beef production caters to the middle and upper class markets; one such example is Hanwoo beef, an expensive cut of specifically Korean cattle meat. Hanwoo beef is popular in the region and has traditionally been gifted by particular individuals, such as business executives, to public officials. However, as of September of 2016, a new anti-graft (anti-corruption) law has been promulgated by the South Korean government prohibiting public officials and immediate family members from accepting gifts worth more than 50.000 Korean Won (approximately US$45). This new legislation severely affects the Hanwoo beef market, given that this cut of meat is one of the most gifted within the country and its average price exceeds 50.000 KRW. In fact, it is estimated that as much as 30% of the meat market, approximately 4 million clients, could stop purchasing Hanwoo beef. Therefore, producers are preparing for a substantial cut back on production.

The ongoing dynamics in the South Korean meats market presents a wide array of opportunities. Two groups that are taking advantage of these market openings are foreign producers, particularly those nations who have free trade agreements with the Republic of Korea, and the domestic pork industry. The foreign industries most likely to benefit from the reduction in Korean beef and meat production are those from the US, New Zealand, and Australia. Meanwhile, the Korean swine and pork industry is also seeing a unique opportunity to expand its market base. By 2017, the total Korean pork and swine herd is expected to grow by 4%.

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