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South Korea agribusiness

Even with the news that the worst of the livestock sector disease problems are now somewhat under control, the impact on both production and consumption is forecast to be significant. While consumption of grains and pork is forecast to fall, production of pork is expected to do so significantly, meaning that meat prices have risen in many areas of the country. These production concerns come at a time when the country is instituting measures to increase agricultural production to become more selfsufficient. However, as long as grain demand (due to the westernisation of the country's diet) continues, and pig and poultry stocks remain diminished, the country will continue to require imports to feed demand. Indeed, the government is even trying to reduce produciton of rice, the good in which South Korea does produce a surplus.

Key Trends

- Milk consumption growth to 2015: -3.25% to 1.63mn tonnes. This will come as consumers continue to switch to other milk products such as soy milk. Korea's low birth rate will contribute to weak demand for milk powder as the use of baby formula drops.
- Wheat consumption growth to 2015: 16% to 5.18mn tonnes. This will be mainly due to feed wheat demand, which should increase towards the end of the forecast period when livestock production will expand.
- Pork production growth to 2014/15: -16% to 927,000 tonnes. We expect that production will start to increase again towards the end of the forecast period once foot-and-mouth disease concerns are brought under control and farmers start to rebuild herds.
- 2011 Real GDP Growth: 4% (down from 6.1% in 2010; predicted to average 4.4% from 2010 until 2015).
- Central Bank Interest Rate: 3.5% in 2011 (up from 2.5% in 2010).

Industry Developments

According to the South Korean agriculture ministry, a total of 120 foot-and-mouth and 26 H5N1 avian influenza cases had been reported in the country by January 12. After an emergency cabinet met to address the situation which has caused alarm in the livestock industry and among consumers, the government pledged to increase vaccinations and import more vaccinations to curb the further spread of the contagious animal disease. By January, approximately 15% of the country's total 12.4mn cattle and swine herd had been culled, with roughly 3mn poultry slaughtered after the avian flu virus strain was detected. As a result of the large-scale slaughtering and market closures, wholesale prices of beef and pork have soared by 9% and 22% respectively from December's average prices, compounding the government's uphill battle against rising food prices.

By February, the mass culling of approximately 20% of the country's total cattle and hog herd prompted the South Korean government to allow quota-free pork imports into the country from February 2011 until June 2011, down from the previous tariff of 25%. South Korea has lowered its pork import tariff of 25% down to zero for the next six months in a move to ensure sufficient domestic supplies following the culling of approximately 20% of the country's hog herd amid the country's worst foot-mouth disease outbreak since 2002. According to the Ministry of Agriculture, the tariff reduction will allow for an estimated 15-20% increase in pork imports for 2011, up from 179,500 tonnes in 2010. Most of the 2.2mn livestock being slaughtered are pigs.

The South Korean government has embarked on three main programmes to ensure grain security for the country over the long term, largely prompted by higher food prices since Q410. Firstly, officials from the Ministry of Agriculture have announced plans to build a KRW200bn (US$180.2mn) national grain storage facility for wheat, rice and corn. Secondly, the government has made a strong push for local agriculture firms to expand into overseas farms in an effort to step up grain security. Lastly, to strengthen its expertise in the grain trade and increase food security, the government-run Korea Agro-Fisheries Trade Corp has also set up a consortium with local companies CJ CheilJedang Corp, Samsung C&T, STX Corp and Hanjin Transportation Co Ltd to establish a new trading company. About Business Monitor International

by S. C.
08 july 2011, World News > Asia