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Report Highlights: 

Chicken production and overall imports are both expected to decrease slightly in 2013 to 690,000 tons and 125,000 tons respectively, while 2014 production and imports from the United States are expected to increase to 706,000 tons and 50,000 tons respectively due to an increased demand during the World Cup soccer tournament and a reduced duty under the KORUS FTA. As well, consumption is expected to go up 2 percent to 811,000 tons in 2014. A small export market of mostly spent layer hens to SE Asia and Hong Kong is expected to increase slightly to 27,000 tons in 2014 up from 25,000 tons.

Executive Summary: 

Local Situation 

In 2014, chicken production is expected to increase slightly to 706,000 tons as a result of increased production capacity by new and existing chicken producers and an expected uptick in demand during the World Cup soccer tournament in August. Additionally, competitive chicken prices compared to other protein sources such as beef and pork, will positively affect total supply in 2014. 

In 2014, chicken imports from the United States, mainly frozen bone-in leg products, are expected to increase slightly to 50,000 tons as a result of the 14 percent FTA duty rate and an expected decrease in international grain prices. 

In 2013, because of a reduced chicken inventory and slaughtered broilers, chicken production is forecast to decrease slightly to 0.9 percent to 690,000 tons. Although favorable tariff cuts under the KORUS FTA and the Korea – EU FTA, chicken imports are expected to decrease slightly to 125,000 tons due to slow demand resulting from an economic downturn since 2011. 

Fear of an excessive chicken supply caused local industry to reduce its slaughtering broilers accordingly. Slaughtered broilers during the first 5 months (January – June period) of 2013 decreased by 3.6 percent compared to the same period in 2012. As a result, total chicken production is expected to decrease slightly to 690,000 tons in 2013. 

Korea’s chicken production capacity and broiler inventory have increased significantly since 2010; imports of grand parental stock (GPS) resulted in increased inventory of parental stock (PS) which led to increased chicken production in 2012. 

Parental Stock (PS) reduction 

Because of excessive broiler inventory since 2010, the Ministry of Agriculture, Food and Rural Affairs (MAFRA) and the Korean chicken industry implemented a plan to reduce 1 million parental stock broilers during April and May 2013 in order to prevent price fluctuations due to oversupply. Industry culled 440,000 PS broilers which helped to prevent price drops at the farm gate. However, the remainder of PS (660,000 birds) were not culled due to disagreement between pertinent producer groups. 

Government Veterinarian to inspect broiler slaughtering beginning July 2014 

The ROKG will implement a new slaughter inspection system beginning July 2014. The new system requires chicken producers to have inspection of slaughtering broilers by a government veterinarian in response to the revision of the Livestock Sanitation Management Act, which passed in the National Assembly on June 27, 2013. 

The current slaughter inspection system in place since 1978 requires a city or provincial veterinarian officer to inspect the slaughtering process for cattle and swine, while company veterinarians inspect ducks and chickens. 

Consumer groups and the National Assembly raised the issue of fairness and objectivity between the two differing systems. The Ministry of Food and Drugs Safety (MFDS) plans to implement the new system for companies with a daily slaughter capacity over 80,000 birds from July 1, 2014, and from January 1, 2015 for a slaughter capacity of 50,000 to 80,000 birds per day, and from January 1, 2016 for less than 50,000 birds per day. 

Consumption 

In 2014, chicken consumption is expected to increase slightly up 2 percent to 811,000 tons due to an expected surge in demand during the World Cup soccer tournament in August 2014 and price competitiveness of chicken products compared to other livestock products. Additionally, an increase in the number of single person households and working couples, the cut chicken market is expected to increase due to sales of ready-to-cook (RTC) chicken products and small packaged chicken products for take-out. 

Due to the economic recession and substitute demand for other livestock products, domestic chicken consumption is expected to decrease slightly in 2013. In particular, reduced pork prices caused some consumers to opt for pork over chicken. 2013 per capita consumption is forecast at 11.9 kilograms due to reduced consumption by households and the restaurant sector during the first half of 2013. 

Among chicken consumption related events, international sporting events have a big influence over chicken consumption in Korea. According to a survey, during the last Word Cup event in 2010, chicken consumption increased by 10 percent in that period. Therefore, it is expected that chicken consumption during the 2014 World Cup will increase accordingly. 

Imported chicken meat is used in the family restaurant sector and chicken franchise chain stores due to its price competitiveness. In particular, prices of U.S. and Brazilian chicken are about 30-40 percent cheaper per kilogram than domestic chicken and their share reached 20 percent of total chicken supply in 2012. 

Imports & Competitors 

It is forecast that chicken imports will recover to the 2012 level of 130,000 tons in 2014 helped by the extra demand during the World Cup period and a steady demand for chicken products among young consumers. In 2014, Imports from the United States, mainly frozen bone-in leg products, are expected to increase slightly as a result of the 14 percent FTA duty rate and an expected decrease in the price of international grains. 

In 2013, Korea’s chicken imports decreased by 5.7 percent to 61,994 tons during the first half (January 1 – June 30) of 2013. In particular, imports from the U.S. decreased to 23,445 tons, down 28.5 percent from the previous year, while imports from Brazil increased to 28,094 tons, up 15.5 percent from the previous year due to its reduced import price. Therefore, chicken imports are expected to decrease to 125,000 tons in 2013 as a result of reduced production in the U.S. and reduced demand for chicken products due to severe competition from reduced red meat prices. 

Although the price of Brazilian de-boned chicken leg imports are 62 percent (1,062 Korean won / Kg) higher than U.S. bone-in legs during the first half of 2013 (January – June period), Korean traders prefer to use Brazilian de-boned chickens as it does not require extra labor costs for the deboning process. 

Due to implementation of FTAs with the U.S. since March 2012 and with the EU since July 2011, import prices for Danish chicken and U.S. chicken are expected to reduce as a result of annual tariff reductions, while Brazilian chicken is expected to gradually lose its price competitiveness. 

Export 

In 2014, exports will increase slightly to 27,000 tons because of continuous demand for spent layer hens in Vietnam and Hong Kong. However, chicken exports between January and June 2013 showed a 35 percent increase compared to the same period of the previous year. Therefore, the chicken exports are forecast at 25,000 tons in 2013 

Korea exports frozen chicken meat mainly to Vietnam and Hong Kong, while “Samgyetang” (chicken ginseng soup) is exported primarily to Japan and Taiwan. The Southeast Asian region, particularly Vietnam, prefers to consume matured chicken, making spent layer hens very popular due to its quality and price competitiveness. 

Distribution 

It is estimated that more than 90 percent of local chicken farms are contracted with vertically integrated chicken producers. According to a survey done by Korea Agro-Fisheries and Food Trade Corporation (aT) in 2011, Korean chickens are distributed as whole chicken (61 percent), de-boned chicken meat (21 percent) and chicken cuts (18 percent). Due to consumers’ preference for a specific weight (1.5 kg), most local chickens are distributed and consumed as whole fresh chicken. 

However, industry forecasts that whole chicken oriented consumption pattern by households will shift to chicken cuts or de-boned chicken meat oriented consumption patterns gradually due to the increasing number of single households and changed diet patterns by young consumers. 

Tariff Phase-Out Schedule under KORUS FTA 

Korea’s 20 percent tariff on imports in the dominant frozen leg quarter category will be phased out by 2021, while tariffs on frozen breasts and wings will be eliminated by 2023. The 18-percent tariff on frozen turkey cuts will be eliminated by 2018

Black Sea Trade Flows (BST Flows)

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