Report Highlights:

In Marketing Year (MY) 2016, chicken production is forecast to increase slightly by two percent to 848,000 MT from 832,000 MT in MY 2015, due to higher parent stock (PS) and broiler inventories throughout MY 2015, and expected increased demand during the summer 2016 Olympic Games. Chicken imports are projected to increase slightly to 110,000 MT in MY 2015. Competition among domestic producers for increased market share has reduced farm prices and presents obstacles to the local industry. Brazil is expected to be the major supplier of frozen chicken to this market in MY 2016, due to suspension of U.S. chicken imports resulting from the HPAI outbreak in the United States. Increased unit prices due to the weakened Korean won versus the U.S. dollar, and lower farm prices for domestic chicken, are expected to dampen demand for imported chicken.

Production:

In Marketing Year (MY) 2016, Korea's chicken production is projected to increase by 2 percent to 848,000 MT from the previous MY 2015 (832,000 MT) as a result of higher Parental Stock (PS) and broiler inventories since MY 2014 due to the battle for market share between existing and new producers, and an expected increased demand during the summer Olympic Games in August as Korean consumers tend to eat more fried chicken during international sporting events.

In MY 2015, Korea's chicken production is expected to increase 5 percent to 832,000 MT from 792,000 MT in MY 2014 due to an increase of PS and broiler inventories since the outbreak of HPAI in the United States in December 2014. Expected substitute demand for imported chicken caused the increase in PS inventory and chicken supply by Korean producers during the first six months of MY 2015. In addition, increased competition among chicken producers resulted in an 8.1 percent increase of slaughtered chickens during the first six months of MY 2015.

Korea's Monthly Slaughtering Figure for Broilers (Unit: 1,000 birds)

January

February

March

April

May

June

Sub Total

2013

60,417

47,741

56,347

62,056

68,992

72,084

367,637

2014

63,512

64,604

62,701

65,606

79,184

81,289

416,896

2015

70,032

59,809

72,065

75,027

81,846

91,856

450,635

Change (%)

10.3

-7.4

14.9

14.4

3.4

13

8.1

Poultry, Meat, Broiler

In MY 2014, Korean chicken producers increased production to prepare for expected higher demand in relation to several international sporting events such as the winter Olympic Games in Russia, the Asian Games in Korea, and the World Cup event in Brazil, which typically created increased demand for chicken based on past experience. Korean importers also increased their import volume due to the same reasoning under a favorable exchange rate throughout MY 2014.

In particular, Korean chicken producers forecast that the import suspension on U.S. poultry and poultry products since the outbreak of HPAI in December 2014 would positively influence domestic chicken demand with some volume shifting from imports to domestic sources during the beginning of MY 2015. However, most of the import volume eventually shifted directly to Brazilian chicken.

Animal Disease

Since Korea had a 5th HPAI outbreak in January 2014, which continued until the middle of June 2015, there was no significant damage to the Korean chicken industry due to the relatively small amount of depopulated chickens compared to other poultry (most damage occurred in the duck industry). The Korean chicken industry entirely depends on the imports of Grand Parental Stock (GPS) for PS supply and broiler production. However, as the results of HPAI outbreaks in the United Kingdom in November 2014 and in the United States in December 2014, Korea had to shift its GPS imports from other countries such as France. Thanks to France and the resumption of chicken trade with the UK in June 2015, Korea was able to import the needed GPS for MY 2015.

Consumption:

In MY 2016, Korea's chicken consumption is projected to increase 3 percent to 943,000 MT from 915,000 MT in MY 2015 due to increased PS and broiler inventories, an expected increased demand during the summer Olympic Games in August, and substitute demand caused by increased beef and pork prices.

In MY 2015, chicken consumption is expected to increase to 915,000 MT, up 2.2 percent from the previous marketing year due to recovered demand from the Sewol ferry accident in April 2014, and substitute demand for beef and pork as a result of increased consumer prices, and the expansion of outdoor camping as a popular activity. In addition, the outbreak of MERS (Middle East Respiratory Syndrome corona virus) in May and June, MY 2015 saw increased demand for domestic chicken through online sales and the franchise chicken delivery sectors. However, demand for imported chicken dropped due to the short term school break during the MERS outbreak to prevent the virus from spreading, which caused people to avoid places like public restaurants, shopping centers and discount stores. Those consumers generally consume more imported chicken, which is relatively lower priced than domestic chicken. Most Koreans still prefer to consume a whole chicken rather than buying chicken cuts, such as chicken legs, wings and breasts. Only chicken breast is selling well for diet conscious young consumers.

In MY 2014, Korea's chicken demand was in trouble due to the Sewol ferry accident in April, and it affected the remainder of MY 2014. However, Korea's chicken demand has recovered in MY 2015, replacing the demand for pork and beef due to higher consumer prices during the first seven months of MY 2015, which increased by 5.7 percent and 2.4 percent respectively, compared to MY 2014 due to the expansion of outdoor camping for the past 2-3 years.

Average Consumer Prices for Beef, Pork and Poultry (Unit: Korean won per Kilogram)

Average Consumer Price

CY 2014

(January 1 – July 30)

CY 2015

(January 1 – July 30)

Change (%)

Beef (Boneless base)

22,670

23,210

2.4

Pork (Boneless base)

18,950

20,030

5.7

Broiler (Bone-in base)

5,827

5,336

-8.4

Despite increased demand for domestic chicken in MY 2015, the consumer price decreased due to higher chicken production caused by stiff competition between new and existing producers.

In MY 2014, the farm price for chickens per kilogram dropped significantly by 14.5 percent to 1,574 Korean won per Kg from 1,840 Korean won per Kg in MY 2013, mainly due to increased domestic production. Meanwhile, the import price for U.S. frozen chicken (mainly frozen jumbo whole legs) during the first six months of MY 2014 dropped by 10.4 percent from 1,713 Korean won to 1,534 Korean won per Kg due to a favorable exchange rate in MY 2014.

Korea's per capita meat consumption (beef, pork, and chicken) increased 2.9 Kg to 45.6 Kg in 2014 compared to the previous year. Recently, per capita meat consumption has increased gradually with the expansion of western dietary habits. In 2014, per capita chicken consumption increased by 1.1 Kg to 12.6 Kg due to various chicken menus in franchise family restaurants and the popular “Chi Maek" (Chicken and Beer) meal available in pubs and enjoyed by many Koreans.

Trade:

Korea imports chicken mostly from the U.S. and Brazil, with its price competitiveness and adherence to proper specifications for the Korean market, while some processed chicken (heat treated) is also imported from Thailand. Korea imports about 120,000 tons of chicken annually, which accounts for approximately 15 percent of Korea's annual chicken production. However, U.S. chicken exports have increased due to better tariff rates under the KORUS FTA since 2012.

In MY 2016, Korea's chicken imports are projected to increase slightly to 110,000 MT, with an expected increased demand during the summer Olympic Games in August; however, the increase will be around 5,000 MT only, due to the increased import price caused by an unfavorable exchange rate since November 2014, and lower domestic chicken prices in the overall oversupply since MY 2014. Brazil will be a dominant exporter to Korea, replacing banned U.S. chicken imports since December 2014. U.S. chickens amounted to 46 percent of total imports and about 7 percent of total supply in Korea before the HPAI outbreak in MY 2014.

In MY 2015, total chicken imports are expected to decrease substantially by about 35,000 MT to 105,000 MT due to the following reasons: 1) Korea suspended U.S. chicken imports since December 20, 2014 due to the outbreak of HPAI; 2) import prices went up due to an unfavorable exchange rate throughout 2015, which burdened Korean importers; and 3) domestic chicken prices decreased due to stiff market competition.

Despite total chicken imports decreasing during the first six months of MY 2015, industry estimates that actual imports did not significantly decrease as most U.S. bone-in frozen chicken shifted to boneless chicken imports from Brazil. U.S. frozen chicken imports were mostly frozen jumbo whole chicken legs and the United States was the top supplier to Korea in MY 2014.

In MY 2014, Korea recorded the highest chicken import level in history with 141,400 MT, which was 11.6 percent higher than the import volume recorded in MY 2013 (126,693 MT). The record high was helped by the following reasons: 1) a lower import price due to favorable exchange rates throughout the year in 2014; and 2) increased demand in the restaurant sector such as in beer pub serving the popular Chi Maek (Fried Chicken and beer).

The U.S. and Brazil covered the majority of the imported chicken market due to competitive prices and quality amounting to 46 percent and 37 percent respectively in MY 2014. A total of 64,937 MT of U.S. chicken was imported in MY 2014, which was 43 percent higher in volume compared to MY 2013, mainly due to favorable exchange rates and tariff reductions under the KORUS FTA. In MY 2014, the average imported U.S. chicken price was 1.48 U.S. dollars per Kg, compared to 2.64 U.S. dollars per Kg for Brazilian chicken.

Most imported chicken is frozen chicken cuts, such as jumbo whole chicken legs from the U.S., deboned chicken and whole chicken legs from Brazil, chicken wings from Denmark and breasts, etc. These are used in menus like fried chicken or chicken “Gangjeong" at restaurants and street vendors, who use relatively low-priced imported chicken rather than domestic fresh chicken. In particular, U.S. frozen jumbo whole legs are generally imported as bone-in legs and then deboned by Korean importers before further processing.

Export

In MY 2016, Korea's chicken exports are projected to increase to 25,000 MT from 24,000 MT in MY 2015 due to increased domestic chicken production and “Samgyetang (Chicken ginseng soup)" exports to the United States, which began in August 2014.

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.

HSK 10

Description

Base Rate

2016

2017

2018

0207141010

Frozen Chicken Legs

20%

10%

8%

6%

0207141020

Frozen Chicken Breast

20%

11.6%

10%

8.3%

0207141030

Frozen Chicken Wing

20%

11.6%

10%

8.3%

0207141090

Other Frozen Chicken

20%

10%

8%

6%

0207271000

Frozen Turkey Cuts

18%

5.1%

2.5%

0%

Poultry, Meat, Broiler

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

Korea, South

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Inventory (Reference)

85

86

86

87

0

88

Slaughter (Reference)

844

885

854

930

0

950

Beginning Stocks

8

8

19

27

0

25

Production

746

792

753

832

0

848

Total Imports

141

141

110

105

0

110

Total Supply

895

941

882

964

0

983

Total Exports

19

19

15

24

0

25

Human Consumption

857

895

855

915

0

943

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

857

895

855

915

0

943

Total Use

876

914

870

939

0

968

Ending Stocks

19

27

12

25

0

15

Total Distribution

895

941

882

964

0

983

CY Imp. from U.S.

0

65

0

10

0

0

CY Exp. to U.S.

0

0

0

1

0

1

Balance

0

0

0

0

0

0

Inventory Balance

11

19

-7

-2

0

-10

Production Change

5

0

1

5

0

2

Import Change

11

0

-22

-26

0

5

Export Change

-27

0

-21

26

0

4

Consumption Change

5

0

0

2

0

3

Imports Percent Consumption

16

16

13

11

0

12

Exports Percent Production

3

2

2

3

0

3

Population

49,039,986

49,039,986

49,115,196

49,115,196

0

0

Per Capita Consumption

17.5

18.3

17.4

18.6

0.0

0.0

TS=TD

0

0

0

0

0

0

Price Comparison (Unit: Korean Won per Kilogram) 4/

Cuts

Domestic 1/

Imports 2/

U.S.

Brazil 3/

Denmark

Leg

5,955

1,519

2,765

2,245

Wing

7,007

-

2,967

3,010

Breast

6,740

5,708

3,001

-

1/ Chilled products, average retail price for January 1 – June 30, 2015 period

2/ Average CIF prices January 1 - June 30, 2015

3/ Frozen Trimmed bone-less products (Mostly)

4/ Average exchange rate (1$ = 1098.66 Korean won) for January – June 2015 period

Countries that are currently allowed to export to Korea are as follows (As of July 15, 2015):

Approved Suppliers

Items

Australia, New Zealand, Denmark, France, Spain, Netherlands, Poland, Sweden and Philippines (only for pet bird).

Poultry birds (include pet or wild bird), hatching eggs, day old chicks, table eggs.

Australia, France, Chile, Denmark, Sweden, Brazil, Netherlands, Poland and Philippines (only for broiler).

Fresh, chilled, or frozen poultry meat

Australia, United Kingdom, France, Chile, Denmark, Sweden, Japan, Brazil, United States, Thailand, Netherlands, Hungary, China, Poland and Canada

Heat-treated poultry meat

TRADE MATRIX

Korea: Import Matrix for Chicken Meat 1/

Import Trade Matrix

Country: Korea

Commodity: Chicken MeatUnit: MT & U$1,000, RTC Basis

Imports for

CY 2013

CY 2014

Jan.-Jun.

2014

Jan.-Jun.

2015

Country

Vol

Val

Vol

Val

Vol

Val

Vol

Val

U.S.

45,308

71,273

64,937

96,376

31,123

46,162

10,065

14,322

Others

Thailand

13,717

55,141

14,406

62,706

6,580

28,363

7,198

31,725

P.R.C.

2,468

8,970

2,384

9,270

1,111

4,244

1,464

5,809

Canada

0

0

0

0

0

0

0

0

Denmark

5,422

12,141

6,483

13,911

3,624

8,293

3,927

7,694

France

0

0

0

0

0

0

0

0

U.K.

0

0

0

0

0

0

0

0

Chile

22

62

0

0

0

0

117

260

Japan

0

0

0

0

0

0

0

0

Brazil

59,411

147,192

52,377

138,177

25,535

64,636

30,070

75,790

Australia

0

0

0

0

0

0

0

0

Other

345

597

815

1,556

268

541

642

1,047

Total for Others

81,385

224,103

76,465

225,620

37,118

106,077

43,418

122,322

Grand Total

126,693

295,376

141,400

321,996

68,241

152,239

53,483

136,647

1/ HS 0207.1X.XXXX plus HS 1602.32.XXXX

Korea: Export Matrix for Chicken Meat 1/

Export Trade Matrix

Country: Korea

Commodity: Chicken MeatUnit: MT & U$1,000, RTC Basis

Imports for

CY 2013

CY 2014

Jan.-Jun.

2014

Jan.-Jun.

2015

Country

Vol

Val

Vol

Val

Vol

Val

Vol

Val

U.S.

0

0

213

1,268

1

5

402

2,419

Others

Hong Kong

5,244

7,950

369

1241

211

636

168

671

Japan

1,166

5,222

837

3,557

385

1,791

372

1,504

P.R.C.

1

9

13

114

8

35

5

27

Taiwan

344

1,417

269

1,065

89

359

135

585

Thailand

0

0

16

64

16

63

0

1

Vietnam

19,296

22,091

17,350

25,041

7,730

11,523

10,950

14,882

Iraq

0

0

12

75

0

0

0

1

Turkey

0

0

0

0

0

0

0

0

Australia

0

0

45

171

0

0

11

54

Russia

0

0

0

0

0

0

0

0

Other

66

358

156

833

1

5

70

398

Total for Others

26,117

37,047

19,067

32,161

8,523

14,902

11,711

18,123

Grand Total

26,117

37,047

19,280

33,429

8,524

14,907

12,113

20,542

1/ HS 0207.1X.XXXX plus HS 1602.32.XXXX