Highlights

The Korean poultry market is expected to continue to expand in 2017, with increases in production and imports increasing to meet growing popularity of chicken products. Korean production is forecasted to increase slightly, two percent over 2016 levels, to 930,000 MT, as a hybrid breed of chicken (“Samgye") increases in popularity. In addition to increased production, imports in 2017 are projected to rise eight percent from 2016 levels, to 140,000 MT. U.S. product was reintroduced to the country in July 2016 after having been banned since the latest outbreak of HPAI in January 2016. U.S. poultry imports are anticipated to begin a gradual recovery of market-share that had been lost to Brazil during this period. Ongoing efforts to reach an agreement on HPAI regionalization aim to ensure future uninterrupted support of U.S. poultry to this important market.

Executive Summary

Production

In Marketing Year (MY) 2017, Korean chicken production is projected to increase slightly, two percent, to 930,000 Metric Tons (MT) from the previous MY 2016 (913,000 MT). Production increases will be limited for the following reasons: 1) decreased inventory of parental stock (PS) throughout 2016, 2) decreased profit for integrated Korean chicken companies as a result of increased competition over the past three or four years, 3) increased frozen chicken stock due to an over-supply of domestic chickens, and 4) increased chicken imports due to the resumption of U.S. chicken imports since July 2016. In particular, production of the Korean chicken variety known colloquially as “Samgye" chicken is projected to continue to increase. Production of “Samgye" chicken is growing due to the comparatively strong economic returns producers receive from this variety. Compared to regular broilers, “Samgye" chicken has a shorter growing period and lower production costs. In MY 2015, about 150 million “Samgye" chickens were slaughtered, accounting for about 15 percent of the total 967 million slaughtered chickens.

In MY 2016, chicken production is expected to increase four percent to 913,000 MT from 878,000 MT in MY 2015. Producers increased production to meet anticipated increased domestic demand from viewers consuming chicken while watching the Summer Olympic Games in Brazil in August. Additionally, consumption returned to previous levels from before the Middle East Respiratory Syndrome corona virus (MERS) outbreak lowered chicken consumption during the chicken high demand season in the previous marketing year. However, the increase in production will be less than experienced during the previous marketing year, due to a reduction in the number of slaughtered chickens and an increase in frozen chicken stock expected during the second half of 2016.

In MY 2016, slaughtered chickens are expected to increase 2.4 percent to 990 million birds from 967 million in MY 2015, due to stiff competition between local integrated chicken companies for market share. Several chicken companies expanded their slaughtering facilities in early MY 2016, leading to an increase in overall chicken production during the first six months of MY 2016. However, the production will not increase as much as it had during the past two to three years, due to the decreased number of PS inventory throughout the 2016. In the past several years, increased PS inventory had contributed to an increase of commercial chicks and broiler inventories.

In MY 2015, the number of slaughtered chickens reached a record 967 million, an 8.6 percent increase over the previous marketing year. The number of slaughtered chickens has increased significantly for the past five years: from 700 million in 2010, to 800 million in 2014, and about 900 million in 2015. This increase resulted from decreased international grain prices and increased market share competition between new and existing local integrated chicken companies, which cover 92 percent of Korea's chicken market.

The number of slaughtered chickens increased by 7.4 percent during the first six months of MY 2016 from the previous marketing year. This increase was not simply due to a strong increase of demand, but also occurred because of stiff competition between local chicken companies for increased market share.

The number of slaughtered chickens increased by 7.4 percent during the first six months of MY 2016 from the previous marketing year. This increase was not simply due to a strong increase of demand, but also occurred because of stiff competition between local chicken companies for increased market share.

As a result of increased chicken inventory and commercial chick production in MY 2015, slaughtered chickens increased 8.6 percent to 967 million birds. Consequently, chicken meat production also increased 11 percent to 877,000 MT, a similar increase to the MY 2014 increase of 12 percent. The MY 2015 production increase was mainly due to the stiff market share competition between new and existing chicken companies.

Recently, inventory of “Samgye" chicken is increasing every year in line with increasing demand. “Samgye" chicken, (which is also known by its technical name, “Baeksemi,") is a hybrid chicken bred using a broiler rooster and a layer hen, resulting in a better texture and a shorter growing period than broilers. With its smaller size (2/3) and lighter weight than a regular broiler, more and more Korean consumers prefer to eat “Samgye" chickens through low priced franchise fried chicken sectors. Its weight is about 800g, about half the 1.6 kg live weight of a standard broiler chicken.

Inventory of “Samgye" chicken doubled during the past decade, from 64 million birds in 2004 to 150 million birds in 2015. “Samgye" chicken is usually consumed in chicken ginseng soup (called “Samgyetang") primarily during the hottest days of the summer season (July through August). Some low- priced franchise chicken delivery companies are also using “Samgye" for a “two chickens for the price of one" promotion, which is possible because of its smaller size and competitive price. Despite increased consumption, the ending stock for “Samgye" also increased due to increased production during the past several years.

After the last outbreak of Highly Pathogenic Avian Influenza (HPAI) in early April 2016, Korea recovered its HPAI-free status as of August 18, 2016. Based on lessons from several HPAI outbreaks, Korean's demand for chicken hasn't fluctuated for the past several years. During the HPAI outbreak in September 2015 and April 2016, most of the depopulated birds were ducks with inconsequential numbers.

Consumption

In MY 2017, Korea's chicken consumption is projected to increase three percent to 1.04 million MT from 1.01 million MT during the previous marketing year. Consumption is expected to increase as (1) a resumption of U.S. chicken imports since July 2016 helps to fill existing demand, (2) the popularity of “Chimac (Chicken and Beer)" continues to grow at the pub, and (3) fried chicken delivery service franchises continue to grow.

In MY 2016, chicken consumption is expected to increase five percent to 1.01 million MT from 963,000 MT mainly due to an increased demand during Summer Olympic Games in Brazil in August and favorable weather (not many rainy days) during the main chicken demand season during the July and August period. Many Koreans eat chicken (mostly in “Samgyetang") during the summer period as healthy foods to beat the summer heat.

Korea's demand for meat has been increasing over the past several years, with diet patterns moving toward a more western meat- and fruit-based diet, and away from grain-based meals. Consumer prices for beef and pork also increased due to decreased supply (“Hanwoo" (Korean cattle) inventory from the second half of 2014 declined) and increasing demand from the growing popularity of outdoor camping activities, including grilling. The demand for chicken meat is also expected to increase with its relatively competitive consumer price as a protein source for Korean consumers.

Korea's demand for chicken has increased significantly for the past several years. Korea's per capita chicken consumption has increased about five-fold, from 2.4 kg in 1980s to 13 kg in 2015. Among the total chicken consumption, about 40 percent is consumed through franchise chicken delivery service, about 40 percent is consumed in hypermarkets and the mass catering industry (including schools and military) and the remaining 20 percent are used for processed chicken products.

Mainly due to an increased demand during Summer Olympic Games in Brazil in August and favorable weather (not many rainy days) during the main chicken demand season during the July and August period. Many Koreans eat chicken (mostly in “Samgyetang") during the summer period as healthy foods to beat the summer heat.

Korea's demand for meat has been increasing over the past several years, with diet patterns moving toward a more western meat- and fruit-based diet, and away from grain-based meals. Consumer prices for beef and pork also increased due to decreased supply (“Hanwoo" (Korean cattle) inventory from the second half of 2014 declined) and increasing demand from the growing popularity of outdoor camping activities, including grilling. The demand for chicken meat is also expected to increase with its relatively competitive consumer price as a protein source for Korean consumers.

Korea's demand for chicken has increased significantly for the past several years. Korea's per capita chicken consumption has increased about five-fold, from 2.4 kg in 1980s to 13 kg in 2015. Among the total chicken consumption, about 40 percent is consumed through franchise chicken delivery service, about 40 percent is consumed in hypermarkets and the mass catering industry (including schools and military) and the remaining 20 percent are used for processed chicken products.

As the percentage of single-member households has increased in Korea, the demand for Home Meal Replacement (HMR) products has also rapidly increased. In 1990, the percentage of single-member households was only nine percent, but it increased 27.2 percent in 2015. Thus, a demand for small packaged and marinated chicken HMR is expected to increase quickly in the coming years in response to the increasing percentage of single households and dual- income families in Korean society.

Imports

In MY 2017, Korea's chicken imports are projected to increase about eight percent to 140,000 MT (from 130,000 MT in MY 2016) due to the resumption of U.S. chicken imports since July 2016 and competitive prices. Imported chicken is about 43 percent less expensive than Korean fresh chicken meat in the retail market. Imported chickens, mostly frozen chicken legs, are consumed as chicken “gangjeong" or chicken “galbi (Stir-Fried Spicy Chicken)" through franchise delivery services, restaurants, or street vendors. Chicken “gangjeong" is deep fried and coated with sweet and spicy sauces and comes in larger shapes than chicken popcorn, which was popular for several years.

In MY 2016, as a result of lower import prices for Brazilian chickens and the resumption of U.S. chicken imports since July 2016, Korea's chicken imports are expected to increase nine percent to 130,000 MT from 119,000 MT in MY 2015. However, the majority of imported chicken during the first six months of 2016 was from Brazil. Brazil gained market share as the import price for Brazilian chickens was about 22 percent lower than the previous year. Brazilian chicken exporters benefitted from decreased international grain prices and the import ban for U.S. chickens due to the re-outbreak of HPAI in Indiana in January 2016.

Most imported chickens are frozen chicken cuts. Korea used to import frozen chickens from U.S. as bone-in frozen jumbo whole legs before the outbreak of HPAI, while deboned frozen chicken legs are imported from Brazil. Of the total 119,000 MT total Korean imported chicken in MY 2015, Korea imported about 91,000 MT (about 77 percent) in frozen chicken legs. Only about 5,000 MT frozen chicken breast and wings were imported from Denmark and Brazil. Chicken breast is mostly used in Korea for canned products for diet concerned young consumers. U.S. frozen jumbo whole legs usually undergo a deboning process, and then are further processed or used at restaurants for chicken “gangjeong" or chicken “galbi" menus.

In MY 2014, Korea imported about 65,000 MT of frozen chickens from the United States, but this number dropped significantly, 83 percent, to 11,000 MT in 2015. Starting in December 2014, Korea implemented an import ban on U.S. chicken meat as a reaction to the HPAI outbreak in the United States. Meanwhile, the import volume of Brazilian chicken, the main competition, increased a substantial 53 percent, to 80,000 MT. Brazilian chicken accounted for 68 percent of total chicken imports in MY 2015. Meanwhile, 13 percent of Korean chicken imports derived from Thailand, nine percent of from the United States, six percent from Denmark, and three percent from China.

In MY 2015, Korea's chicken imports decreased about 18 percent to 119,000 MT from the previous marketing year. Import numbers reflected an increased domestic supply and reduced demand resulting from the MERS outbreak during the high poultry demand season.

During the first six months of MY 2016, imports of chicken meat increased 11 percent to about 60,000 MT. Although the U.S. dollar appreciated against the Korean won during this period, Brazilian chicken imports increased substantially by 37 percent (16,000 MT) to 46,000 MT compared to the previous marketing year due to decreased import prices as a result of decreased international grain price. Brazilian chicken meat accounted for about 78 percent of total imports with its higher quality and more competitive price than other countries.

By the end of MY 2016, chicken meat imports are expected to increase to 130,000 MT, a 10 percent increase from the previous marketing year. This increase is anticipated due to the following reasons: 1) reduced production cost in decreased international grain price, 2) resumption of U.S. chicken meat imports, and 3) depreciated U.S. dollar against the Korean won since July 2016.

While Brazilian product had largely captured U.S. market share for chicken imports in Korea during the ban on U.S. chicken imports, it is not anticipated that this will be a lasting change. U.S. and Brazilian product fill different market demands based on differing price, quality and status in the deboning market. By the end of MY 2017, the U.S. share of total chicken imports is expected to rebound to levels near those before the ban on U.S. product was implemented. USDA and MAFRA are currently negotiating a regionalization agreement for HPAI to avoid further interruptions in U.S. imports in the event of future HPAI outbreaks.

Exports

In MY 2016, Korea's chicken meat exports are projected to increase about 4,000 MT to 30,000 MT as a result of growing popularity of chicken ginseng soup (“Samgyetang") exports to China since June 2016 and continued old layer hens' chicken meat exports in Vietnam. Korea exports about 20,000 MT of old layer hens' chicken meat to Vietnam annually.

In MY 2015, Korean chicken meat exports increased 37 percent to 26,000 MT due to increased exports of old layer hens' chicken exports to Vietnam, which accounted for about 91 percent of Korea's total chicken exports. Korea also exported about 2,200 MT of “Samgyetang", a heated chicken product, mainly to Japan, Taiwan and the United States.

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.

Production, Supply and Demand Data Statistics:

Poultry, Meat, Broiler

2015

2016

2017

Market Begin Year

Jan 2015

Jan 2016

Jan 2017

Korea, Republic of

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Inventory (Reference)

87

89

88

90

0

90

Slaughter (Reference)

930

967

950

990

0

1010

Beginning Stocks

27

27

30

35

0

40

Production

850

878

865

913

0

930

Total Imports

119

119

125

130

0

140

Total Supply

996

1024

1020

1078

0

1110

Total Exports

26

26

30

30

0

32

Human Consumption

940

963

953

1008

0

1038

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

940

963

953

1008

0

1038

Total Use

966

989

983

1038

0

1070

Tnding Stocks

30

35

37

40

0

40

Total Distribution

996

1024

1020

1078

0

1110


Approved Suppliers

Items

Australia, New Zealand, Denmark, Spain, Netherlands, Poland, Sweden,

Japan, Hungary, Canada, United Kingdom, Germany, the United States

and Philippines (only for pet bird).

Poultry birds (include pet or wild

bird), hatching eggs, day old chicks,

table eggs.

Australia, Chile, Denmark, Sweden, Brazil, Netherlands, Poland, Hungary,

Canada, United Kingdom, Thailand, the United States 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, the United

States and Canada

Heat-treated poultry meat

Countries that are currently allowed to export to Korea are as follows (As of June 1, 2016):

PRICE TABLES

Korea: Year Average Broiler Prices (Korean Won/Kg, boneless basis)

Year

2012

2013

2014

2015

2016 1/

Farm Price

1,693

1,839

1,574

1,486

1,374

Wholesale Price

3,255

3,412

3,108

2,941

2,677

Consumer Price

5,755

5,971

5,615

5,254

5,329

Import Trade Matrix

Commodity: Chicken Meat

Unit: MT & U$1,000, RTC Basis

Country

CY 2014

CY 2015

Jan.-Jun. 2015

Jan.-Jun. 2016

Vol

Val

Vol

Val

Vol

Val

Vol

Val

U.S.

64,937

96,376

10,752

15,542

10,065

14,322

934

1,272

Thailand

14,406

62,706

15,469

67,227

7,198

31,725

6,256

25,494

P.R.C.

2,384

9,27

3,089

12,125

1,464

5,809

1,824

6,771

Canada

0

0

0

0

0

0

0

0

Denmark

6,483

13,911

7,208

14,4

3,927

7,694

3,084

5,509

France

0

0

0

0

0

0

0

0

U.K.

0

0

0

0

0

0

0

0

Chile

0

0

117

260

117

260

0

0

Japan

0

0

0

0

0

0

0

0

Brazil

52,377

138,177

80,134

185,287

30,07

75,79

46,393

84,622

Australia

0

0

231

505

0

0

292

613

Other

815

1,556

1,6

2,404

642

1,044

856

1,209

Total for Others

76,465

225,62

107,848

282,208

43,418

122,322

58,705

124,218

Grand Total

141,4

321,996

118,6

297,75

53,483

136,647

59,639

125,49

Korea: Export Matrix for Chicken Meat

Export Trade Matrix

Country: Korea

Commodity: Chicken Meat

Unit: MT & U$1,000, RTC Basis

Imports for

CY 2014

CY 2015

Jan.-Jun.

2015

Jan.-Jun.

2016

Country

Vol

Val

Vol

Val

Vol

Val

Vol

Val

U.S.

213

1,268

570

3,378

402

2,419

205

1,212

Others

Hong Kong

369

1,241

333

1,,06

168

671

1,579

2,323

Japan

837

3,557

888

3,503

372

1,504

329

1,441

P.R.C.

13

114

9

50

5

27

21

121

Taiwan

269

1,065

332

1,365

135

585

213

807

Thailand

16

64

3

12

0

1

0

0

Vietnam

17,350

25,041

24,041

30,929

10,950

14,882

12,383

12,825

Iraq

12

75

1

21

0

1

0

0

Turkey

0

0

0

0

0

0

0

0

Australia

45

171

28

134

11

54

20

95

Russia

0

0

0

0

0

0

0

0

Other

156

833

198

1010

70

398

78

425

Total for Others

19,067

32,161

25,833

38,330

11,711

18,123

14,623

18,037

Grand Total

19,280

33,429

26,403

41,708

12,113

20,542

14,828

19,249