Korean Producers Struggle As Prices Collapse

SOUTH KOREA - Oversupply of cattle is expected to push prices further down in 2012, according to the USDA Foreign Agricultural Service.

16 March 2012

2 minute read

Asia

Producers are facing increasing pressure as cattle prices are plummeting. Despite suffering from foot and mouth disease in late 2010 and early 2011, cattle numbers are strong.

Steer prices have fallen 35 per cent since 2010, likely due to an increase in cattle inventories, which have increased 70 per cent over the last 10 years, and 26 per cent over the last five.

To combat this the Ministry of Agriculture is offering incentives, to encourage producers to send poor performing cattle to slaughter, instead of keeping them for the breeding herd.

The Ministry hopes to reduce cattle numbers by 100,000 head in 2012 and a further 100,000 head in 2013, in a bid to level out cattle prices.

Offering 500,000 won/head ($444) for heifers and 300,000 won/head ($267) for cows has seemed to help stabilise the market. Cattle prices are still far below pre foot and mouth levels, which is also encouraging producers to liquidate herds.

All of this is expected to increase cattle slaughter, which is now estimated for 2012 at 1.1 million head, a 27 per cent increase on 2011.

Consumption of beef is always increasing. Supermarkets offer local beef (Hanwoo) at discounted prices to encourage consumption.

Estimations for 2012 suggest that consumers may favour US beef over Australian beef. However, the Korea-US free trade deal which came into play yesterday (15 March) is not likely to have a significant impact on US beef imports due to the tariff levels not being reduced by much.