7.2. Australian cattle industry projections - beef exports Korea
The situation facing Australian beef into Korea in 2012 is expected to become more difficult, as local production rises, the high stocks are cleared and the US ramps up its efforts to recapture market share – buoyed by a Free Trade Agreement (FTA), weak currency and an ability to deliver the product most sought after by Korean importers, short ribs. Hence, Australia’s competitive position in Korea is set to be further challenged in 2012.
Australian beef and veal exports to Korea greatly exceeded expectations for 2011, increasing 18% on the previous year, to 146,347 tonnes swt – falling just short of the record 149,663 tonnes swt in 2006. This growth reflected strong Korean consumer demand and weaker competition from Japan for suitable cuts. Korean consumption of local, US and Australian beef all grew significantly in 2011.
Of the 146,347 tonnes swt of Australian beef exported in 2011, 75% was frozen beef. Frozen chuck roll was the most popular cut, making up 17% of total exports, followed by frozen blade (11%), manufacturing beef (11%) and short ribs (8%). Of the chilled beef exports, the main cuts were chuck roll (5%), blade (4%) and short ribs (4%).
The imported beef volumes for 2011 shed more light on the influence of the US in the market, and potential impact in 2012. For the first 11 months of 2011, total Korean imports of US beef increased 42%, to 106,458 tonnes swt. Of this increase, short ribs dominated, increasing 10% in volume and making up 57% of total imports. Additionally, striploin imports jumped 44%, to make up 9% of total imports, while chuck roll and brisket made up 21% and 9% of total imports, respectively.
Contributing to the increase in imports from the US was the relatively low US currency, which averaged 4% lower against the Korean won. In comparison, the A$ appreciated 7.5% during 2011.
Driven by the increase in product from the US (up 42%), along with Australia (up 12%), total Korean beef imports for January to November increased 20% year-on-year.
With the increased beef imports for 2011, and higher domestic production, total beef consumption in Korea was estimated to have increased 8% in 2011, to 484,000 tonnes swt. Assisting the demand for beef in Korea was the comparatively healthy economy, and higher pork prices throughout the year, largely in response to the fallout from the Foot and Mouth Disease outbreak and the forced destruction of infected pigs. Due to the shortage of pork, the Korean Government took the extraordinary step of reducing tariffs to allow in additional pork imports during 2011.
Another important event that took place in the Korean beef market during late 2011 was the signing of the Korean-US FTA that will eliminate the 40% tariffs on US beef over 15 years. While the lower tariff on pork will have an influence on consumer demand for proteins, it is the changed tariff rates on US beef that may most influence future buying patterns.
The tariff rate for US beef will decrease by 2.7% each year, commencing in 2012, eventually giving the US a major competitive advantage if not quickly matched through an Australia-Korea FTA.
The Korean economic situation and consumer demand for beef are expected to remain comparatively healthy in 2012 – with beef consumption expected to increase a further 5%, to total consumption to a record 509,500 tonnes swt. This increase will come from local beef, US product and a rundown in the current high imported beef stocks, with imports from both Australia and New Zealand expected to decline. The rising production of Korean beef is mainly the result of the historically high Hanwoo cattle herd.
Given the anticipated increased competition from US beef (FTA, weak currency and ample availability of short ribs), higher domestic beef production and high stocks, total Australian beef exports in 2012 are expected to decline 15% on 2011, to 125,000 tonnes swt. Given the assumption for the importation of US beef in 2012, this would leave Australia with a 42% share of the imported beef market – well below the 73% registered in 2005, but still double the 21% share Australian held in the market prior to the US BSE ban in late 2003.
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