Update on Korea’s Beef Imports in 1998

South Korea is the second largest market-following Japan-for U.S. beef in Asia, and usually the third or fourth largest global market. In 1997, U.S. beef exports to Korea reached almost 90,000 tons, the second highest ever. However, Korea's beef imports have collapsed in 1998 because of the financial crisis, slumping consumption, and the sharp devaluation of the won that drove imported beef prices up. Korean import data through August indicated that beef shipments were about 41,000 tons, 60 percent lower than a year earlier.

In December 1993, as part of the Uruguay Round process, the liberalization of the Korean beef market was set for January 1, 2001, and in return, Korea agreed to substantially increase annual allotments of beef imports under a global minimum access quota. The quota is divided between the Livestock Product Marketing Organization (LPMO), the government purchasing organization, and private groups that operated under a simultaneous buy-sell (SBS) system. There are currently nine SBS supergroups importing beef for various endusers. Under the agreement, the SBS groups import an increasingly larger share of the quota each year, as the Korean market moved toward full liberalization. In 1998, the supergroup share is 60 percent and is scheduled to rise to 70 percent in 1999.

In 1997, the minimum access quota was 167,000 tons (RWE) and in 1998 the quota is 187,000 tons (RWE). For the first time, Korea failed to meet its quota obligations, falling short by nearly 5,500 tons in 1997. The current import pace clearly points to Korea missing its quota obligations by a much greater margin in 1998. Korea is forecast to import about 125,000 tons on a carcass weight equivalent which would equal about 90,000 tons on a retail weight equivalent.

Beef consumption collapsed as Korea was pulled under by the financial crisis early in 1998. The devaluation of the won drove the price of imported beef upward, while increased production drove down domestic prices. Higher input costs made holding cattle expensive and meat production accelerated as slaughter rose. Consumption is projected to fall about 12 percent below last year. However, while total consumption partially recovered in the latter part of 1998, consumption of imported beef has remained depressed.

Korea’s Beef Import Schedule
	Minimum Market Access Quota	SBS Share	LPMO Share
1993	99,000	14,850	84,150
1994	106,000	21,200	84,800
1995	123,000	36,900	86,100
1996	147,000	58,800	88,200
1997	167,000	83,500	83,500
1998	187,000	112,200	74,800
1999	206,000	144,200	61,800
2000	225,000	157,500	67,500
2001	January 1, Liberalized Beef Market

In 1998, the SBS supergroups are allocated 60 percent of the quota, or 112,200 tons, and LPMO is obligated to import 40 percent, or 74,800 tons. The SBS groups have been battered financially by the crisis and their ability to import beef has been severely hampered. The SBS supergroups are expected to import about 40-50 percent of their allotted amount.

LPMO, which is obligated to issue tenders for its share of beef imports, did not issue a tender until May 1998. The pace of LPMO tenders was extremely slow and did not pick up until September 1998. Through September, LPMO had tendered for about 32,000 tons of beef, most of which is expected to clear customs in Korea by the end of the year. LPMO is expected to tender its full 1998 obligation, but has already indicated it will have difficulty customs-clearing the full amount by year's end.

The United States has supplied 56 percent of Korean beef imports in 1998, 2 percentage points higher than in 1997. Australia's share has also risen slightly to nearly 34 percent. So far in 1998, New Zealand's imports have taken the hardest hit as they were down 76 percent through August compared with a year earlier. Both U.S. and Australian imports were down 58 percent.

The outlook for beef only improves slightly in 1999. A small recovery in beef consumption is expected and imports would likely increase slightly. Korea remains obligated to import 206,000 tons (RWE) of beef in 1999. Although immediate market conditions are weak, the Korean domestic beef market will be faced with a substantial tightening because of the strong rate of slaughter over the last two years. The domestic cattle situation will likely return to the pre-crisis condition where a heavily supported industry created high domestic prices, which could provide an attractive opportunity of beef imports to begin to recover.