Transcript that Power Point that is an overview of US Korea Ag Dealings

2008 Korean Agriculture Overview
for
Oklahoma Ag Leadership Group
February 27, 2008
Economy

Asia’s third largest economy after Japan ($3.2 t) and China ($4.4 t)

Korea’s 2007 nominal GDP: $970 billion

2007 economic growth was ~5.0%

2008 forecast fluctuating between 4.5 - 5%

U.S. economy slowdown

Rising commodity prices (i.e. grains, crude oil)

Newly elected President pledging 7% growth

Achieve growth through: leaner government, privatization, lower
taxes and improved business climate, etc.

Agriculture should no longer be considered a primary industry
Political

Feb 25: President Lee (GNP)
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April 9: National Assembly (NA) elections

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Supports KORUS FTA and resumption of U.S. beef imports
Plans to strengthen ties with U.S., Japan and China
UDP holds majority with 141 seats; GNP has 130 seats
GNP expected to gain majority in April elections
FTA ratification

NA Special Session before elections possible, but unlikely
Demographics

Population: 50 million; homogenous

One of the world’s most densely
populated countries

Rapid urbanization

One of world’s lowest fertility rates:
1.1 (births/woman)

Population growth rate forecast to fall
from 0.5% to 0% in next 15 years.

Labor force growing at 1%, but is
expected to contract around 2030.

Challenges of shrinking labor force
ahead
Korea Ag Situation

Agriculture accounts for 3% of GDP, and is expected to decline

> 60% of farmers are 60 years of age or older; and the number of farms is
declining

Korean farmers have actively protested against market liberalization,
imports of U.S. beef and rice, and the KORUS FTA

The main agricultural products produced in Korea are rice, root crops,
barley, vegetables, fruit, livestock, poultry and fish

Rice is the heart of Korean agriculture. 80% of farmers grow rice on half of
all the farm land in the country

Import restrictions (i.e. beef, rice) and government support payments keep
retail agricultural product prices high
Agricultural Imports

In 2007 (Jan-Nov), South Korea imported $18.5 billion worth of
agricultural products, 3.8 billion (20%) from the United States

Main imports from U.S. include:
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Coarse grain ($861 m)
Hides ($344 m)
Wheat ($316 m)
Red meats ($290 m)
Fruits & processed fruits ($250 m)
Feeds & fodders ($215 m)
Soybeans ($149 m)
Forest products ($178 m)
Seafood ($118 m)
Cotton ($114 m)
Red Meat Imports
Red Meat Imports & Consumption (1,000 MT)

U.S. beef imports suspended
since Oct 5, 2008

Higher pork imports with
U.S. beef out of market

The U.S. is #1 supplier
(82,000 MT)

U.S. beef market share in
2007 only 7%; 70% in ’03

AU share now 70%; NZ 20%
The Importance of Re-Opening the
Korean Market to U.S. Beef
Imports of U.S. Beef
900
800
700
600
500
400
300
200
100
0
Million USD
900
800
700
600
500
400
300
200
100
0
2003 2004 2005 2006 2007e
Fresh/Chilled
Imports of U.S. Pork
Frozen
Million USD
2003 2004 2005 2006 2007
Fresh/Chilled and Frozen
Poultry Meat
U.S. Imports Face Stiff Competition From Brazil

2007 over-production causes total
imports to fall
120
Million USD
100

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Imports of U.S. poultry drop 50% to
21,000 MT
However, imports of Brazilian
poultry increase 50% to 21,000 MT

Growing preference for Brazilian deboned leg meat
80
60
40
20

U.S. = Brazilian market share (MT)
0
2003 2004 2005 2006 2007e

Market share by $: Brazil 53% >
U.S. 35%

Will pay extra for deboned leg meat
U.S.
Brazil
Others
Grains

Heavy dependence on imported grains
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Corn: 9 million MT
Wheat: 2.2 million MT
Soybeans: 2.0 million MT
Soybean meal: 1.2 million MT
Higher international grain prices push annual retail prices upward
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Compound feed: + 30 %
Flour: + 34 %
Bakery and confectionary: + 20-30 %
Instant noodles: + 7 %

Food corn processors purchased GM corn for the first time
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Government and industry cooperate to offset rising prices

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Government lowered tariffs
Program implemented to increase domestic roughage production
Industry to tap into futures markets; consolidated purchases; increased
storage
Corn

Main U.S. competitor: China

China faced with tight
exportable supplies.
Corn Imports (1,000 MT)
10,000
9,000
8,000
7,000


∴ Imports of U.S corn could
reach ~ 7 million MT in
07/08; >90 market share.
LMO Act requires new
testing, labeling and
documentation.
6,000
5,000
4,000
3,000
2,000
1,000
0
2004
Feed
2005
2006
Processing
2007e
U.S.
Wheat

Main U.S. competitor: Australia

Australian wheat supplies tight
due to ongoing drought
Wheat Imports 1,000 MT
4,000
3,500
3,000

U.S. wheat import forecast: 1.2
MMT; ~ 50% market share
2,500
2,000
1,500

U.S. market share could climb
higher if Australian supplies
remain tight
1,000
500
0
2004

MRL - malathion
2005
Milling
2006
Feed
2007e
U.S.
KORUS FTA

Beef cuts: 15-year straight-line tariff phase out from 40% to 0% with a
safeguard that begins growing from 270,000 tons

Pork: duty free on January 1, 2014
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Poultry cuts: tariffs of 18 to 27 percent will be phased out in 7 to 12 years

Milling wheat: immediate duty free access

Dairy: immediate duty-free access for double the current export volume
of total dairy products. Duty-free quotas for cheese, skim/whole milk
powder, food whey, and butter.