South Korea’s growing economy and appetite for poultry is forecast to push broiler meat production up by 2% in 2011 to 660,000 tons.
According to the US Department of Agriculture (USDA)’s Foreign Agriculture Service, consumption is expected to rise for the third straight year to 737,000 tons. Meanwhile, imports are forecast to remain steady at 90,000 tons, half of which will be from the US.
This rise in production is largely attributed to a growing number of health conscious consumers who are eating more chicken and, to a lesser extent, country of origin labeling (COOL), says the local industry. The 2010 production estimate has been revised upward to 647,000 tons, up by 5.5% from the previous year because of greater demand for fast food chicken during the World Cup.
Stronger consumer demand and high, but stable, feed costs have in turn put upward pressure on prices. For example, the average retail price from January to July 2010 was Won 5,901 (US$5.31) per kilogram, up by almost 11% from the 2009 average.
Feed is a producer’s biggest expense and accounts for about 60% of total costs. Feed prices for January to July 2010 remained stable, but were higher than historical averages. These higher feed costs, however, had little impact on production because most of the costs were passed directly to consumers.
Consumption continues to grow
Korea’s broiler meat consumption is expected to climb for the third straight year reaching 737,000 tons, in 2011. According to industry sources, this increase is smaller compared to the past two years because of rising retail prices. In addition, the absence of a large extended sporting event such as the football World Cup, when people were ordering home delivered fast food chicken, is also expected to slow growth.
The forecast for broiler meat consumption in 2010 has been revised upward to 721,000 tons, an increase of nearly 7% over the previous year. Per capita consumption for this same period is estimated at 10.2 kilograms (boneless basis), up slightly more than 6%. The jump in consumption in 2010 is linked to healthy eating, the explosive growth in the franchise chicken delivery service, and increased demand during the World Cup.
COOL has also played a role over the last few years in bumping up demand for domestic broiler meat. Outbreaks of foot-and-mouth-disease, reported in spring 2010 in cattle and swine, however, had a negligible impact on broiler meat consumption.
Top ranked snack food
The fast food delivery business accounts for an astounding 50% of total broiler meat consumption, according to the Korea Chicken Council. Moreover, chicken ranked as the top snack food to be consumed with beer, according to an Internet poll taken during the World Cup. Korean consumers are also very health conscious and many have started eating more chicken, particularly breast meat, as it is high in protein and low in fat. In the past, whole chickens were consumed in traditional dishes during the summer. However, dietary patterns have gradually changed due to rising incomes, greater availability of international foods, and healthy eating trends.
As a result, consumers are eating more chicken, including white meat, in a variety of dishes throughout the year. The demand for chicken cuts is also growing since cuts are easier to cook compared to a whole bird. However, there is still plenty of room for growth in the cuts market - whole birds still account for nearly 60% of consumption.
According to the local industry, mandatory country of origin labeling at restaurants has also helped spur consumption of domestic broiler meat since it was first introduced in December 2008. At that time fast food delivery businesses were exempt from this requirement, however the COOL regulation was expanded to include these delivery establishments as in August 2010. Again, the domestic broiler industry, anticipates that this change in labeling will contribute to increased demand in the coming years.
Labeling increasing demand
The local industry’s optimism regarding COOL is supported by a recent survey conducted by the Consumers Union of Korea last June, which found that more than 80% of consumers identified country of origin as their top priority when buying chicken.
Another notable policy development is the Ministry for Food, Agriculture, Forest and Fisheries’ expansion of mandatory packaging requirements for broiler meat to all slaughter establishments and retail shops beginning January 1, 2011. This latest revision is intended to further improve sanitation and safety. Previously, only slaughter establishments handling 50,000 birds a day were subject to this requirement. This extension is not expected to have an impact on trade as the bulk of imported product is used in the processing sector.
Imports remain steady
Broiler meat imports in 2011 are forecast to remain steady at 90,000 tons. The expected decline in demand resulting from the new COOL requirement for chicken delivery businesses will be offset by strong demand from the local processing sector and a stable currency.
Imports of U.S. broiler meat during in 2011 are expected to soften ending the year at 45,000 tons. Broiler meat imports, particularly chicken leg quarters, shot up nearly 70% during the first half of 2010 reaching roughly 37,000 tons. A steady exchange rate combined with increased availability of U.S. chicken meat because of the temporary closure of the Russian market helped boost imports during this six-month period.
Imports of US broiler meat are expected to almost double from 2010 reaching 55,000 tons. About half of the import market is made up of chicken leg quarters (CLQ), which are used for processing or restaurant delivery service. The US is the leading CLQ supplier to Korea at roughly 23,400 tons followed by Brazil at 13,000 tons from Jan. to June 2010.
The average cost, insurance and freight price for US and Brazilian CLQs are Won 1,474/kg and Won 2,432/kg, respectively. Brazilian CLQs are a bit more expensive since they are trimmed boneless. In comparison, domestic CLQs are approximately 3 to 5 times more expensive. Breast meat imports also surged during this period in large part because of the healthy diet trend.