clay-eastwood
Clay Eastwood, manager of International Marketing

by Clay Eastwood, manager of International Marketing

Monthly Market Highlight

South Korea is a booming and rapidly expanding market for U.S. pork exports. In 2017, U.S. pork and pork variety meat exports to Korea increased 28 percent by volume and were valued at $457 million – up 30 percent year-over-year and the second highest year for exports on record to the country. This market boasts strong consumer demand for value, quality, convenience, and diversity of agricultural products. The U.S. was the leading supplier of imported agricultural products to Korea in 2017 and accounted for $6.9 billion, or 23.5 percent, of Korea’s total agricultural imports. Korea is the fifth largest market for U.S. pork and while most U.S. pork enters Korea duty-free under the Korea-U.S. Free Trade Agreement (KORUS FTA), U.S. pork faces competition for market share from Germany, Spain, Canada, and Chile. Historically, fish has lead Korean animal protein imports, but pork is the second largest protein export followed by beef, poultry, and lamb. Top imported U.S. pork and pork variety meats include Boston butts, picnics, single ribbed bellies, collar butts, skirts, boneless hams, spare-ribs, back ribs, neck bones, back bones, and feet. The National Pork Board, along with the U.S. Meat Export Federation (USMEF), invested $625,000 into this market in 2018 and recognize its tremendous opportunity for continued growth and expansion in years to come.

 

 

Imports of animal protein in Korea
Source: Organisation for Economic Co-Operation and Development (OECD)

 

Market share of Korea’s pork imports
Source: OECD and USMEF

Overview of Korea

South Korea, officially the Republic of Korea, is a small country in East Asia constituting the southern portion of the Korean Peninsula. This peninsula is flanked by China to the west and Japan to the east with a predominately mountainous landscape. South Korea is the 11th largest economy in the world with a national GDP of $1.53 trillion as of 2017. It is about the size of Indiana and has a population of 51 million, where over 90% of Koreans live in urban areas. Korea is a global leader in the industrial and technological sectors, ranking as the world’s 5th largest exporter and 8th largest importer. Korea’s growing economy has played a role in driving domestic and imported protein per capita consumption growth and since the implementation of the KORUS agreement in 2012, pork consumption is up 22 percent. In 2017, the U.S. exported over 381 million pounds of pork and pork variety meats to Korea.

According to the USDA, in 2017, U.S. agricultural exports to South Korea totaled $6.9 billion, making it the 6th largest market.
Source: USDA

Animal Protein Consumption

Pork has historically ranked second only to fish among animal protein per capita consumption in Korea. Pork consumption has grown slightly over the last ten years. However, coupled with a decreasing per capita consumption of fish, the top two ranking proteins seem to show a slowly narrowing gap. Simultaneously, poultry and beef consumption have shown minimal growth over time, whereas, lamb consumption remains virtually at zero. Much like other Asian countries, pork is a staple in the Korean diet, and as such, lends itself to traditional Asian cuisines and preparations.

Animal protein consumption continues to increase.
Source: OECD

Domestic Industry

Korea by nature relies heavily on imports to fulfill its food and agricultural needs due to a predominately mountainous terrain that is unsuitable for commercial farming. In addition, much of the available farmland is dedicated to rice production. In 2016, the agricultural sector only accounted for 2.2 percent of the Korean Gross Domestic Production (GDP) and is expected to remain a minor contributor to the Korean economy in the future. Korean protein production has certainly changed over the last ten years. Most notably is the steady decline in fish production and an increase in pig production, whereas beef and poultry production has remained fairly constant. In 2017, the U.S. exported $6.9 billion worth of agricultural products to Korea, a 95 percent increase from 2007. Currently, the U.S. holds approximately 30 percent market share for pork and pork variety meats in Korea.

Korea’s domestic protein production has changed in the last 10 years. Source: OECD

Retail Sector

The retail food sector in Korea has evolved dramatically ever since the opening of its first large-scale discount grocery store (hypermarket) in 1993 (EMART by Shinsegae Group) and liberalization of retail business to foreign ownership in 1996 (Macro, a Dutch retailer was the first one that entered the market). Over the last two decades, modern format, large-scale retail businesses such as hypermarket chains, grocery supermarket chains, convenience store chains, and online retailers have grown rapidly at the expense of traditional street markets and family-operated small grocers. The overall retail sector in Korea generated 386 trillion won of cash-register sales in 2016 (approximately $331 billion), up 5.2 percent from the previous year. Total sales of food products in the retail sector amounted to 88.1 trillion won, up 6.3 percent from the previous year. In other words, food products accounted for 23 percent of the overall retail sector sales in Korea.

Korea’s leading retail segments
Source: USDA Gain Report

Looking Ahead

Pork exports to South Korea continue to exceed expectation and this burgeoning international market is proving to be a bright spot for U.S. pork in 2018. In July, U.S. pork and pork variety meat exports to Korea reached 326.8 million pounds (up 44 percent) and were valued at $424 million (up 50 percent) year-to-date. As a country that depends on agricultural imports, this emerging market continues to shine among leading markets for U.S. pork and offers tremendous value to U.S. pork producers. NPB’s continued focus on diversification of our export markets and an enhanced focus on emerging markets is paramount to our international marketing strategy amidst a challenging trade environment.