Report Highlights

The larger-than-expected increase in pork production has pushed the pork imports down more than 100,000 metric tons (MT) to 343,000MT. The US pork import estimate is lowered to 100,000MT.

Production and Animal Numbers

Swine inventories were falling through most of 2009 because of high compound feed prices. In some cases, smaller sized operations temporarily stopped raising pigs. However, this trend reversed course as feed prices started to soften during the latter half of the year. In September, inventories started to expand as these growers returned to business. In fact, the number of swine farmers increased by 300 from June to December and finished the year at 8,000.

As these farmers returned, the total herd size increased more than half a million head from 8.18 million in June to 8.72 million at the end of 2009. This increase in inventory put some downward pressure on carcass prices during the last quarter. However, farmers kept expanding inventories since the drop in feed prices more than offset the decrease in the carcass price.

The 2010 production estimate was raised to 15.1 million head in large part due to the higher than expected carry-over stocks. However, as the implementation of the Korea-EU FTA draws closer, farmers will become more cautious about increasing production in the future. In addition, the prospects of higher feed prices and manure disposal costs will keep 2010 production and inventories in check.

In response to the H1N1 outbreaks in North America in April 2009, Korea banned live swine imports, including breeding stock, from North America. The ban was finally lifted after six months in October 2009. Several shipments of US live swine have cleared inspection since the market was re-opened. Live swine imports are expected to double to 2,000 head in 2010 as farmers replenish their breeding stocks. The majority of these swine will be imported from the United States and Canada.

Pig Meat Production

Expanded swine inventories will push domestic pork production above the previous estimate to 1.1 million metric tons in 2010. But, as was mentioned earlier, pork production is projected to level-off as we get to closer to the implementation of the Korea-EU FTA.

Higher production was the main factor behind lower than expected imports last year to 383,000 metric tons. Detections of H1N1 and country of origin labeling requirements were also minor factors pushing imports down. Pork imports during 2010 have been lowered to 343,000MT, down 100,000MT from the previous estimate because of strong domestic production. The US pork import estimate for 2010 was revised down to 100,000MT.

The findings of H1N1 briefly caused pork consumption to decline in April 2009. According to a survey conducted by the Korea Rural Economic Institute (KREI) shortly after H1N1 was reported in Korea, roughly 43 per cent of respondents indicated that they would reduce their pork consumption or stop eating pork.

In contrast, several cases of Foot and Mouth Disease (FMD) in January 2010 had very little impact on total pork sales. According to a survey done at Hanaro Mart, a local hypermarket chain, pork sales actually picked up after the most recent FMD cases because consumers were informed about the safety of eating pork after the previous outbreaks in 2000 and 2002. The survey results follow.

With that said, the 2010 pork consumption estimate is expected to remain largely unchanged at 1.5 million metric tons as the fear over H1N1 dissipates and the Korean economy continues to pick-up steam.

Although, the FMD outbreak did not impact the domestic sale of pork, it did impact pork exports. Japan, Philippines and Thailand have responded to these cases by closing their markets to Korean pork. As a result, the pork export estimate for 2010 has been cut to zero. This stoppage in trade, however, will have a negligible impact on the overall pork complex because the volume of pork exports is very small, averaging 17,620MT over the last decade.

Further Reading

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March 2010