A report from the USDAS Foreign Agricultural Service says that the average retail price for domestic fresh bellies in July 2011 was 23,730 won/kg, up 43 per cent from November of last year, just before the FMD outbreak.

In response, the Ministry of Strategy & Finance, which is leading the interagency charge to curb rising consumer inflation, has cut the duties on 260,000 metric tonnes of imported bellies and other pork cuts on several occasions to help stem the pain at the register.

With the current duty reduction, imported belly meat is currently selling at less than half the price of domestic bellies at 11,500 won/kg for fresh and 8,500 won/kg for frozen.

Nevertheless, retail belly prices remain at historic highs.

In addition to the tariff cuts, the Ministry for Food, Agriculture, Forestry & Fisheries (MIFAFF) announced on 19 July support measures to jump start imports of fresh and chilled belly meat in hopes of lowering domestic prices.

The MIFAFF measure is focused on fresh/chilled belly meat for two main reasons. First, Korean consumers prefer fresh bellies over frozen, especially during the summer grilling season. Second, importers are reportedly having a tough time securing bellies on the international market.

The measure contains five main pillars to help lower fresh/chilled belly meat prices:

1. price support incentives;
2. incentives for contracting under the emergency government purchase of 10,000 metric tonnes;
3. the domestic selling price on the government-purchased meat would be cut by about 10 percent;
4. support payment to offset air freight expenses for imports outside the emergency government purchase; and
5. request to consumers to eat other pork cuts and local beef.

These incentives are effective until 20 August.

With respect to price support incentives, the Korea Agro-Fisheries Trading Corporation (aT), which is the government-run state trading entity, will temporarily act as middleman in the transaction between the importer and customer.

In particular, aT will pay the importer the contracted price and will then sell the meat at a discount to the customer depending on prevailing domestic prices and when the product arrives in Korea.

On 21 July, aT opened an emergency tender for 10,000 metric tonnes of chilled belly meat, which will more or less be a consolidated purchase on behalf of the local importers.

The tender closed on 26 July.

The product will be sold at about a 10 per cent discount to local buyers, depending on the prevailing market price when the product is released into the market.

There are a couple reasons for making the purchase in this fashion.

First, the government wants to publicly demonstrate its deep-seated resolve to fight inflation by making such a large purchase.

Second, some importers were reportedly worried about customers, who knowing that the product had a limited shelf life, were holding out for a discount.

According to local trade sources, only a portion of the 10,000 metric tonnes tender will likely be filled because of the limited exportable supplies of fresh belly meat in the United States, Canada and Chile.

Producers in these countries make more money by producing bacon and spare ribs from the belly. Please refer to pork import statistics at the end of this report for more details.

The measure urges Korean consumers to eat other pork cuts, like Boston Butt and tenderloins.

It also calls for consumers to eat more beef to help prop up sagging cattle prices due to the record cattle inventories.

However, changing dietary patterns even when prices are high takes time.