FAS/Seoul Monitoring of Media Reporting on Agricultural Issues

Today's Date:   Wednesday, April 29, 2015

For Coverage:  March 1 ~ April 29, 2015

1. GRAIN & OILSEED ISSUES

<4/21/2015> Gov’t gives rice subsidies early boost [English, CSY]

http://koreajoongangdaily.joins.com/news/article/article.aspx?aid=3003322&cloc=joongangdaily%7Chome%7Cnewslist1

Summary: The government raised subsidies for rice farmers in the country by 100,000 won ($93) on average from a year earlier, to account for Korea opening its rice market to imports.  The Ministry of Agriculture, Food and Rural Affairs announced Monday it would raise the subsidies for rice farmers to an average of 1 million won per hectare of their lands.   Considering that the average size of each rice farmer’s land in the country is 1.1 hectares, the average rice subsidy is expected to be 1.1 million won.

The subsidy increase came after the government’s announcement in July 2014 that it would open up Korea’s rice market to imports subject to tariffs. Protesting the move, farmers demanded something in return.  In the midst of protests by farmers in September 2014, the ruling Saenuri Party and the government announced it would raise the rice subsidy to 1 million won per hectare.   The government was supposed to raise subsidies starting 2017, but accelerated the raise to this year.

U.S.: “Rice Is Not an Exception to Market Opening”… [Korean, CSC]
ROK: “[Rice] Cannot Be Linked with TPP Talks”
(Korea Economic Daily, April 9, 2015, Page 3)

By Reporter Shim Sung-mi from Washington

Full text:  A rough road ahead for negotiations to join the TPP

Japan, which has refused to open its rice market further, considers importing 50,000 tons of rice at a lower tariff rate.

If the ROK concedes to the U.S., other rice exporting countries are expected to make the same demands. 

Since a high-ranking USG official pointed out that the ROK should lower the threshold of its rice import market in order to join the Trans-Pacific Partnership (TPP), “further opening of the rice market” has emerged as a hot-button trade issue.

The U.S. is expected to demand that the ROK lower the current 513 percent tariff on imported rice or make an exception and levy a lower tariff on a certain amount of U.S. rice imports.  However, the ROKG has made clear its position that “TPP negotiations and further opening of the rice market are separate issues that cannot be linked together.”  Therefore, negotiations with the U.S. over the ROK’s entry into the TPP are expected to be tortuous.

The U.S. increases its bargaining power through pressure.

The primary principle of the U.S.-led TPP is “market opening without exception.”  [The U.S.] intends to introduce a U.S.-style trade order to the Asia-Pacific region under which market barriers in all trade sectors, including goods, services, intellectual property rights and investments, should be reduced.

A high-ranking USG official said, “The Vietnamese and Malaysian governments are also being asked to make promises (law revisions etc.) that are politically sensitive at home for their participation in the TPP,” adding, “All countries wishing to join the TPP are in a similar situation.”  This means that when existing partners are at risk of domestic political losses due to TPP talks, the ROK alone cannot be granted an exemption from opening its rice market.

The U.S. also asked Japan, which has already engaged in TPP talks, to “import 200,000 tons of U.S. rice at a lower tariff rate or to reduce rice import tariffs uniformly,” separately from the annual minimum market access (MMA) quota (770,000 tons of rice imports).  The Japanese government is considering importing 50,000 tons of U.S. rice per year at a special lower tariff rate.

It appears the U.S. is intending to raise its negotiation capabilities by bringing up the subject of rice imports to the negotiation table and pressuring the ROK to additionally open up its rice market, since rice is the ROK’s Achilles’ heel.  The U.S. seems to be trying to obtain some leverage over other areas using the ROK government’s position of having to defend its politically sensitive rice market.

The ROK government says “Rice is not a subject for negotiation”

Regarding the U.S. demand to open up the rice market, our government continues to say that it is not acceptable.  The ROK has signed FTAs with 14 countries and regions including the U.S, yet rice has never been put on the negotiation table.  This is due to the opposition from the public and farmers’ organizations claiming that doing so would deprive the ROK of its food sovereignty.  The Minister of Agriculture, Food and Rural Affairs Lee Dong-phil also openly promised on several occasions that rice will not be included in any and all FTA negotiations, including the TPP.

Also, the ROK government cannot readily accept the U.S. demand to open up the rice market when it has already opened up (imposed tariffs on) the rice market from January, following the signing of an FTA with China.  A high-level government official said that the government has already spent too much energy in opening up the rice market this year, and an additional opening up of the rice market to join the TPP could critically damage the current administration.

The TPP negotiations expected to face difficulties

The topic of rice is quickly becoming a key issue in the TPP negotiations, and this will hinder the ROK from carrying out negotiations to join the TPP.  If the ROK even slightly opens up its rice market in exchange for joining the TPP as demanded by the U.S., then other rice exporting countries, such as Australia and Vietnam, will be expected to make the same demands.  In order for the ROK to join the TPP, it has to receive approval from all 12 of its member countries.

A related government official mentioned that the biggest variable in the TPP negotiation will be how well the ROK manages to defend its rice market during its negotiations with the U.S.

2. LIVESTOCK ISSUES

<4/9/2015> Number of cattle, pigs in S. Korea down in Q1 [English, CSY]

http://www.koreaherald.com/view.php?ud=20150410000632

Summary: The number of livestock in South Korea fell on-year in the first quarter of 2015 due to the spread of animal diseases and fewer calves being bred, government data showed Friday.  The data by Statistics Korea revealed there were just under 2.66 million cattle in the country, down 3.6 percent or 101,000 head from the previous quarter. Pigs were down 119,000 or 1.2 percent on-quarter.  The office said foot-and-mouth disease (FMD) outbreaks resulted in the fall in the number of pigs. The data showed some 111,000 pigs were culled because of the highly contagious FMD from December through February.

Compared to the year before, the steady rise in prices caused more sows to be bred, which pushed up overall numbers.  The number chickens in the country rose 1.8 percent in the first three months of 2015 from the previous quarter, with that for ducks also gaining 1.9 percent. As of late March, there were some  68.88 million chickens in the country and 7.68 ducks, according to the data.

<4/13/2015> S. Korea's per capita meat consumption jumps nearly fourfold in 3 decades [English, CSY]

http://english.yonhapnews.co.kr/business/2015/04/13/69/0501000000AEN20150413001300320F.html

Full text: South Koreans are consuming more meat than ever while their annual intake of rice continues to set record lows every year, a government report showed Monday.  According to the report from the Ministry of Agriculture, Food and Rural Affairs, the country's annual per capita consumption of meat came to 42.7 kilograms in 2013, up nearly four times from 11.3 kg in 1980.  Such a growth was largely attributed to a change in people's taste.  "The country's meat consumption jumped greatly as people's eating habits are becoming more and more Westernized," a ministry official said.  The per capita consumption of vegetables rose 41.3 percent to 170 kg per year over the cited period while the annual intake of rice has nearly halved from 132.4 kg in 1980 to 67.2 kg in 2013.  As the country's meat consumption has expanded, its meat imports have continued to grow, with its self-sufficiency rate dropping from 97.8 percent in 1980 to 72.8 percent in 2013.   In 2013 alone, South Korea imported 267,578 tons of beef, along with some 400,000 tons of pork.  On average, each South Korean consumed 20.9 kg of pork, 11.5 kg of chicken and 10.3 kg of beef in 2013, the report said.

3. MARKETING ISSUES

Imports of Fresh Fruits on a Strong Increase … Korean Consumers are Less Loyal to Local Products [Korean, OSY]

http://www.hankyung.com/news/app/newsview.php?aid=2015042083941

Summary: Korea’s total imports of fresh fruits amounted to 666,000 metric tons in 2014, up 40 percent from 2005.  Reduction of price due to free trade agreements that Korea has developed with trade partners was a key reason for the import growth.  For example, wholesale market price of imported cherry declined from 15,000 won in 2013 down to 9,000 won per kilogram in 2014.  As a result, sales of local fruits saw a significant decline in recent years.  For example, sales of local fresh fruits in E Mart during the first quarter 2015 declined 17.8 percent for pear; 15.7 percent for Korean melon; 9.7 percent for tangerine orange; and 2.1 percent for apple compared to the same period of the previous year.  Market analysts also point out that Korean consumers are getting less loyal to local agricultural products.  According to a consumer survey by Korea Rural Economic Institute, the percentage of Korean consumers who replied that they were going to purchase local agricultural products regardless of the price has continued to decline from 37 percent in 2009; 34.1 percent in 2012; to 29.5 percent in 2014.

Meat Consumption Continues to Increase .. Per Capita Consumption Amounts to 43 Kg in 2013 [Korean, OSY]

http://news.donga.com/3/all/20150414/70686202/1

Summary: According to ‘Key Agricultural Statistics 2014’ released by the Ministry of Agriculture on April 13, each Korean consumed 42.7 kg of meat in 2013, which was 7 kg higher than the last survey in 2010.  Pork (20.9 kg) was the most consumed meat by Korean consumers, followed by chicken (11.5 kg) and beef (10.3 kg).  The growth of meat consumption was mainly because of expansion of western diet.  Korea’s self-sufficiency rate for meat supply has declined from 97.8 percent in 1980 to 72.8 percent in 2013.

SPC to Develop a Wheat Field in Korea … to Secure 5,000 Metric Tons of Local Wheat Supply by 2018 (Korean, OSY)

http://news.donga.com/3/all/20150409/70599537/1

Summary: SPC Group, the leading bakery store chain in Korea announced on April 8 that it has signed a partnership with the Ministry of Agriculture to develop a wheat farm in Gyeongnam province.  The project to develop a 147 hectare (ha) of wheat field in the province will help SPC to realize its plan to use over 5,000 metric tons of local wheat by 2018.  Currently, 2 million metric tons of wheat consumed in Korea rely most on imports.  Local wheat accounted for only 1.5 percent of the what consumption in 2014.

“Korea Should Further Open Up the Rice Market to Join TPP” [Korean, OSY]

http://www.hankyung.com/news/app/newsview.php?aid=2015040838121

Summary: Daniel Russell, the Assistant Secretary for East Asia Pacific Region of the U.S. State Department said in an interview with Hankook Economic Daily News recently that Korea should consider further opening up the rice market to join the TPP (Trans-Pacific trade partnership).  He mentioned that rice was a key issue that the U.S. has negotiated with Japan for Japan’s participation in the TPP, so negotiation with Korea would include the rice market opening as well.  Japan was reportedly considering to establish a separate 50,000 metric tons of rice quarter for TPP partner countries that will be subject to a low or zero import duty.  A high level Korean government official commented that “the TPP negotiation with the U.S. will not include the rice market issue”.

High Quality Chilled Meat Leads Import Growth of American Beef into Korea [Korean, OSY]

http://news.donga.com/3/all/20150407/70557971/1

Summary: According to the meat industry, Korea’s imports of American beef saw 31 percent increase during 2011-2014 in value but 1.9 percent decline in volume.  Marketers point out that American beef imported into Korea has seen a growth mainly in high quality chilled meat whereas price-oriented lower quality frozen meat is on a decline.  Marketers add that the expansion of chilled meat imports indicates that increased number of Korean consumers are getting away from negative image about American beef caused by Mad Cow Disease outbreaks.

On-line Shopping has Become the Largest Retail Industry in Korea in 2014 [Korean, OSY]

http://www.hankyung.com/news/app/newsview.php?aid=2015040526541

Summary: According to the Korean government statistics and industry reports, on-line shopping has become the largest retail industry in Korea by generating 47 trillion won in 2014.  The sales figure includes 1.7 trillion won of purchases that Korean consumers made directly from foreign on-line shops.  The growth rate of on-line shopping in 2014 (17.5%) was much higher than conventional retail industries such as hypermarkets (3.4%) and department stores (-1.9%).

Each Korean Ate 254 Eggs in 2014, Record High [Korean, OSY]

http://news.donga.com/3/all/20150402/70504668/1

Summary: According to the Ministry of Agriculture, per capita consumption of chicken eggs in Korea reached a record high, 254 in 2014, up 5 percent from the previous year.  The Ministry added that production of eggs in Korea would increase 3.8 percent this year to 660,000 metric tons.  Over 99 percent of eggs consumed was brown colored ones as Korean public maintained a wrong belief that brown eggs were more nutritious than white eggs.  White eggs were mainly consumed during the week of Easter.

Paris Baguette Launches Baguette Bread Made 100% from Imported French Wheat [Korean, OSY]

http://news.donga.com/3/all/20150403/70504749/1

Summary: Paris Baguette (PB), the leading window bakery chain in Korea with over 3,000 stores, announced on April 2 that it had launched baguette bread made 100% from imported French wheat.  PB added that French wheat was imported for the first time into Korea for this project and processed into flour by the milling company under its business umbrella.  PB pointed out that French wheat is more suitable for French style bakery products, including baguette because of low protein content and high mineral content.

Mr. Sangyong Oh

Precooked, Portion-Packed Rice Reports Strong Sales Growth … Due to Increase of Single Member Households and Dual-income Households [Korean, OSY]

http://news.donga.com/3/all/20150324/70286100/1

Summary: According to the industry, sales of precooked, portioned packed rice amounted to 180 billion won in 2014, up 8 percent from the previous year.  Although Korean are eating less rice due to diversified diet, demand for precooked, portioned packed rice are showing continuous growth.  The key driving force is increase of single member households and dual-income households that need convenient and cost saving way to prepare quick meals at home. 

Take-out Meal Market Shows Strong Growth … Industry Sales to Reach 3 Trillion Won Soon [Korean, OSY]

http://news.donga.com/3/all/20150313/70100205/1

Summary: Korean consumers’ busier lifestyle generates strong demand for take-out meals.  In particular, convenience store industry is making heavy efforts to offer higher quality products at value price.  For example, Seven Eleven has organized a chef team recruited from five star hotel kitchens to develop new take-out meal products.  Department stores and hypermarket stores are also expanding take-out meal sections.  Industry analysts forecast that current take-out meal sales in Korea, 2.5 trillion won a year, will soon grow to 3 trillion won.

Korean Consumers’ Mobile Shopping Increases 7.2 Times over the Last Two Years [Korean, OSY]

http://news.donga.com/3/all/20150312/70076783/1

Summary: According to the Korea On-line Shopping Industry Association, Korean consumers’ total spending on mobile shopping amounted to 13.1 trillion won in 2014, which was 7.2 times larger than in 2012.  Accordingly, sales of leading Korean on-line shopping malls via mobile gear (smart phone) orders showed a significant growth.  For example, G Market (www.gmarket.com, the leading on-line shopping mall in Korea) saw its sales from mobile orders increase from 4 percent of its total sales in 2012 to 38 percent in 2014.  Fashion goods (60 percent), children goods (63 percent) and food (49 percent) were the items that Korean consumers purchased via mobile shopping most often.

Youngnam Milk Closes Business .. High Ex-Farm Price of Raw Milk Due to Government Protection Endangers Korean Milk Processors [Korean, OSY]

http://www.hankyung.com/news/app/newsview.php?aid=2015030981031

Summary: Youngnam Milk, one of the oldest fluid milk processors in Korea closed the business in February 2015.  Market analysts point out that Youngnam’s case indicates the serious challenge that the Korean milk processing industry faces today.  Most of the Korean milk processors reportedly has seen a significant amount of loss in recent years because of the rising price of ingredient raw milk as well as stagnant milk consumption growth.  Currently, Korean government maintains high protection measures on behalf of local dairy farms in that ex-farm milk price is structured to increase each year based on increase of farm production cost and general consumer prices.  As a result, raw milk price supplied by local dairy farms has continued an increase over the years regardless of the supply-demand for milk in the market.  According to the Korea Dairy Processors Association, price of raw milk that Korean milk processors pays to the local dairy farms, 1,088 won per liter as of 2015, is over three times higher than in New Zealand (316 won) or over two times higher than in the U.S. (481 won).  On the other hand, consumption of fluid milk (retail packs) in Korea declined 4.7 percent in 2014 to 1.35 metric tons.  Despite the sluggish sales of fluid milk, local dairy farms are expected to increase the production under the government protection in the coming year.  Korea Rural Economic Institute has forecast that local dairy farms would increase the production 2.6 percent in the first quarter 2015 to 560,000 metric tons.  Therefore, much of the over-supply raw milk is likely to further increase the already high inventory of milk powder kept by the milk processors.

Korean Consumers’ Increased Attention to Northern Europe Brings New Products … Lotte Food Launches a Finland Themed Functional Yogurt Beverage [Korean, OSY]

http://www.hankyung.com/news/app/newsview.php?aid=2015030980581

Summary: Lotte Food launched “Benecall” on March 12 under license production agreement with Ricio, a Finland food company.  “Benecall” is a fluid type functional yogurt beverage that can help reduce cholesterol intake, according to Lotte.  It is reported that Korean consumers are developing interest in Northern European countries.  As a result there is increased launchings of new products in Korea that are themed around food ingredients and cuisine of Northern European countries.