Implications of South Korea's Foot-And-Mouth Disease Outbreak

Frozen Bone-In Beef
Published May 22, 2023
Warnings for the current foot-and-mouth disease in South Korea were increased on May 19th, 2023 as a total of 11 cases have been detected so far. Prices are now rising in the affected North Chungcheong province. If the outbreak expands, local supply disruptions will likely trigger higher prices and more imports of beef and other meat products.

On May 19, Yonhap News Agency reported that South Korea’s ministry of agriculture increased the foot-and-mouth disease (FMD) crisis warning level to its highest, at “serious”. This is applicable to affected cities/counties: Cheongju, Jeungpyeong, and seven adjacent ones. As of May 19th, there were nine cases of FMD detected in Cheongju City and two more in Jeungpyeong County. Cattle in affected farms are being culled. Other cattle in the affected counties were vaccinated and are expected to be tested once a week for early detection. Other measures that were implemented were the closing of local beef markets and facilities, as well as transport restrictions from farms in affected areas. For now, the Korean agriculture ministry sees low chances of nationwide spread. Before the current outbreak, the last time FMD cases were detected was in 2019.

The first immediate effect of the outbreak was higher prices. According to Tridge data, Hanwoo beef prices (grade 1+B) in North Chungcheongbuk, the general vicinity of affected cities/counties, rose during the week starting May 15 after the disease cases were announced. Hanwoo beef prices rose by 3.9% week-over-week and 7.5% month-over-month to their highest level in 6 months, at KRW 18,451/kg (USD 13.91/kg). The price increase corresponds to the immediate local supply disruptions. Yet, this price level still remains 18% below the levels of the same week last year.

Source: Tridge

The next effects would depend on the possible expansion of the outbreak and the duration to contain it. Currently, beef production is high due to high cattle slaughter rates, which have resulted in lower beef prices. However, if domestic production is considerably affected by animal cullings and movement restrictions, prices could increase nationwide assuming demand stays the same.

In addition to the price increase derived from local supply disruptions, South Korean beef imports, which were previously expected to remain unchanged this year, could also see an increase. Korea’s main origin imports for beef are the US and Australia, and, with a lesser volume, New Zealand, Canada, Mexico, and others. While it would depend on the quality of the imported beef, prices are likely to be pressured up due to the intrinsic higher costs of imports, which include logistics and duties.

Now, if prices are pressured up from those two fronts, they could reach a point where demand begins to suffer due to the pressure on consumers. This year, a higher beef demand resulting from current low prices was expected, but this could change if the price increases go beyond a certain point, driving consumers to begin substituting beef for cheaper protein alternatives.This, along with high production numbers, is what triggered prices to start falling from their 2022 records.

These are the current expectations for beef supply and demand in Korea, which could be affected if the outbreak expands. According to the USDA, Korean beef and veal production totaled 330 thousand mt in 2022, representing an 8.6% increase compared to 2021. Meanwhile, as of April, production for 2023 was projected at 379 thousand mt, which would represent a 15% increase . Production was expected to experience a notable increase this year as cattle slaughter rates remain high, a trend that began in H2 2022. Low live cattle prices (derived from high supply numbers) incentivized producers to reduce their cattle inventory through more slaughtering and this is expected to continue until cattle prices recover.

Beef and veal imports in 2022 totaled 595 thousand mt and they were expected by the USDA to remain the same for 2023.

Beef consumption was estimated at 925 thousand mt during 2022, but is expected to increase to 974 thousand mt. Behind the increase in consumption is the higher availability of domestic beef and the resulting lower wholesale prices. 

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