Meat

Background

South Korea: Chicken inventory up

Chicken production in South Korea is expected to increase in 2020 as the industry increased its parent stock broiler inventory in 2019 to meet the expected extra demand for chicken.

Broiler and hybrid chickens account for about 93% of Korean poultry production. Broiler chickens average 1.5 kg live weight and represented 76% (807 million) of the total number of slaughtered chickens in 2019. The most common hybrid chicken in Korea is the Samgye, a crossbreed between a broiler and a layer used for chicken ginseng soup in the summer season. In 2019, Samgye accounted for 16.9% (179 million) of the total number of slaughtered chickens, averaging 850 g live weight. Native-breed chickens (averaging 2 kg live weight) and spent hens made up the remaining 6-7% of slaughtered chickens in 2019.

According to a consumer survey in 2019, 63% of Korean consumers prefer to purchase whole fresh chicken compared to 37% who prefer processed chicken products. Photo: Koos Groenewold
According to a consumer survey in 2019, 63% of Korean consumers prefer to purchase whole fresh chicken compared to 37% who prefer processed chicken products. Photo: Koos Groenewold

2019: Chicken production up

In 2019, Korea’s chicken production increased to 952,000 mt, up 4% from 2018 due to ongoing market competition between chicken companies, a record high level of parent stock (PS) broiler inventory (8.3 million birds), and steady demand for chicken.

2020: Broiler parent stock inventory up

In 2020, up 2% from 2019, Korea’s chicken production is expected to increase to 971,000 mt. The chicken industry increased its PS broiler inventory by 13.5% in 2019 to meet the expected extra demand for chicken caused by the outbreak of African Swine Fever affecting pork consumption, and the planned (now postponed to 2021) 2020 Tokyo Olympics. As a result of increased PS, the number of slaughtered chickens during the first 6 months of 2020 increased by 3.4% compared to the same period in 2019.

Increase chicken production may drive prices down

In 2021, Korea’s chicken production is projected to increase marginally by 0.9% to 980,000 mt as vertically integrated chicken companies plan to add slaughtering capacity, and commercial chick production is expected to increase with expanded PS broiler inventory. The increased chicken supply may cause some losses to chicken companies and drive prices lower as chicken supply (including frozen inventory) may rise quicker than consumer demand, which remains sluggish due to the Covid-19 pandemic recovery.

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Farm-gate prices fall 30%

Despite an increase in the number of slaughtered chickens by 3.4% during the first 6 months of 2020, chicken consumption has declined due to the Covid-19 pandemic. As a result, the average farm-gate price fell by 30.7% to KRW1,028 per kg compared to the same period in 2019. In summer (June to August), about 24% more chickens are slaughtered in Korea than the rest of the year since many people participate in outdoor events where chicken is popular. Moreover, ‘Samgyetang’, Korea’s chicken ginseng soup, is a popular summer dish. However, the lower 2020 summer farm-gate prices and increased frequency of rain has reduced actual chicken consumption in this period. Due to increased chicken supply and reduced chicken consumption, domestic frozen chicken inventory has increased substantially, As of mid-July 2020, frozen chicken inventory totalled about 17,000 mt, an increase of 82.3% from July 2019.

2021 chicken consumption expected to rise

According to the Ministry of Agriculture, Food and Rural Affairs, Korea’s per capita chicken consumption was 14.8k g (boneless meat basis) in 2019, up 0.6 kg from 14.2kg in 2018. In 2021, chicken consumption in Korea is projected to increase by 4% to 1.1 million mt as chicken prices remain lower than beef and pork. Furthermore, the rescheduled summer Olympic games in Tokyo and an expected return to professional sports like baseball and soccer, which frequently draw tens of thousands of spectators, will gradually increase chicken demand throughout the year.

2020 chicken consumption expected to decline

In 2020, Korea’s chicken consumption is expected to decrease by 0.4% to 1.07 million mt, mainly due to Covid-19 causing a sharp reduction in the group catering sector. Also, the implementation of the reduced legal work hour limit to 52 hours per week (from 68 hours) this year substantially reduced the frequency of company dinners, which is popular in Korea. Hotel and restaurants were also affected by the pandemic, further driving demand down.

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According to the Korean chicken industry, about 30% of slaughtered chicken is consumed in the franchise chicken industry, about 20% for the group catering/institutional use industry and the remaining 50% is consumed through the big discount chain stores, butcher shops, restaurants, supermarkets, and traditional wet markets. According to a consumer survey in 2019, 63% of Korean consumers prefer to purchase whole fresh chicken compared to 37% who prefer processed chicken products.

2019: ASF drove chicken imports up

In 2019, Korea’s chicken imports increased to 177,797 mt, up 9.2% (15,010 MT) from 162,787 mt in 2018 due to the outbreak of ASF in Korea, China, and Southeast Asia, and a new chicken supplier to Korea in Brazil. Brazilian frozen raw chicken legs are priced 46% lower than the domestic product, making Brazilian products more attractive for further processing operations. In terms of imported products, Brazil is now the dominant chicken supplier in Korea with a 66% market share in 2019, followed by Thailand (22% share).

Chicken imports decline 10% in 2020

In 2020, Korea’s chicken imports are expected to show a decline of 10% to 160,000 mt due to increased frozen domestic chicken inventory and reduced consumption during the Covid-19 pandemic. Chicken imports during the first 6 months of 2020 decreased by 6.8% to 81,755 mt from the same period of 2019 (87,706 mt). The reduced imports were mainly from Brazil for frozen chicken (mostly deboned whole legs) and Thailand for processed chicken products, including heat-treated products.

Import prices for frozen chicken legs increased by 7.8% to around KRW2,373/kg during the first half of 2020 from the previous year due to unfavourable exchange rates and increased demand for Brazilian chicken in China caused by the ASF outbreak.

2021: Tokyo Olympic games expected to drive chicken imports up

In 2021, Korea’s chicken imports are projected to increase by 5% to 168,000 mt due to steady demand for processed chicken products and the anticipated extra demand during the 2021 Tokyo Olympic games.

2021: A slight increase in chicken exports

In 2021, Korea’s chicken exports are projected to increase slightly to 53,000 mt from the previous year (51,000 mt) due to continued demand for Korean spent hens in Vietnam and increasing chicken demand in Hong Kong. In 2019, Vietnam was the top buyer for Korean chickens (45,455 mt), accounting for 92% of total chicken exports, followed by Hong Kong with 4% (1,818 mt).

The information in this article as been extracted from a USDA GAINS report prepared by Sunyoung Choi and Tymothy McGuire.