BMI View: We believe that any significant changes in the South Korean agricultural industry will be mostly public sector-led due to the strong unions behind the industry. The numerous free trade agreements signed in 2015 , with the Trans Pacific Partnership being the most significant, signal to us that the agriculture industry is truly going through a much-needed transformation that will lead to increasing competitiveness with global agri - players. Other efforts , such as promoting high-value add food and beverages , also support our view.
Government-led efforts will benefit the industry over the longer term and help it to remain relevant. These include: the expansion of education and financial support for farmers to allow them entry into the food processing business; plans to modernise traditional methods of food production; the creation of new agricultural food districts for exporters; and the introduction of state designation of food exporting companies.
Rice consumption decline to 2018/19: 7.2% to 4.1mn tonnes. As South Koreans substitute their carbohydrate intake with bread instead of rice, consumption of the grain is expected to fall in tandem with the changing diet.
Cheese consumption growth to 2019: 1.4% to 81,000 tonnes. As Western food has become more popular in Korea, demand for cheese has expanded rapidly. The majority of cheese is consumed in restaurants and fast food outlets and comes in the form of processed cheese. Exporters with the lowest price, such as the US, have gained a market share in supplying the South Korean cheese industry.
Beef production growth to 2018/19: 19.7% to 401,000 tonnes. Even with the anticipated increase in local beef output, the country will remain reliant on imports to meet demand. Indeed, base effects are the key reason for the significant growth rate.
2015 BMI universe agribusiness market value: USD32.1bn (up from USD31.3bn in 2014; forecast to average annual growth of 2.3% to 2019
2015 real GDP growth: 3.1% year-on-year (y-o-y) (down from 3.3% in 2014; predicted to average 3.4% from 2014 until 2019)
2015 consumer price index: 1.0% y-o-y average (down from 1.3% in 2014; predicted to average 2.3% to 2019).
Since the foot and mouth disease (FMD) outbreak in December 2014, a total of 151 cases of FMD in swine have been confirmed as positive and 139,061 heads on 160 farms have been culled as of March 2015, still a relatively small number. The government has implemented quarantine measures such as: non-structural protein (the antibody known to be infected with FMD) tests on swine from infected areas; enhanced clinical tests prior to sending swine to slaughter houses; and increased test on trucks transporting feed and livestock.
We believe that the increasing appetite for Western-styled dairy products spells more opportunities for US dairy firms, especially if they adapt their high-sodium and high-cream contents to the South Korean palate, which prefers less salty and less creamy flavours. US-made cheese and butter stand to benefit the most as these dairy products experience the highest demand from South Korean consumers.