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2008 Korean Agriculture Overview for Oklahoma Ag Leadership Group February 27, 2008

2008 Korean Agriculture Overview for Oklahoma Ag Leadership Group February 27, 2008. Economy. Asia’s third largest economy after Japan ($3.2 t) and China ($4.4 t) Korea’s 2007 nominal GDP: $970 billion 2007 economic growth was ~5.0% 2008 forecast fluctuating between 4.5 - 5%

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2008 Korean Agriculture Overview for Oklahoma Ag Leadership Group February 27, 2008

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  1. 2008 Korean Agriculture Overview for Oklahoma Ag Leadership Group February 27, 2008

  2. Economy • Asia’s third largest economy after Japan ($3.2 t) and China ($4.4 t) • Korea’s 2007 nominal GDP: $970 billion • 2007 economic growth was ~5.0% • 2008 forecast fluctuating between 4.5 - 5% • U.S. economy slowdown • Rising commodity prices (i.e. grains, crude oil) • Newly elected President pledging 7% growth • Achieve growth through: leaner government, privatization, lower taxes and improved business climate, etc. • Agriculture should no longer be considered a primary industry

  3. Political • Feb 25: President Lee (GNP) • Supports KORUS FTA and resumption of U.S. beef imports • Plans to strengthen ties with U.S., Japan and China • April 9: National Assembly (NA) elections • UDP holds majority with 141 seats; GNP has 130 seats • GNP expected to gain majority in April elections • FTA ratification • NA Special Session before elections possible, but unlikely

  4. Demographics • Population: 50 million; homogenous • One of the world’s most densely populated countries • Rapid urbanization • One of world’s lowest fertility rates: 1.1 (births/woman) • Population growth rate forecast to fall from 0.5% to 0% in next 15 years. • Labor force growing at 1%, but is expected to contract around 2030. • Challenges of shrinking labor force ahead

  5. Korea Ag Situation • Agriculture accounts for 3% of GDP, and is expected to decline • > 60% of farmers are 60 years of age or older; and the number of farms is declining • Korean farmers have actively protested against market liberalization, imports of U.S. beef and rice, and the KORUS FTA • The main agricultural products produced in Korea are rice, root crops, barley, vegetables, fruit, livestock, poultry and fish • Rice is the heart of Korean agriculture. 80% of farmers grow rice on half of all the farm land in the country • Import restrictions (i.e. beef, rice) and government support payments keep retail agricultural product prices high

  6. Agricultural Imports • In 2007 (Jan-Nov), South Korea imported $18.5 billion worth of agricultural products, 3.8 billion (20%) from the United States • Main imports from U.S. include: • Coarse grain ($861 m) • Hides ($344 m) • Wheat ($316 m) • Red meats ($290 m) • Fruits & processed fruits ($250 m) • Feeds & fodders ($215 m) • Soybeans ($149 m) • Forest products ($178 m) • Seafood ($118 m) • Cotton ($114 m)

  7. Red Meat Imports Red Meat Imports & Consumption (1,000 MT) • U.S. beef imports suspended since Oct 5, 2008 • Higher pork imports with U.S. beef out of market • The U.S. is #1 supplier (82,000 MT) • U.S. beef market share in 2007 only 7%; 70% in ’03 • AU share now 70%; NZ 20%

  8. The Importance of Re-Opening the Korean Market to U.S. Beef Million USD Million USD

  9. Poultry MeatU.S. Imports Face Stiff Competition From Brazil • 2007 over-production causes total imports to fall • Imports of U.S. poultry drop 50% to 21,000 MT • However, imports of Brazilian poultry increase 50% to 21,000 MT • Growing preference for Brazilian de-boned leg meat • U.S. = Brazilian market share (MT) • Market share by $: Brazil 53% > U.S. 35% • Will pay extra for deboned leg meat Million USD

  10. Grains • Heavy dependence on imported grains • Corn: 9 million MT • Wheat: 2.2 million MT • Soybeans: 2.0 million MT • Soybean meal: 1.2 million MT • Higher international grain prices push annual retail prices upward • Compound feed: + 30 % • Flour: + 34 % • Bakery and confectionary: + 20-30 % • Instant noodles: + 7 % • Food corn processors purchased GM corn for the first time • Government and industry cooperate to offset rising prices • Government lowered tariffs • Program implemented to increase domestic roughage production • Industry to tap into futures markets; consolidated purchases; increased storage

  11. Corn Corn Imports (1,000 MT) • Main U.S. competitor: China • China faced with tight exportable supplies. • ∴ Imports of U.S corn could reach ~ 7 million MT in 07/08; >90 market share. • LMO Act requires new testing, labeling and documentation.

  12. Wheat Wheat Imports 1,000 MT • Main U.S. competitor: Australia • Australian wheat supplies tight due to ongoing drought • U.S. wheat import forecast: 1.2 MMT; ~ 50% market share • U.S. market share could climb higher if Australian supplies remain tight • MRL - malathion

  13. KORUS FTA • Beef cuts: 15-year straight-line tariff phase out from 40% to 0% with a safeguard that begins growing from 270,000 tons • Pork: duty free on January 1, 2014 • Poultry cuts: tariffs of 18 to 27 percent will be phased out in 7 to 12 years • Milling wheat: immediate duty free access • Dairy: immediate duty-free access for double the current export volume of total dairy products. Duty-free quotas for cheese, skim/whole milk powder, food whey, and butter.

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