Introduction

Significant income growth in the Republic of Korea has led to an increase in living standards and changes in consumer diets to include a higher proportion of meat, particularly beef (Kim et al. 2007). However, beef production in the Republic of Korea has not been able to keep pace with the strong growth in demand because of limited production capacity and rising costs of production.

The strong demand for beef, together with a domestic supply shortage, has resulted in a strong rise in consumer prices for beef, especially for those beef cuts which are highly preferred by Korean consumers. The Republic of Korea has progressively opened its market to imports by liberalising its beef import regime and, as a result, imports of beef have become increasingly important in meeting the growing demand. In 2007, imported beef accounted for 53 per cent of the Republic of Korea’s total beef consumption.

The United States and Australia have been the two major foreign suppliers of beef to the Republic of Korea. However, the discovery of BSE (bovine spongiform encephalopathy or ‘mad cow’ disease) in the United States in December 2003 resulted in the Republic of Korea imposing an import ban on US beef. In the absence of US beef, Australia increased its share of the Korean beef market, reaching 73 per cent of total beef imports in 2007. Also, Australian beef exporters have increasingly adapted to meet the specific quality preferences of Korean consumers. For example, during the absence of US beef, Australia increased its exports of more marbled grain-fed beef which is highly preferred by Korean consumers. Grain-fed beef now accounts for more than one-quarter of Australia’s beef exports to the Republic of Korea.

In June 2008, the Republic of Korea and the United States reached an agreement to reopen the Korean beef market to the United States. Under the new beef trade protocol, the market was open to US beef produced from cattle less than 30 months of age, including bone-in beef cuts. The Republic of Korea will also open its market to US beef produced from cattle aged 30 months or more, once Korean consumer confidence improves. But US beef exporters are required to remove the BSE-transmitting specified risk materials (SRMs) from cattle of all ages. Moreover, negative consumer sentiment for US beef is likely to limit its consumption in the Republic of Korea in the short term.

However, any increase in US beef imports will reinforce competition between domestic and imported beef, as well as amongst imported beef from different sources in the Korean market.

The aim of this study is to provide an analysis of beef consumption, production and trade issues in the Republic of Korea and thus examine the prospects for Australia’s beef exports to that market. The main focus is on recent beef market developments, particularly those of the past several years, and their implications.