South Korean beef prices article

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ddg1263

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http://blogs.wsj.com/korearealtime/2012 ... meRealTime

By Evan Ramstad

South Korean cattle farmers staged another protest in Seoul Monday to draw attention to a plunge in wholesale prices that they say are driving them out of business. Meanwhile, across the Pacific, U.S. cattle prices are soaring as supplies are at the lowest level since 1973.


European Pressphoto Agency
South Korean farmers protest falling cattle prices on Monday in Seoul.
The disparity can be explained in part by South Korea’s disconnection from world agriculture markets. With big tariffs that slow food imports, South Korean commodity prices follow their own path.

In 2008, when consumers in the rest of Asia were upset by sharp increases in rice prices, South Koreans saw little change. They were already paying some of the world’s highest prices to farmers operating in a closed market.

Now, at a time when U.S. farmers are watching Argentina’s hot summer days and Brazil’s cattle output for the effect on their own planting and selling plans, South Korean farmers remain mostly locked in their own centrifugal force.

Some media accounts of the current farmer crisis in South Korea blame rising imports of beef from the U.S. and elsewhere for depressing Korean prices. But U.S. imports, which were halted from 2003 to 2008 on fears of mad-cow disease, haven’t yet recovered to half of their pre-2003 levels. And the South Korea-U.S. free trade agreement, which will force South Korea to lower food tariffs, hasn’t yet taken effect.

Instead, the reason South Korean wholesale beef prices have plunged 22% compared to a year is simple: farmers are raising too many cattle for the market to bear. South Koreans consume only about one-third of the beef per year that Americans do, so the market is small for starters. On top of that, despite government warnings and last year’s outbreak of foot-and-mouth disease, farmers have continued to build up their livestock herds.

Some people are blaming the Agriculture Ministry for not enforcing a cap on cattle breeding. Others say that farmers became overconfident in the popularity of Korean-grown beef, which everyone know as “Han-woo.”

But the pressure is only starting on farmers. The FTAs with the U.S., European Union and ones in the works with Canada, Australia and New Zealand, are likely to force Korean farmers to shed the inefficiencies that have kept food prices so high in South Korea.

To understand what’s ahead consider that South Korean farmers are upset that the per-pound price of Korean wholesale beef has plunged to 6,190 won, or about $5.36.

In the U.S. on Friday, April cattle futures prices on the Chicago Mercantile Exchange closed at $1.265 a pound, the highest price since 1964.







The thing that catches my eye is the price the south Korean farmers are getting for their cattle. It says in the article that they receive a 5.36 price per pound wholesale... While we get 1.26 price per pound. I am shocked that they can demand this high of a price.... It makes me realize where our market is in comparison to others around the world. Even with these high prices we are still extremely competitive overseas. I know other countries are not as out of balance, and probably we can find some examples of cheaper beef.... But all in all we have a competitive industry across the globe.


One other item that stands out to me is that they claim that our current prices were were last seen in 1964. I am sure this is adjusted for inflation.... Well the cattle farmers in 1964 were doing good because their inputs were substantially lower, and land cost was nowhere what it is now.... You could buy an acre of land in the country dirt cheap back then. Maybe this adjustment in prices we are seeing is a back lash in the supply and demand of current inventories and not trader driven as other markets follow.

If you put to many farmers out of business then someone has to provide the service...my contention has been that many cattle ranchers were just using the cattle as a tax write off, and now that everyone is broke, they need a tax " right on" instead of write offs.....couple this along with the drought and demand remaining constant or even increasing... We may se some decent pricing for beef producers... I know it is a pipe dream because someone along the line will try and eat up all the profit, but it is still encouraging that the economic pie is growing.....
 

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