Hanwoo Beef Market Strategies in 2024 Amid Challenges and Anticipated Rise in Demand During Chuseok Holiday

South Korea’s Beef Market Overview

The South Korean beef industry, particularly the Hanwoo beef sector, has encountered several challenges in 2024. Prominent issues include high production costs, sluggish consumer demand, and increased competition from imported beef products. A significant factor contributing to the high production costs is high feed prices, which have been influenced by global grain price volatility, disruptions in supply chains, and rising freight costs since South Korea largely depends on imported feeds. For example, data from Freightos indicates that global freight prices averaged USD 5,081.75 per 40-foot container in Jul-24, marking an 18.69% increase from Jun-24 and the highest level since Aug-22.

According to the United States Department of Agriculture (USDA), beef consumption in South Korea is projected to reach 937 thousand metric tons (mt) in 2024, representing a slight 0.32% drop compared to 2023. This decrease is due to tightened consumer spending, driven by ongoing economic challenges and the market's incomplete recovery from the impacts of the COVID-19 pandemic.

The South Korean beef industry is also facing stiff competition from cheaper imported beef products. South Korea primarily imports beef from the United States (US), Australia, New Zealand, and Canada. A growing concern for domestic beef farmers is the country’s increasing openness to imports from additional countries. For example, in Jun-24, South Korea lifted trade barriers on French and Irish beef, further expanding the range of foreign beef entering the domestic market. This move has raised concerns among South Korean beef farmers, especially amid the ongoing management crisis caused by declining cattle prices.

Amid these challenges, the South Korean beef industry has faced declining beef prices, particularly in the first half of 2024, resulting in financial losses for farmers. According to Tridge's wholesale price data, the average price of grade 2A Hanwoo beef in Gimhae-si fell by 26.12%, from USD 10.68 per kilogram (kg) in W1 to USD 7.89/kg in W6. Prices then remained subdued, with regular fluctuations from W6 to W29. This price trend underscores the difficulties Hanwoo beef producers have encountered in the first half of the year.

Fortunately, there has been a positive shift, with average Hanwoo prices beginning to rise from W30. Prices have so far increased by 32.54% from USD 8.02/kg in W30 to USD 10.63/kg in W35. This upward trend is attributed to the anticipated high demand for Hanwoo beef during the upcoming Chuseok holiday in Sep-24.

Figure 1: South Korea’s Hanwoo Beef Price Trend from 2023 to 2024

Support from the Government and Market Stakeholders

Given the current challenges and the upcoming holiday season, the South Korean government has outlined both short-term and long-term strategies to stabilize supply and demand within the Hanwoo beef industry. For instance, the Ministry of Agriculture, Food, and Rural Affairs (MAFRA) plans to collaborate with key stakeholders to offer Korean beef gift sets at a discount of 30% or more during the Chuseok holiday season.

Additionally, the government aims to increase the availability of practical gift sets priced under USD 74.92 (KRW 100,000), with a planned year-over-year (YoY) increase of around 16% in supply and a 9% increase in sets priced below USD 74.92. MAFRA also intends to continue holding large-scale discount events, offering up to 50% off on Hanwoo beef until the end of 2024. Further efforts to boost consumption include supporting the supply of Korean beef raw meat to catering and processing companies, enhancing market accessibility, and encouraging greater consumer engagement.

Figure 2: Premium Korean Hanwoo Beef Set

The National Agricultural Cooperative Federation (NongHyup Agribusiness Group) committed USD 180 million (KRW 240 billion) to support consumption promotion events aimed at stabilizing beef prices and enhancing the development of forage production and distribution systems. During the first half of 2024, NongHyup Agribusiness Group facilitated the sale of 29,000 cattle through 11 discount events, backed by USD 69 million (KRW 91.6 billion) from NongHyup Agribusiness Group and USD 3.5 million (KRW 4.66 billion) from self-help and government funds. NonghHyup Agribusiness Group plans to host nine additional discount events in the second half of 2024, aiming to sell another 31,000 cattle. Furthermore, NongHyup Lively, an online shopping platform specializing in livestock products, is running a half-price Korean beef promotion in partnership with local livestock cooperatives.

In addition to price stabilization efforts, NongHyup Agribusiness Group has significantly supported the South Korean beef industry by reducing feed costs. Since introducing a USD 0.015/kg (KRW 20/kg) subsidy in Dec-22, NongHyup Agribusiness Group has reduced feed prices six times through Aug-24. Despite challenges like a high exchange rate in Apr-24, feed prices were reduced again by USD 0.0075/kg (KRW 10/kg) earlier in the year and by another USD 0.015/kg (KRW 20/kg) in Aug-24. These reductions have resulted in a total profit of USD 300 Million (KRW 400 billion) for farmers from 2022 to 2024. NongHyup Agribusiness Group also plans to allocate USD 75 million (KRW 100 billion) to agricultural and livestock cooperatives managing forage in 2024, marking an increase of USD 9.8 million (KRW 13 billion) from 2023. This investment is expected to lead to the distribution of 600 thousand mt of forage in 2024.

Leveraging Support from the Government and Market Stakeholders

With strong support from the government and key stakeholders, South Korean beef producers should leverage the price stabilization programs and feed cost reductions to enhance their financial stability. One effective strategy is to form partnerships for bulk-purchasing feed, which can significantly reduce individual costs. Additionally, producers should engage with policymakers to advocate for trade policies that protect domestic beef from cheap imports. Diversifying revenue streams is also crucial, with producers exploring value-added products like premium cuts, ready-to-cook Hanwoo meals, or organic beef, which can command higher margins.

As beef demand is expected to rise during the Chuseok holiday, wholesalers and retailers need to develop strategies that attract customers by aligning with current market trends. For example, tiered pricing can cater to different consumer segments, providing premium options for high-end markets and more affordable sets for budget-conscious buyers. This approach can include practical gift sets and discounted bulk purchases during Chuseok. Collaborating with restaurants and culinary influencers to create signature dishes featuring Hanwoo beef is another viable strategy. Promoting these dishes through social media platforms like TikTok and showcasing them at food festivals can significantly boost brand visibility and consumer interest.

Looking ahead, Tridge predicts a modest increase in beef prices during the Chuseok holiday season, fueled by anticipated higher consumption and intensive promotional campaigns. However, 2024 prices could remain slightly below those of previous years, largely due to the competitive pricing of imported beef. Despite this, premium Hanwoo products are expected to see strong demand due to their high quality, tenderness, and marbling. The cultural importance of providing the best quality food for family gatherings and ancestral rituals will drive this demand. As a result, producers and market players are likely to benefit significantly during this gift-giving season.