Seoul - South Korea is likely to import less pork from the United States this year because of high prices and local traders' declining interest in U.S. export credit incentives, dealers said.
Falling local interest rates and the won's strength against the dollar have also dimmed expectations for the as yet unallocated U.S. export credit package for fiscal 1999, making it relatively less attractive, they said.
“U.S. pork belly exports to Korea will likely fall this year due to higher U.S. prices than those of Europe,” said a trader at Hanhwa Co Ltd.
Traders said this would give European countries a chance to boost their exports to South Korea, with Denmark and Belgium being perhaps the biggest beneficiaries, though it was difficult to say in advance exactly which nations would gain most.
U.S. pork belly prices have risen to $3,100 a tonne C&F from $2,500-$2,700 a tonne in early January, the trader said.
This compared to current European pork belly prices at $2,700 a tonne C&F, he said.
Inquiries by local importers rose in January on expectations of increasing consumption in the school and company picnic season starting from March, traders said. That was partly driving U.S. pork belly prices upward.
But they said local importers were believed to have not yet committed to major deals, unlike Japanese importers who were said to have purchased a large quantity of U.S. pork in January.
Another trader with Tong Yang Global Co Ltd said local importers would switch to refrigerated pork belly from frozen pork belly out of the United States this year, due to its better taste and shorter shipping period than that from Europe.
Frozen pork belly March futures on the Chicago Mercantile Exchange (CME) finished up 1.725 cents per lb to 61.900 cents on Friday on strong cash markets, encouraged by the food aid package to Russia.
This compared to CME pork belly March futures of 55.925 cents per lb at the end of January and 44.050 cents at the beginning of January.
Last year, several big local trading houses showed a great appetite for U.S. beef and pork belly, making using of GSM-102. Importers were profiting from using foreign exchange and interest rate differentials between local rates and dollar-based export credits, traders said.
Since then, the South Korean currency has recovered some 70% of its value against the dollar and interest rates have dropped to single digits from more than 20% last year.
But local importers failed to make good profits because of slackening pork demand and declining pork prices in the domestic market during the country's economic slowdown, they said.
The United States allocated $160 million in export credits to South Korea for the import of U.S. meat in fiscal 1998. South Korea was the largest user of U.S. export credits that year, with total purchases of about $1.38 billion of U.S. farm products.
South Korea's pork imports totalled 44,190 tonnes in the first 11 months of 1998, compared to 60,011 tonnes in all of 1997, data by the Korea Trade Information service showed.
Imports from Denmark were 21,314 tonnes in the period, followed by Belgium with 5,405 tonnes, the United States with 4,705 tonnes and Canada with 4,267 tonnes, the data showed.
This compared to imports of 25,760 tonnes from Denmark in all of 1997, 3,828 tonnes from Belgium, 6,849 tonnes from the United States and 11,635 tonnes from Canada, the data showed.
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