News & Events | Taiwan Awaits Korea Beef Deal and Tourists

Taiwan Awaits Korea Beef Deal and Tourists

Although the U.S. beef issue in South Korea has attracted worldwide media attention, beef traders in Taiwan remain among the most anxious due to shifts in beef import costs likely to result from a restart of Korean imports of U.S. beef. The interest in the Korean issue was evident at USMEF's pavilion at Food Taipei 2008, which is currently being held at the city's newest exhibition hall in the Taipei suburb of Nangang.

"There is nervousness among the Taiwan trade over the recent protests in Korea. Importers are concerned how that might play out in terms of restarting U.S. beef exports to Korea," said Davis Wu, USMEF-Taiwan's director. "As a new administration like Korean President Lee's, we assume the Taiwanese government also is following events there with interest," added Wu.

Taiwan traders face the possibility of price increases in U.S. beef items popular in Korea should the latter market reopen. Future pricing directions for items such as short ribs and rib fingers are of intense interest to traders, who want clear knowledge of Korea's access status before planning future U.S. purchases as well as domestic sales from stocks. A reopening in Korea would likely lead to U.S. beef price hikes. U.S. beef has benefited in recent months from high Australian offer prices - resulting from increased sales to Russia - along with record high pork prices and product shortages.

Taiwan beef imports fell 15 percent in the first quarter as Australian shipments plummeted, but U.S. exports increased by approximately 30 percent. Through April, U.S. beef exports to Taiwan are up 29 percent compared to year ago levels. Taiwan traders at Food Taipei stated that May U.S. beef shipments were "very strong."

As in other Asian countries, consumer sensitivity to rising food prices is increasing as the costs of fuel and other staple foods increase. Taiwan's new president raised fuel prices in late May, raising the specter of inflation and causing consumers to tighten their pocket books. USMEF-Taiwan reports that retail food sales have increased, including those for meat, while the foodservice sector - especially the middle segment - is getting squeezed by a public now more reticent to spend. The slowdown comes at a critical time for Taiwan's foodservice industry as it enters one of its peak business periods, school summer vacation, when large numbers of youths fill Yakiniku houses and other restaurants.

The prospect of higher beef prices follows a spike in Taiwan's local hog prices, with live hog prices reaching record levels. This week, Taiwan hogs were trading in the range of NT$75 per kg. live weight or $1.12 per cwt. A number of Taiwan hog operations have closed their businesses following a surge in grain prices that began in the middle of 2007. A reported 800 farmers have exited the industry, according to Taiwan's Council of Agriculture. If each enterprise produced an average of 700 market hogs per year, the decline in annual production linked to the closures would equal 560,000 hogs annually. A government culling plan, undertaken in the spring of last year when prices were low, has further reduced inventories. Taiwan slaughters about 9.5 million hogs per year. Hog raising is profitable at current market prices, but production costs of NT$60-65 per kg are rising as grain and fuel prices escalate.

Traders at Food Taipei claimed this week that demand for U.S. pork imports is strong, but Taiwan's de facto ban on pork imports derived from animals fed Ractopamine has raised shipping risks and curtailed shipments. U.S. pork exports to Taiwan for the first four months of 2008 are off 18 percent in volume.

"Whereas last year the Ractopamine problem probably did not influence trade volumes that much because of low domestic prices, it’s really pinching sales to Taiwan now," said Joel Haggard, senior vice president of the Asia Pacific Region. USMEF additionally notes that container shortages are hurting all sales to the region.

While economic uncertainty increases, the Taiwanese government is moving quickly to improve relations with China in areas which could quickly benefit the local economy. Direct charter flights are set to start July 4, and 36 such services will be provided per week under the new agreement. In addition, Taiwan will allow 3,000 mainland Chinese tourists to visit the island each day, a major boost to tourism.

"Although there is some concern in Taiwan about mainland tourists being low-yield, Hong Kong's economy, including its food and beverage industry, has definitely gained by the increase in mainland visitors," said Haggard.