Hanaro Mart Offers 20% Discount on Korean Beef... Will Large Supermarkets Lower Prices Too?

Government Prepares 'Hanwoo Supply Stabilization Measures'
Lower Retail Prices... Promote Competition Through Price Disclosure
Reduce 140,000 Cows to Resolve Oversupply

[Asia Economy Sejong=Reporter Joo Sang-don] The government is collaborating with Nonghyup to offer discounted sales of Hanwoo beef centered around Hanaro Mart. This aims to stimulate additional Hanwoo consumption by lowering consumer prices in line with the decreased wholesale prices.

On the 12th, the Ministry of Agriculture, Food and Rural Affairs announced the 'Hanwoo Supply and Demand Stabilization Measures' containing these details.

The Hanwoo industry has reached a record high with 3.58 million heads raised this year, and slaughter volume increased by 80,000 heads to 950,000 compared to the previous year, with the upward trend expected to continue into next year. The Ministry views that the Hanwoo wholesale prices have entered a downward trend phase due to this supply volume.

In fact, Hanwoo wholesale prices fell 20.4% over one year, from 19,972 KRW per kg in January last year to 15,904 KRW per kg this January. However, retail prices for 1st grade sirloin only decreased by 12.9% compared to last year.

An official from the Ministry of Agriculture, Food and Rural Affairs stated, "Due to the retail price structure including direct and indirect distribution costs, the wholesale price decline is not fully reflected in consumer prices, making it difficult to create additional demand. We plan to first promote discounted sales centered on Hanaro Mart to induce price reductions at competitors such as large supermarkets, online malls, supermarkets, and butcher shops."

Accordingly, the government aims to stabilize the Hanwoo industry in 2023 through a soft landing of Hanwoo wholesale prices by creating additional demand for the expected extra supply of 24,000 tons in 2023 compared to 2022, thereby minimizing losses for small and medium-sized farmers.

First, the '2023 Delicious Hanwoo Project' will be launched nationwide, selling Hanwoo at about 20% below the national average price throughout the year, centered on 980 Nonghyup Hanaro Marts nationwide. Additionally, during Hanwoo's off-season months of February to March, June to July, and October to December, nationwide additional discount events called 'So Surprise~2023 Korea Hanwoo Sale' will be intensively held to suppress sharp drops in Hanwoo wholesale prices caused by demand decreases as much as possible.

Large supermarkets will also be encouraged to participate in the off-season discount events, and part of the discount costs will be supported through self-help funds to foster a nationwide atmosphere of expanded Hanwoo consumption.

Furthermore, meat used in processed meat products and ingredients manufactured and used by large processing and catering companies will be replaced with Hanwoo. Companies wishing to switch ingredients to Hanwoo can apply to receive partial support for the price difference. Currently, some ingredients used by Samsung Welstory are being replaced with Hanwoo through Hanwoo self-help funds, with partial support for the price difference. The plan is to expand this support by accepting applications from major processing and catering companies in the future.

As imported meat prices soar, the price of imported frozen beef has surged by more than 55% compared to last year, increasing the burden of food costs on ordinary citizens. On the 29th, a customer visiting the meat section of a large supermarket in Seoul checks the prices. Photo by Yoon Dong-ju doso7@

Efforts will also be made to expand Hanwoo exports. Due to quarantine issues, exports have so far been about 44 tons centered on Hong Kong in 2022. With South Korea's expected acquisition of foot-and-mouth disease vaccine-free status in May 2023, Hanwoo exports are planned to expand to 200 tons in 2023. To target the revitalized Hong Kong market with increasing travelers, promotional events for Hong Kong buyers, distributors, and the dining industry, local consumer tasting experiences, and Hanwoo cooking contests will be significantly expanded as part of the export promotion to Hong Kong.

In Malaysia, halal certification for Hanwoo slaughterhouses is being pursued in the first half of this year. The government plans to promote Hanwoo export expansion through promotional events targeting buyers and distributors timed with the halal certification.

To improve Hanwoo management conditions, the burden of feed costs, which account for the largest portion of farm management expenses, will be reduced. To this end, the allocation ratio of feed purchase funds (totaling 1 trillion KRW in 2023 with an interest rate of 1.8%) for Korean and beef cattle farms will be expanded from the original 50% to 60%.

Additionally, reflecting the decline in international feed grain prices and exchange rate stabilization, prices of feed from agricultural and livestock cooperatives, which hold a 31% market share, will be further reduced.

More fundamentally, measures to lower feed prices for farms will be implemented simultaneously. To expand domestic forage (grass feed) production, 7,000 hectares of paddy summer forage will be secured, and direct payments (4.3 million KRW per hectare) will be provided to farms cultivating summer forage (Strategic Crop Direct Payment System). Also, the support unit price for silage (fermented grass feed) production will be increased, and the area of specialized forage complexes will be expanded to boost domestic forage production. For imported forage, the quota tariff will be increased by 400,000 tons compared to the average year (800,000 tons), and the Hanwoo Association's quota tariff allocation will be increased.

Along with this, for farms whose management has deteriorated due to sharp Hanwoo price drops, agricultural management rehabilitation funds will be provided to allow refinancing of relatively high-interest policy funds at a low interest rate of 1%.

Additional measures for small and medium-sized farms will also be promoted. Priority support for feed purchase funds will be changed from farms raising '150 or fewer cattle' to those raising '100 or fewer cattle,' and forage quota tariff allocations will be prioritized for small and medium-sized farms.

To alleviate the issue of insufficient collateral for farms, measures to activate loans using livestock as collateral will be pursued simultaneously. For agricultural management rehabilitation funds, considering the management deterioration and urgency of support for small and medium-sized farms, a plan to simplify loan procedures temporarily to the maximum extent is being reviewed.

Reduction of the number of heads raised and strengthening of mid- to long-term supply and demand management will also be pursued. The government plans to reduce 140,000 cows by the first half of 2024 to quickly restore supply volume to an appropriate level and allow the market to autonomously achieve a soft landing of Hanwoo prices.

The government intends to lower distribution costs so that retail prices reflect wholesale prices as much as possible. A Ministry of Agriculture, Food and Rural Affairs official explained, "Retail prices are decided independently by sales points, so direct government intervention is difficult. However, we plan to continuously strengthen Nonghyup's leading role in livestock product pricing to induce competition among distribution channels and make policy efforts to minimize distribution costs."

Hanaro Marts selling Hanwoo will determine and suggest recommended retail prices reflecting weekly changes in wholesale prices, and even without discount events, Hanwoo will be sold at prices 20% lower than the national average. Also, retail prices will be regularly surveyed and disclosed through the Livestock Products Quality Evaluation Service, Hanwoo Association, and consumer organizations to induce price competition among retail stores, and transportation and processing costs will be reduced by expanding online livestock product auctions and introducing partial meat auctions.

Alongside this, the introduction of a 'Livestock Product Delivery Price Reporting System' is being pursued. Livestock contract operators, wholesalers, and processors will be required to report prices for livestock or partial meat deliveries and packaged meat deliveries, and average delivery prices will be disclosed to encourage efforts to reduce distribution costs at the retail stage. The Ministry of Agriculture, Food and Rural Affairs has completed the legislative notice for the 'Act on the Management and Support of Livestock Product Distribution' containing this system.

Junghee Kim, Director of Food Policy Bureau, Ministry of Agriculture, Food and Rural Affairs.

Kim Jeong-hee, Director of the Food Policy Bureau at the Ministry of Agriculture, Food and Rural Affairs, said, "This measure is expected to help consumers purchase Hanwoo without burden and alleviate the management burden of small and medium-sized farmers," adding, "To stabilize Hanwoo supply and demand early, active cooperation is needed, especially from full-time farmers and large-scale farms, to reduce the number of cows."

This content was produced with the assistance of AI translation services.