South Korea is one of the most reliable export markets for U.S. agricultural goods. Its vibrant economy offers easy access to modern retail outlets and is home to a large urban population seeking convenient and healthy food products. Increasing wealth, a growing number of women in the workforce, and a younger generation seeking international foods are also contributing to the rise of convenience stores, bulk retail outlets, and western-style family restaurants.
With more than 51 million people, South Korea is the third most densely populated country in the world. More than 80 percent of Koreans live in urban areas and more than 50 percent live within, or in the direct vicinity of, the capital city of Seoul. Between 2012 and 2017, Korea’s GDP grew by a cumulative 25 percent and is expected to grow by 2.7 to 3 percent annually for the next five years. The country’s per capita gross domestic product (GDP) is $39,000 (adjusted for purchasing power parity), compared to $59,500 in the United States.
According to the United Nations Food and Agricultural Organization, 70 percent of Korea’s land is mountainous terrain, unsuitable for large-scale commercial farming. Moreover, the agricultural sector accounted for only 2.2 percent of the country’s 2017 GDP and is expected to remain a minor contributor to the economy. Given the dense population and land scarcity, Korea will remain dependent on imported food to feed its increasingly wealthy population.
The United States-Korea Free Trade Agreement (KORUS) entered into force on March 15, 2012, significantly increasing export opportunities for U.S. agriculture. Although full implementation of KORUS will take more than 20 years, the bilateral agreement provides U.S. producers the ability to expand sales of bulk, intermediate, and consumer-oriented agricultural exports with the elimination of duties on almost two-thirds of U.S. agricultural exports. Products such as wheat, corn, soybeans for crushing, whey for feed use, hides and skins, cotton, almonds, pistachios, orange juice, cherries, and wine previously faced duties as high as 487 percent, but under KORUS those duties are being phased out. Additionally, many other products gained increased access through duty-free tariff-rate quotas and tariff reductions, providing U.S. exporters preferential access over many competitors.
United States Remains Top Agricultural Supplier to South Korea
With its growing economy and limited arable land, South Korea is the eighth-largest agricultural importer in the world. In 2017, those imports totaled $25 billion, led by beef, corn, food preparations, pork, and fresh fruit. The United States is Korea’s largest supplier of food and farm products, accounting for 27 percent of agricultural imports in 2017. Top U.S. competitors in the Korean market are the European Union (EU) with a 13-percent market share, Australia with an 11-percent market share and China with 10-percent market share.
Agricultural exports from the United States to Korea grew 11 percent last year, from $6.2 billion in 2016 to nearly $7 billion in 2017. Korea was the United States’ sixth largest market for agricultural exports in 2017, with the U.S. agricultural trade surplus increasing by 12 percent from 2016 to $6.3 billion in 2017. Top U.S. agricultural exports to the country include beef, corn, fresh fruit, and pork. Collectively, these top four commodities accounted for 42 percent of total U.S. agricultural exports to Korea in 2017.
During 2012 and 2013, the first two years of KORUS, unusual agronomic conditions resulted in U.S. agricultural export declines to Korea, largely due to the two largest export categories: corn and beef. Corn normally comprises more than a quarter of U.S. agricultural exports to Korea, but the 2012 U.S. drought slashed this share to just 4 percent in 2013. Korean beef imports were abnormally large the two years prior to KORUS due to the worst outbreak of foot and mouth disease in Korean history. Beginning in 2014, Korea began repopulating its herds, which coupled with high U.S. beef prices, led to the volume of imports of U.S. beef reaching unusually low levels. Beef exports to Korea have since improved, increasing rapidly since 2014 and on pace to set a new record in 2018.
Read more, and get the full U.S. Agricultural Export Opportunities in South Korea report with graphs and more. (.pdf)