South Korea's milk production was already in decline when an outbreak of foot-and-mouth disease devastated the Korean livestock sector in late 2010. An estimated 8% of Korea's dairy herd was culled (the swine sector was hit even harder with an estimated 30% of pigs culled), while 2011 milk production volumes were 8.9% down on the previous year.
However, 2012 has seen a recovery in livestock numbers and milk output - official sources forecast that 2012 milk volumes will be up by as much as 10%. That said, given the previously already shrinking milk volumes, there is a more serious underlying issue for Korean dairy farming: it is simply not competitive, with farmgate prices averaging US$0.864 in 2012.
This means that most of Korea's raw milk goes into the manufacture of liquid drinking milk and fresh products (yoghurt, fermented milk, lactic acid bacteria drinks). This trend is set to continue as fermented milk and drinking yoghurt demand is growing, unlike the declining market for liquid milk. Further processed products are imported or made from imported ingredients, with cheese in particularly strong demand.
Opportunities in Korea's dairy market
With large volume requirements, there are certainly opportunities for dairy exporters to take advantage of this growing demand for dairy-based ingredients and cheese, especially as Korean businesses are aggressively expanding into other Asian markets, in particular China.
This expansion drive is not limited to dairy/formula and food companies, but rather a wider phenomenon underpinned by the growing popularity of Korean culture and pop music.
How can dairy exporters tap into the "Korean Wave" sweeping through Asia?