1. 2008 Korean Agriculture Overview for Oklahoma Ag Leadership Group February 27, 2008

2. Economy  Asia’s third largest economy after Japan ($3.2 t) and China ($4.4 t) Korea’s 2007 nominal GDP: $970 billion  2007 economic growth was ~5.0%  2008 forecast fluctuating between 4.5 - 5% U.S. economy slowdown Rising commodity prices (i.e. grains, crude oil)  Newly elected President pledging 7% growth Achieve growth through: leaner government, privatization, lower taxes and improved business climate, etc. Agriculture should no longer be considered a primary industry

3. Political  Feb 25: President Lee (GNP) Supports KORUS FTA and resumption of U.S. beef imports Plans to strengthen ties with U.S., Japan and China  April 9: National Assembly (NA) elections UDP holds majority with 141 seats; GNP has 130 seats GNP expected to gain majority in April elections  FTA ratification NA Special Session before elections possible, but unlikely

4. Demographics  Population: 50 million; homogenous  One of the world’s most densely populated countries  Rapid urbanization  One of world’s lowest fertility rates: 1.1 (births/woman)  Population growth rate forecast to fall from 0.5% to 0% in next 15 years.  Labor force growing at 1%, but is expected to contract around 2030.  Challenges of shrinking labor force ahead

5. Korea Ag Situation Korea Ag Situation  Agriculture accounts for 3% of GDP, and is expected to decline  > 60% of farmers are 60 years of age or older; and the number of farms is declining  Korean farmers have actively protested against market liberalization, imports of U.S. beef and rice, and the KORUS FTA  The main agricultural products produced in Korea are rice, root crops, barley, vegetables, fruit, livestock, poultry and fish  Rice is the heart of Korean agriculture. 80% of farmers grow rice on half of all the farm land in the country  Import restrictions (i.e. beef, rice) and government support payments keep retail agricultural product prices high

6. Agricultural Imports Agricultural Imports  In 2007 (Jan-Nov), South Korea imported $18.5 billion worth of agricultural products, 3.8 billion (20%) from the United States  Main imports from U.S. include: Coarse grain ($861 m) Hides ($344 m) Wheat ($316 m) Red meats ($290 m) Fruits & processed fruits ($250 m) Feeds & fodders ($215 m) Soybeans ($149 m) Forest products ($178 m) Seafood ($118 m) Cotton ($114 m)

7. Red Meat Imports  U.S. beef imports suspended since Oct 5, 2008  Higher pork imports with U.S. beef out of market The U.S. is #1 supplier (82,000 MT)  U.S. beef market share in 2007 only 7%; 70% in ’03  AU share now 70%; NZ 20% Red Meat Imports & Consumption (1,000 MT)

8. The Importance of Re-Opening the Korean Market to U.S. Beef Million USD

9. Poultry Meat U.S. Imports Face Stiff Competition From Brazil  2007 over-production causes total imports to fall  Imports of U.S. poultry drop 50% to 21,000 MT  However, imports of Brazilian poultry increase 50% to 21,000 MT Growing preference for Brazilian de- boned leg meat  U.S. = Brazilian market share (MT)  Market share by $: Brazil 53% > U.S. 35% Will pay extra for deboned leg meat Million USD

10. Grains  Heavy dependence on imported grains Corn: 9 million MT Wheat: 2.2 million MT Soybeans: 2.0 million MT Soybean meal: 1.2 million MT  Higher international grain prices push annual retail prices upward Compound feed: + 30 % Flour: + 34 % Bakery and confectionary: + 20-30 % Instant noodles: + 7 %  Food corn processors purchased GM corn for the first time  Government and industry cooperate to offset rising prices Government lowered tariffs Program implemented to increase domestic roughage production Industry to tap into futures markets; consolidated purchases; increased storage

11. Corn  Main U.S. competitor: China China faced with tight exportable supplies.  ∴ Imports of U.S corn could reach ~ 7 million MT in 07/08; >90 market share.  LMO Act requires new testing, labeling and documentation. Corn Imports (1,000 MT)

12. Wheat  Main U.S. competitor: Australia Australian wheat supplies tight due to ongoing drought  U.S. wheat import forecast: 1.2 MMT; ~ 50% market share  U.S. market share could climb higher if Australian supplies remain tight  MRL - malathion Wheat Imports 1,000 MT

13. KORUS FTA  Beef cuts: 15-year straight-line tariff phase out from 40% to 0% with a safeguard that begins growing from 270,000 tons  Pork: duty free on January 1, 2014  Poultry cuts: tariffs of 18 to 27 percent will be phased out in 7 to 12 years  Milling wheat: immediate duty free access  Dairy: immediate duty-free access for double the current export volume of total dairy products. Duty-free quotas for cheese, skim/whole milk powder, food whey, and butter.