South Korean Food and Agricultural Market Conditions Under COVID-19 Outbreaks

The IMF projected that, due to the spread of COVID-19, the global economy will exhibit a reversed growth (-3.0%) in 2020. The Korean economy is also forecast to grow a mere 0.2% in 2020 due to the huge losses in private consumption and exports for the time being, followed by a gradual moderation led by goods exports from 2H 2020. What are the impact and conditions by the global spread of COVID-19 on the food and agricultural industry in South Korea?

Graph COVID-19

Outbreak COVID-19 in South Korea

COVID-19 in general

The first local infection of COVID-19 was reported on 20 January 2020. The Korean government upgraded the disease status to 'Serious' (the highest level) on 23 February, when massive infection cases in a religious group in Daegu and Gyeongsangbuk-do province were found. Korea controlled COVID-19 through high diagnostic capability, a free press and a democratically accountable system. The government has asked people to only leave home for essential activities and has recommended the closure of bars, eat-in restaurants, religious services, and indoor sports. Daily new infections have been on a decline since mid-March.

With the strict social distancing campaign coming to an end on 5 May, South Korea began its 'everyday life quarantine scheme' on 6 May. This means various public institutions that were once closed, will re-open, and events and gatherings will be permitted. School has been confirmed to open gradually from seniors in high school on 20 May.

Local food and agricultural market

The Korean food market has been seriously hit by the on-going COVID-19 outbreak. Consumers have reduced outdoor activities dramatically, including shopping and dining trips, since 20 January 2020.

Most food retailers have ample supplies, and prices have been stable. Online food sales have skyrocketed. Grocery stores have seen an increase in sales as well as more people eat at home. Restaurants have been hit hard as people implement social distancing.

From a survey with Dutch food companies in Korea, the sales of Dutch food were observed to be stable. Although the sales in off-line markets dropped drastically, on-line sales offset the losses.

Korean agricultural production is threatened by a shortage of migrant labor due to Covid19-related travel restrictions. Other inputs remain in sufficient supply. Market conditions have impacted some product exports and smaller producers that supply school cafeterias, which have been closed for a prolonged period. Like other countries, the flower sector is also largely impacted due to decreasing consumption amid the crisis. The society is campaigning for flower promotion.

Trade

Air freight fares are on average 3 times higher than normal prices as cargo flights are restricted due to COVID-19. Sea freight is also influenced by soaring air freight fares. Some sea transportations were delayed or cancelled. The fares slightly went up, sometimes 1.5 times higher than average, but has been stabilized since April.

Trade has not been significantly disrupted, although some importers report a large drop in sales. Agri-food imports decreased about 3% in the 1st quarter of 2020 compared to the same period in 2019, while agri-food exports increased 6% due to increasing demand for Korean foods such as ginseng, kimchi and instant noodles in China.

Top 10 Agri-food commodities imported from the Netherlands into Korea in the 1st quarter 2020

Commodities

Import value (USD 1,000)

Increase rate on-year (%)

Milk powder

24,052

16.1
Pork 16,969 -18.6
Beer 7,929 26.3
Food machinery 5,248 -45.6
Feed 5,003 6.9
Malt extract 3,780 53.2
Cheese 3,419 20.2
Live plants 3,333 35.9
Cocoa preparation 3,158 -14.1
Agricultural machinery 2,809 -37.2

Agri-food imports from the Netherlands has been stable. Even live plants which have to be transported by plane have actively been imported into Korea. Trade of agri-food machinery was damaged as it needs people (engineers) s’ travel for installation. Pork was also impacted because imported pork including Dutch pork goes generally to restaurants while local pork goes to individuals.

Measures / supports by the government

KRW 1 million (around EUR 755) as COVID-19 emergency disaster relief fund were given to four-person households in May, while single- to three-person households received less. Apart from this fund, regional governments already gave some funds to local residents in April. Small businesses also received Korean government-guaranteed loans in April. The 2nd program for small businesses will start at the end of May.

For agricultural production, MAFRA (the Ministry of Agriculture) increased resources for different kinds of funds such as Disaster Prevention Management Fund and Raw Material Purchase Fund, and decreased interest rates and farm machinery rental fees for farmers. Also the government has found new ways to support farmers that are severely affected by COVID-19 pandemic.  With the schools closing, the organic farmers have lost their main client which were the school canteens. As a way of compensation, the Korean government has bought most of the organic products and delivered them as food packages to those under quarantine.

Since air freight fares stay high, Korean government has supported farmers to export fruits or vegetables into ASEAN countries by ship, instead of plane. In pilot exports of melon and strawberry, it is proven to be successful in terms of economic feasibility and quality (freshness).

Since Korean inspectors cannot come to the Netherlands for registration / inspection of Dutch agri-food companies due to COVID-19, Korean government has decided to replace some field inspections to paper inspections, or exempt field inspections temporarily.

As a response of EU’s measures on accepting copies of certificates from 3rd countries, Korea has also decided to accept copies of certificates from EU member states for all kinds of agri-food products.