WASHINGTON, D.C., U.S. — A free trade agreement (FTA) between the U.S. and South Korea, commonly known as the KORUS FTA, that entered into force in 2012 has offered opportunities for the U.S. Grains Council (USGC) to further develop sales to a mature customer with a historic preference for U.S. grain products, the USGC said.
The council has been active in South Korea since opening an office in Seoul in 1972, and the country remains one of U.S. agriculture's most important markets. USGC-Korea programs have been instrumental in the growth of the country's animal agriculture and corn processing industries.
As a result of the agreement, most U.S. agricultural products locked in zero tariffs, solidifying the longstanding relationship between U.S. farmers and agribusinesses and South Korean buyers and end-users of grain and offering new room for sales of barley and distiller's dried grains with solubles (DDGS) to expand.
The FTA gives U.S. barley imports duty-free treatment and, since its implementation, the country's purchases of U.S. barley have grown quickly, totaling $1.2 million during the 2014-15 marketing year.
"The FTA significantly enhanced the competitiveness of U.S. barley in the market, and the Council played an important role in connecting local buyers with U.S. suppliers," said Haksoo Kim, USGC director in South Korea. "We assisted with an Idaho food barley trade mission during which participants visited importers, distributers and end-users to build relationships that were critical to sales."
The emergence of U.S. DDGS into the South Korean feed formulations was another opportunity gained through the FTA, which allows the corn co-product to enter the market duty free.
U.S. suppliers shipped $90 million worth of DDGS to South Korea in 2011. Since then, South Korea's purchases have grown, and the market has become the third largest for U.S. DDGS with $178 million worth bought in calendar year 2014.
"The council has analyzed the market conditions and the impact that the KORUS FTA has had to develop and implement appropriate programs and activities," Kim said. "This agreement made it possible to cultivate a new market for U.S. barley and to expand the market share of U.S. corn co-products in this cutthroat, competitive market.
"Typical programs include feed grain buyers teams, food-corn buyers teams, trade servicing and feed grain trade seminars as well as DDGS programs hosted by consultants, biotech safety evaluation committee teams, DDGS promotional activities, U.S. food barley promotional activities and more."
The trade agreement has also impacted U.S. corn as it competes with corn from South American and Black Sea origins for South Korean market share. Yet, the advantages of zero-duty tariff rate from the KORUS FTA keep U.S. corn exports flowing to South Korea as some of the top competitors, such as Brazil, Ukraine and Russia, don't have free trade agreements in place with South Korea and are faced with a 3% duty.
Kim also explained that South Korean corn buyers continue to be very conscious of both quality and price. They buy corn from six or more countries and can switch quickly to other feed ingredients when logistical or price opportunities present themselves.
"Koreans like to do business based on relationships - it reaffirms that they are getting a quality product from genuine people," said Jim Greif, a grain farmer from Monticello, Iowa, U.S., and Iowa Corn Growers Association director, who traveled on a USGC grain quality mission to South Korea in June.
Kyle Kirby, grain farmer from Liberal, Missouri, U.S., also traveled to South Korea with the council this past summer and saw the effects of the KORUS FTA firsthand.
"The goal of the mission I traveled on was to answer questions the Korean end-users had about the condition and progress of the upcoming 2015 crop," Kirby said. "Also, it was to address concerns they had about the quality of the crop."
Kirby explained that end-users in South Korea were very anxious about the 2015 crop conditions after hearing about flooded fields that prevented early planting in the U.S. As his group answered questions about the impact of the weather on the crop, he saw how important it was for the overseas buyers to build relationships and get real time updates from U.S. grain producers.
"We heard nothing but positive news regarding the U.S./Korea trade relationship," Kirby said. "They want to do business with the United States as they feel we offer the most consistent, steady supply of coarse grains and co-products."