GAIN reports 2015: South Korea's domestic demand outpacing production capabilities

With the growing interest in higher quality cheese, South Korea's market is expected to grow, according to South Korea: Dairy and Products Annual, an assessment by USDA's Global Agricultural Information Network (GAIN). But, due to the high price of domestic raw fluid milk, the local cheese industry is in an unfavorable position.

Korea is still at a beginning stage in terms of product variety and consumption patterns. Importation of premium products is likely to accelerate due to favorable free trade agreements. Both the Korea-U.S. and Korea-EU free trade agreements reduce the tariff on cheese to 0% by 2026.

Growth in fluid milk product sales value is being driven by demand for healthier premium products, despite a decline in volume sales. Many consumers traded up to products with more health benefits. Currently, the majority of local drinking milk products are pasteurized at very high temperatures in order to maximize efficiency against cost. The rapid growth of lower-temperature pasteurized milk has a higher average unit price.

New government price controls pushed average drinking milk prices higher in 2014. The value of drinking milk products are expected to increase at a rate of 3% between 2014 and 2018, at constant 2014 prices. The local raw fluid milk price jumped 13%, to $1 per liter, since January 2015, recording the highest raw fluid milk price in the world.

Probiotics has become the new buzzword in the health food industry in Korea. In 2014, yogurt grew 8%, reaching sales of U.S. $2.5 billion. Drinking yogurt was the best sales product in 2014.

In 2014, $56 billion in local dairy product sales were up 1% from 2013. Domestic raw fluid milk production increased 5.8%; however total raw fluid milk consumption increased by only 2.1%, which was satisfied by a 12.2% increase in imports. Drinking milk products by value decreased by 2.7% in 2014 to reach 1.64 million metric tons.

Cheese sales increased by 9% in current volume terms to reach 118,000 metric tons in 2014. Unprocessed cheese sales increased by 12% in 2014, contributing 80% of overall sales volume for cheese in the year.

Read: South Korea: Dairy and Products Annual

USDA's Global Agricultural Information Network (GAIN) provides regular assessments of international commodity and trade conditions. For more information, or for an archive of all FAS GAIN reports, visit