* Local beef prices at record high due to declining herd
* Rebuilding herd expensive given record high calf prices
* Jan-Aug beef imports at highest since 2011 -customs
* Australian beef exporters the main beneficiary
By Rebecca Jang and Meeyoung Cho
HONGSEONG, South Korea, Sept 25 (Reuters) - Soaring South Korean beef prices should be welcome news for its hard-pressed cattle farmers, but a failure to rebuild herds and customers balking at paying record levels for prized local “Hanwoo” meat mean imports are set to keep pouring in.
Overseas purchases by the world’s sixth-biggest buyer are at four-year highs and a further rise is expected in 2016 - mainly benefiting Australia - as South Koreans’ loyalty towards local beef is tested by prices climbing 35 percent in eight months.
Native bred Hanwoo cattle are often pampered by their farmers and South Koreans consider the meat top class, at least akin to Japan’s globally recognised Wagyu beef. While locals have been prepared to pay more for Hanwoo, their willingness to shell out extra may have reached a tipping point now.
“Hanwoo is the food we cannot skip on special days like holidays and rituals for ancestors, but on a regular basis my husband and I eat imported beef as Hanwoo is so expensive,” said Park Hee-jung, a 62-year-old housewife, who was shopping at a department store in Seoul.
Local beef ribs currently fetch 4,912 Korean won ($4.13) per 100 grams, almost triple the price of Australian ribs, data from Korea Agro-Fisheries & Food Trade Corp shows.
And according to a survey by Korea Rural Economic Institute, this is much higher than the 1.67 times more South Koreans are prepared to pay over the price of Australian ribs.
“It’s a tough time to sell,” said cattle farmer Min Jae-ki, who also runs a butcher’s restaurant in Hongseong, 150 kilometres (93 miles) southwest of Seoul.
“We are charging the same as before although beef prices have gone up. Otherwise customers won’t come.”
Min said the cost of supplying beef to his restaurant, where customers can barbecue meat after selecting it, had increased by 1 million won per cattle from a year ago. Margins have been squeezed further after beef prices rose to a record of 6.9 million won per 600 kg in August.
The price of Hanwoo beef is likely to rise further as cattle numbers dropped 14 percent over two years to 2.66 million this March with many small farmers forced out of business after a prolonged slump in prices since 2010.
Herds have also been decimated by outbreaks of foot-and-mouth disease and it will be difficult to rebuild them quickly with calves fetching a record price of 3.5 million won now.
“If you are buying calves you first have to punch a calculator to see how much you can earn,” said Yoo Kwan-jo, a 57-year-old farmer raising 650 cattle in Hongseong.
Almost all of the beef cattle population in South Korea is Hanwoo and breeding it requires attention to pedigree. The Korea Animal Improvement Association is the only organization approved by the state to register and evaluate pure-bred Hanwoo cattle.
Farmer Yoo said he includes corn and rye grown on the farm in the feed he gives to his cattle and even pipes music into the sheds in a bid to help stimulate healthy growth.
“As parents provide good food to help their kids grow pretty and well, we treat the cow in the same way,” said Yoo, who used to individually massage cows when he had a smaller herd, but now uses a comb machine to brush and pat their backs.
With fewer Hanwoo cattle and higher prices, South Korean beef imports have risen. Purchases from Australia rose 11 percent in the first eight months of 2015 to over 113,000 tonnes, data shows. Total imports were at 200,000 tonnes, up 4 percent on year or the highest since January-August in 2011.
“High prices for domestic beef will boost imports further next year,” said Lee Hyung-woo, a research associate at the Korea Rural Economic Institute.
Australian beef will likely be the winner with lower tariffs under a free trade agreement also helping.
In Australia, the world’s No.3 beef exporter, farmers are slaughtering at a near-record pace as a drought worsened by an El Nino weather pattern scorches pastures.
“Korea has been a very strong and stable market for us over the last three or four years ... Australia is on track to send about 150,000 tonnes beef to South Korea this year,” said Ben Thomas, manager of market information at industry body Meat and Livestock Australia in Sydney.
($1 = 1,190.6800 won)
Additional reporting by Colin Packham in SYDNEY; Editing by Tony Munroe, Ed Davies and Himani Sarkar