By Oh Young-jin
Staff Reporter
Anybody who goes to a neighborhood butcher's or department store's food section would wonder why Korean beef is so expensive, if they are not already overwhelmed by its price tag and can't even think about buying it.
A recent report by the Korean Agro-Fisheries Trade Corp., a semi-government organization, gives part of the explanation, blaming ``margins'' pocketed by middlemen and retailers for the exorbitant price of Korean beef.
In a nutshell, a rancher sells a cow for 5 million won or $5,000, but the price is jacked up by 3 million won to 8 million won when it is carved into various cuts and turned into processed products before being placed on display for consumers at retail shops.
The report cites a rancher in Hoengseong, Gangwon Province, the area from which the best Korean beef originates, who hands over his ``subprime'' 650kg cow for 5.26 million won to middlemen called ``collectors.''
The collectors sell it to meatpackers, adding 340,000 won to the bill as fees for slaughtering, transportation and refrigeration plus margins. Now the price goes up to 5.6 million won before retailers take over.
The report says that it is retailers who jack up the price. They include 1 million won for rent and personnel expenses and add another 1.67 million won for profit margins. When consumers buy Korean beef in cuts, the final cost of the cow has risen to 8 million won.
The finding, however, doesn't entirely blame retailers alone for the price inflation of Korean beef.
For ranchers who use a coop to directly deal with retailers, additional relevance is given to the common belief that middlemen are wedged in a protracted process between ranchers and consumers.
For instance, a Hoengseong rancher hands over a cow for 7.43 million won, which also includes 120,000 won for slaughtering, to the so-called ranchers' association. The association adds 1.25 million won for expenses and fees before handing it over to a logistics center. The center adds 1.28 million won as sale fees to the price, which now comes up to 9.96 million won.
Retailers beef up the price tag with margins and expenses of 2.3 million won, which brings up the final price to 12.3 million won. In this case, a rancher gets less than 60 percent of the price charged to consumers.
The report says that these two Hoengseong cases reflect the general situation nationwide as ranchers only get about 61 percent to 63 percent of the price charged to consumers for their cattle.
``The protracted process standing between ranchers and consumers should be streamlined with margins added in between to be rationalized in order to bring competitiveness to Korean beef,'' Oh Se-il, a senior researcher at the Korean Rural Economic Institute, was quoted by Yonhap News as commenting in the report.
Oh suggested the consolidation of production, processing and wholesaling, while organizing many cottage industry-level ranchers into bigger corporate types.