Korea's pricey Brazilian egg imports put large taxpayer subsidies under scrutiny

Brazilian eggs, originally imported to tame inflation, are proving an expensive proposition for the government. At 39,000 won ($29) per tray, they cost three to four times as much as eggs imported from countries such as the United States. Further, the government also is spending heavily to make them affordable to consumers.

Of the 133.24 million eggs the government imported through September, 125.78 million came from the United States, according to Agriculture Ministry data provided to People Power Party (PPP) Rep. Kim Yong-tae on Sunday. By country, Thailand supplied another 5.62 million eggs, Brazil 1.12 million and Denmark 720,000.

Brazilian eggs sell for roughly 100 won each at the farm gate, according to the Center for Advanced Studies on Applied Economics at the University of Sao Paulo. Airfreight and import duties push their landed cost sharply higher, but the government has been covering the gap between import costs and the prices charged to consumers.

Brazilian eggs also face a 27 percent import tariff, far higher than the zero duty on U.S. eggs, 5 percent on Thai eggs and 1.6 percent on Danish eggs. Although the government has reduced tariffs on selected imports to curb inflation, it left fresh eggs from Brazil out.

The government helped bring the retail price of imported eggs down to around 4,980 won per tray at major supermarkets in July and August. It supplied retailers with eggs at an average of 131 won each, regardless of where they came from, according to the Agriculture Ministry.

The government covered the difference between import costs and supply prices with public funds, including the Livestock Development fund. The government budgeted about 120 billion won for fresh egg imports.

“Shouldn't the government have invested in Korea's domestic egg industry instead of using the Livestock Development fund and supplementary budget funds to import foreign eggs?” Rep. Kim said during a parliamentary audit on Wednesday.

The origins of the Brazilian egg imports have also come under political scrutiny. The opposition party has questioned why the import process moved forward after a Korea-Brazil summit in February.

“Brazilian President Lula is among the most left-wing presidents in South America,” PPP leader Jang Dong-hyeok wrote on Facebook on Saturday. “Was looking after the left at home not enough? Did they have to extend the favor to the international left?”

Agriculture Minister Song Mi-ryung dismissed the allegation at a parliamentary audit. “There is no connection,” she said.

The government maintains that the imports were necessary to address domestic egg shortages at the time. Last winter's outbreak of highly pathogenic avian influenza forced the culling of 11.34 million egg-laying hens, which reduced production and drove up prices.

“The measure was a short-term response to egg shortages, aimed at easing costs for consumers and encouraging retailers to cut prices,” the Agriculture Ministry said in an explanatory statement issued Sunday.

The price of eggs eased from 7,418 won per tray in mid-July to 6,937 won in early October. Yet the decline cannot be attributed to imports alone, as a recovery in domestic production also helped ease price pressures.

The government also described the Brazilian imports as a test of alternative supply sources, part of an effort to move beyond its heavy dependence on U.S. eggs.

An outbreak of highly pathogenic avian influenza in the United States earlier this year restricted egg imports from major producing regions, while heat waves in Spain and the Netherlands reduced local output and made imports from those countries more difficult, according to the government.

“Brazil is a major livestock exporter, and its location in the Southern Hemisphere means its seasons are opposite to ours,” an Agriculture Ministry official said. “That makes it a valuable alternative supplier as we prepare for winter avian influenza outbreaks.”

Most imported eggs sold at major supermarkets come from the United States.

“The United States has a well-established system for tracking eggs through the supply chain, including records of when they were laid,” a source from a major supermarket chain said. “But verifying distribution systems in countries such as Brazil and Thailand requires more scrutiny, which makes large retailers cautious about carrying their eggs.”

The government's heavy spending on import subsidies has also fueled debate over whether such measures can keep inflation in check over the long term.

The spending gap is stark. While the government has set aside 120 billion won for egg imports, direct facility subsidies for domestic egg producers totaled just 9.7 billion won over the past nine years, according to Rep. Shin Chang-sik of the Rebuilding Korea Party.

Production could face further pressure when new rules requiring more space for each laying hen take full effect in September next year, raising the minimum from 0.05 to 0.075 square meters (0.54 to 0.81 square feet).

The controversy is hardly new. During the 2017 avian influenza outbreak, the government imported fresh eggs from the United States for the first time by subsidizing half the airfreight costs and waiving tariffs. The support amounted to roughly 4,600 won per tray in taxpayer money. But imports fell short of targets, and critics argued that the policy offered little more than temporary price relief.

“The money would be better spent improving domestic supply and distribution channels and strengthening production systems that can withstand avian influenza outbreaks,” an industry source said.

BY AHN HYO-SEONG [[email protected]]