Government agencies are looking into possible distortions in beef pricing as hanwoo meat remains expensive despite a plunge in homebred cattle prices.

Beef cattle prices have fallen sharply as a result of an oversupply of cows raised in Korea over the past two years, weighing heavily on cattle breeders.

The ministries of agriculture, home affairs and the nation’s antitrust watchdog are also reviewing ways to curb beef prices by fostering a large distributor run by groups of cattle breeders to simplify the five-stage distribution system to three stages.

Agriculture Minister Suh Kyu-yong said the government was seeking to reduce the portion sold through cattle markets and expand the amount directly traded through groups of livestock farmers.

“We are working with the Ministry of Public Administration and Security, which manages prices at restaurants, to find out if the beef is appropriately priced,” Suh said in a televised interview with cable news channel News Y Monday.

“The Fair Trade Commission has examined problems in the distribution process and possible distortions in pricing in order to draw plans to lower beef prices.”

Suh denied claims that the downfall in cattle prices was caused by the increased supply of imported beef.

“Hanwoo consumption last year gained 30,000 tons from a year ago to 216,000 tons,” he said.

“Hanwoo consumption can continue to grow if the quality of beef is improved and distribution costs are reduced.”

Attributing the cattle price fall to the increased number of cows raised from 2002 to 2010, when a beef cow was traded at between 5 million and 6 million won per head, Suh vowed to cut back the number by encouraging livestock farmers to kill female cows.

The government aims to weed out 200,000 female cows over the next two years to meet the optimal number of cows by the end of next year.

To cut beef supply, the government is promoting veal.

“After the ministry’s veal tasting event on Jan. 9, we are receiving inquiries from hotels, restaurants and consumers about veal, which is soft and low in fat, therefore good for diet,” Suh said.

To stabilize cattle feeding costs, the government plans to apply tariff quotas to 21 grain fodder items, up from the current 11, and keep applying zero value-added tax for the next 10 years, according to the minister.

“We will double the grass cultivation area for cattle feeding by 2014, and start offering subsidies from this year for farmers growing feed grain to induce a 20 percent cut in animal feed prices,” he said.

Suh also emphasized that the reform of Nonghyup’s business structure will not be delayed.

Under a revised Nonghyup bill which passed the National Assembly last March, the federation will set up holding companies for its distribution and banking divisions, as well as a Nonhyup bank, a life insurance company and a nonlife insurer.

“A majority of Koreans want the Nonghyup reform, and to cut the beef distribution costs, Nonghyup’s support of agricultural marketing and supply should be reinvigorated,” Suh said.

“The reform bill will go into effect on March 2 as scheduled.”

About the Korea-U.S. free trade agreement, which will gradually remove the 40 percent tariff on U.S. beef over the next 15 years, the minister said Korea’s livestock business will still be sustainable if feeding costs are slashed by 2.7 percent annually.

As for the FTA between Korea and China, Suh said the two sides will have to discuss ways to protect sensitive items in agriculture and fisheries ahead of the actual negotiations.

By Kim So-hyun (sophie@heraldcorp.com)