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FAPRI 2010 Agricultural Outlook: World Meat

19 November 2010

Both the world beef and pork trade are starting to recover, according to the latest Agricultural Outlook from the Food and Agricultural Policy Research Institute (FAPRI).

World Beef and Veal

World beef trade recovers and is projected to continue to grow by an average rate of 3.1 per cent throughout the decade, ending at 6.7 million metric tonnes in 2019. Responding to the recovery in trade and the growth of the world price, beef production increases at an annual rate of 1.1 per cent (0.6 million metric tonnes) in the next decade, reaching 58.9 million metric tonnes in 2019.

Australia loses 1.1 percentage points of market share. Brazil keeps the leading beef exporter position and further expands its market share by 6.4 points by 2019. Argentina loses 3.0 points of market share as it favours domestic use over exports, and India loses 0.4 points. Canada loses 2.0 percentage points of market share in beef trade, while New Zealand gains 0.5 points. China becomes a net importer over the projection period.

Export restrictions and depressed returns as well as a two-year drought lead to a smaller cattle herd and cause lower beef production in Argentina. But easing of export controls and rising cattle numbers coupled with currency depreciation throughout the next decade allow Argentina to expand its net exports in the outer years, with exports reaching 530,000 metric tonnes in 2019.

Because of volume restrictions imposed by the EU and higher prices in some destinations, Brazil's beef exports decreased 10 per cent in 2009. A rebound in economic growth and an expanding cattle herd allow recovery of six per cent annually in the next decade, with exports reaching 2.75 million metric tonnes in 2019. Improvement in productivity, favourable domestic policies, aggressive promotion and a weakening currency enhance Brazil's competitiveness.

With slightly lower production and reduced export market demand, Australian net beef exports decline a little in the short run. Over the rest of the period, Australia posts a 1.6 per cent annual growth rate in its net exports. Exports of live animals grow by 4.3 per cent annually, reaching 1.30 million head in 2019.

New Zealand benefited from the compromised SPS status of other beef exporters and a weakening currency as well as from growth in its dairy sector. Despite a decrease in 2010 because of lower production, exports continue to grow over the rest of the decade at 3.0 per cent annually, reaching 666,000 metric tonnes in 2019.

Uncertainty over COOL results in weaker Canadian cattle exports despite restoration of live cattle trade with the US. After a drop of 30 per cent in 2009, exports slowly recover, ending at 1.20 million head in 2019. Meat trade is weak in the short to medium term. Beef net exports begin to increase in 2014 but reach only 221,000 metric tonnes in 2019.

China has always exported beef in the past, although the volume has been small and declining. In the long run, however, because of economic growth and its accession to the WTO, China becomes a beef importer, with net imports reaching 36,000 metric tonnes in 2019. Domestic production, restricted by poor genetics and limited good pasture land, is projected to grow 2.4 per cent annually.

EU beef consumption dropped 0.5 per cent in 2009 and will continue to revert to its long-term declining trend. With maximum decoupling of support in the beef sector, which began in 2007, and shrinking dairy animal numbers, beef production in the EU declines over the projection period. The EU was already a small net importer beginning in 2003 and continues in this position for the rest of the decade, importing 408,000 metric tonnes in 2019.

Japan's beef imports are significantly reduced because of the higher world price, weak domestic economic conditions, and a crisis in consumer confidence. A 0.5 per cent decline in production and a 1.4 per cent growth in consumption fuel expansion of net imports. Imports grow at 2.0 per cent and reach 803,000 metric tonnes in 2019.

World Pork

Recovering from a 12 per cent drop in 2009, pork trade grows by 2.8 per cent (122,000 metric tonnes) annually in the next decade, reaching 5.52 million metric tonnes in 2019. Pork production increases in the next decade at a rate of 1.9 per cent (1.85 million metric tonnes), reaching 115.46 million metric tonnes in 2019.

The EU loses 7.0 percentage points of market share, dropping from 30.3 per cent to 23.3 per cent. Also, the long-term competitiveness of the EU is not very promising, given its appreciating currency and strict animal welfare and environmental regulations. Canada's market share decreases by 6.4 percentage points, while the US gains 13.2 percentage points. Despite SPS challenges, Brazil's long-term prospects are good, with new investments to improve infrastructure and raise productivity. Brazil's market share grows by 4.4 percentage points.

Hog inventory in Canada has declined since 2006. It begins to grow in 2011. A shrinking herd and lower industry returns cause lower production in the short run. Canada's exports of live hogs to the US decline at 0.8 per cent, reaching 5.93 million head in 2019, partly because of uncertainty about country-of-origin labelling (COOL). Pork net exports decline in the short run and stay at around 0.9 million metric tonnes over the baseline.

Brazil's pork exports grow by 9.0 per cent annually, reaching 1.1 million metric tonnes in 2019. Improvement in productivity, favourable domestic policies and a weakening currency improve Brazil's competitiveness in the world pork market.

Stimulated by increased export refunds, the EU's net exports jumped by 17.9 per cent in 2008 but they decline after that and end at 1.2 million metric tonnes in 2019. Strict environmental regulations and animal welfare requirements limit the EU's long-term capability. Production is stable over the projection period, compared to the 0.2 per cent growth in consumption.

Taiwan's pork production declined 11.7 per cent between 1997 and 2008. Constrained by environmental pressures and high feed costs, production increases at 0.5 per cent, which boosts net imports by 16 per cent per year over the next decade.

Recovery in the beef and poultry sectors impacts Japan's pork sector. Consumption increases slightly, at 0.5 per cent, over the next decade, and production also increases, at 1.1 per cent. As a result, net imports decline in the short run but turn around in 2013 and reach 1.2 million metric tonnes in 2019.

Consumption recovery boosted China's net imports in 2008, with domestic production and consumption increasing four per cent and five per cent, respectively. Over the next decade, production grows at 2.8 per cent, falling slightly short of the 3.0 per cent growth in consumption. China's exports have continued to decline, and the country becomes a net importer in 2014, as growth in imports exceeds growth in exports. Net imports expand to 138,000 metric tonnes in 2019.

World Poultry

A lower TRQ in Russia reduces broiler trade in the short run but trade recovers and grows at a rate of 1.3 per cent annually. Total broiler production increases by 0.97 million metric tonnes, reaching 8.29 million metric tonnes in 2019.

The US maintains its market share. The EU remains a net importer. Brazil loses 5.1 points of market share. After losing 59.4 per cent of its exports because of AI, Thailand regains 2.6 points of market share in the next decade. Productivity improvements, product innovation and a shift to higher-valued products enable Thailand to overcome SPS concerns and its higher cost of production. Australia gains 1.2 points of market share.

Over the rest of the decade, Brazil's net exports stay at around 3.6 million metric tonnes. Fiscal incentives and subsidies from local government continue to encourage large new investments in broiler production.

In 2009, Thailand's broiler sector began to recover from the AI crisis that caused a major export drop beginning in 2004. Recovery is helped by a new TRQ from the EU, expansion of integrated producers, productivity improvements (low feed conversion ratios), reduced processing costs, investment in production innovation and a shift to higher-valued cooked products. Thailand's net exports increase by 6.5 per cent annually, reaching 635,000 metric tonnes in 2019.

The EU changed from a net exporter to a net importer in 2007 and it continues in this position. Its net poultry imports reach 29,000 metric tonnes in 2019.

Under NAFTA, Mexico removed the global TRQ and its prohibitive out-quota rates. A safeguard agreement was reached with the US, whereby a TRQ for chicken leg quarters is imposed. The product is duty free but out-quota is charged a 98.8 per cent duty. The TRQ was removed in 2008. Strong domestic demand drives net imports to grow 2.0 per cent annually and reach 577,000 metric tonnes in 2019.

With its WTO accession, Taiwan removed its quota and replaced it with a 'tariff-only regime' in 2005. As a result, imports are projected to increase 7.3 per cent annually. They reach 116,000 metric tonnes in 2019. A shift to differentiated local breeds sustains domestic production at a growth rate of 1.5 per cent per year.

Russia imposes a lower TRQ of 0.78 million metric tonnes over the next decade. Over the outlook period, quota for imports is binding, as domestic production is encouraged and grows by 3.0 per cent, exceeding the 1.7 per cent growth in consumption.

In the next decade, China's net imports grow rapidly, reaching 418,000 metric tonnes in 2019.

Further Reading

- You can view the full report by clicking here.


November 2010

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