Short Term Outlook for EU Meat Markets22 July 2013
Prospects for an improved economic situation and lower grain prices could generate a slight increase in meat production which could reach around 43.5 million tonnes in 2014, after two consecutive years of reduced overall meat production driven mainly by lower supplies in beef and pig meat, according to the Short Term Outlook for EU Arable Crops, Meat and Dairy Markets produced by the European Commission.
Recent growth rates in poultry meat production are expected to slow down, while meat production from sheep would continue to contract after the unusual increase of this year.
In 2013, overall meat production and consumption is expected to decline for the second year in a row, driven mainly by lower supplies in beef and pig meat.
By contrast, poultry meat follows a different trend.
Prospects of improved economic situation and lower grain prices could generate a slight increase in meat production in 2014.
Prospects of Increased Beef Production in 2014
The EU-27 cattle numbers totalled 86.6 million heads in December 2012, marking a slight recovery of +0.5 per cent compared to the year before.
The cow herd remained stable after three consecutive years of steady decline, leading to reduced meat domestic availabilities throughout 2012 and lower decrease or even some stabilisation in 2013.
Nevertheless, 2014 production should increase due to recapitalisation of the cattle herd, especially the dairy herd that started in 2012. Average carcase weights are stable in the EU at around 287.6 kg (more precisely, 291 kg in EU-15 against 254 kg in EU-N12).
Tight domestic supply would bring 2013 meat imports close to 2010 level in a context of increased availability in South America after the end of the herd recapitalisation; in early 2013 compared to the corresponding period last year, Brazil exported 42,400 tonnes into EU (+40 per cent), Uruguay 19,600 tonnes (+14 per cent) while Argentina, despite a +7 per cent production forecast by USDA, diminished its shipments to 14,500 tonnes. Exports of live animals and meat are affected negatively by the reduced supply and by the ban introduced by Turkey for sanitary reasons. On the back of improved beef meat production in 2014, imports should slightly decline and exports might be lower to the benefit of the domestic use.
With firm beef meat prices this year (to note that young bulls recorded a historical high in January: € 397 per 100 kg carcase weight), per capita consumption would continue to retreat, albeit at a slower rate. Nevertheless, improvement in the economic situation of most EU countries and slightly more meat supplies in 2014 could stabilise consumption at 10.8 kg per capita (in retail weight).
The cattle herd in Croatia is stable at around 452,000 heads accounting for 0.5 per cent of total EU herd while slaughterings amounted to 216,600 heads or 46,800 tonnes in 2012 (-12 per cent against the previous year).
Decrease of Pig Meat Production in 2013 for Second Year in a Row
After two consecutive years of increased pig meat production in the European Union, 2012 marked a two per cent decrease. High feed costs, the restructuring process or the implementation of new welfare rules are the main drivers for such a decline in herd numbers and in meat production.
Tight supply conditions are likely to continue in 2013 at a very similar pace (-2 per cent) as indicated by the December 2012 survey and by slaughtering data for the first months of the year. The census set the EU live swine herd lower by 1.8 per cent against the previous year at 145.8 million heads, driven mainly by the dramatic fall in Poland (-14.7 per cent) and lower numbers in Spain (-1.5 per cent), France (-1.4 per cent) and Denmark (-0.5 per cent); on the contrary, Germany's herd, which accounts for 20 per cent of EU total, increased by 3.4 per cent, partially offsetting the decline in the other countries.
As for production, increased slaughterings in Germany (+1.3 per cent) in the first months were not enough to compensate for the declines in Denmark (-7 per cent), Spain (-3.7 per cent), France (-2.3 per cent), Netherlands (-5 per cent) and Poland (-1.4 per cent).
Lower supplies maintained meat prices at high levels throughout the first quarter of 2013 (€172 per 100 kg c.w. in March); a slight relief in prices could be observed in May due to sluggish demand, but prices started to pick up again in June. Firm prices and limited supply are expected to lead to a decrease in both consumption and exports in 2013.
On the trade side, data for the first four months indicate a decline by two per cent in pig meat exports mainly due to Russia (-2 per cent compared to the same period of last year).
April EU exports to Russia increased by 27 per cent compared to their respective 2012 figure, in spite of some restrictions introduced by Russia on certain EU meat. In addition, the Russian ban on the US and Canadian pig meat exports in place since February should favour EU exports into Russia. Nevertheless, and despite the recovery of Russian imports and the increased demand in China (+78 per cent) and Japan (+5 per cent) in early 2013, exports are expected to decline by six per cent given the limited supply over the whole year.
Projected lower cereal prices on the assumed good 2013 harvest are expected to help increase production and stabilise consumption in 2014.
With the accession to the EU, Croatia will add approximately 1.2 million heads to the EU total pig herd (December 2012 census), sourcing 86 thousand tonnes of meat per year or a small 0.4 per cent of EU pig meat production.
Slower Increase in Poultry Meat Production and Consumption
Following a strong world and EU demand fuelling the increase in domestic production in the past few years, the trend marks a slowdown in 2013. High grain prices in the first semester put pressure on margins, leading to expectations that farmers would limit 2013 production to 12.5 million tonnes, further pushing meat prices to new record levels (€197 per 100 kg in May). Despite expected lower prices for feed as of the second half of 2013, the growth rate in production could continue slowing down in 2014.
As regards trade, 2013 exports seem to have reached a plateau at 1.3 million tonnes. Exports are directed mainly to some African countries (only in the first four months, volumes to Benin increased by 14 per cent and to South Africa by eight per cent). While booming to Saudi Arabia (+19 per cent), exports to Hong Kong contracted by 19 per cent.
Yet the pace of growth seen in the last years in EU exports is expected to weaken over the projected horizon on the back of increased competition on world market, high production costs and unfavourable USD/€ exchange rate affecting the competitiveness of EU poultry meat.
As for imports, once the embargo over Thai poultry was removed in July 2012, the flows into EU of salted poultry meat increased exponentially in the first months of the year (and total poultry meat coming from Thailand increased by 60 per cent compared to the same period of 2012) and could bring EU imports to a +2.5 per cent rate against 2012. Looking at 2014, no significant changes are foreseen in terms of trade.
Consumption would continue its steady development over the projected period though at a lower rate because of higher prices.
Contrasting Year for Sheep Meat
As regards this sector, 2013 would display a mixed picture concerning the development in production: the first part of the year would be characterised by a large number of slaughterings taking place in the United Kingdom and Ireland (+8.5 per cent and 30 per cent) because of a large carry-over of lambs from 2012 driven by unfavourable weather conditions; this increase is expected to be counterbalanced by lower production in the second half of the year as a result of a lower productivity and reduced flock numbers in the key producing countries (-1.2 per cent in Spain, -2 per cent in Greece, -2.2 per cent in France and -11.7 per cent in Italy). On average, the sheep and goat meat production in the EU is expected to increase by 0.9 per cent in 2013. This increase shall be considered exceptional and of short length as in 2014 production is expected to resume declining.
As shown in the graph 1, heavy lamb prices started to recover as of February averaging €520 per 100 kg in May.
On the trade side, despite high imports in the first four months (+12 per cent higher volumes from New Zealand accounting for 87 per cent of EU sheep meat imports), expected tighter supply from this trade partner in the second part of the year should limit the 2013 overall increase to 1.9 per cent. In 2014 imports are expected to expand by a limited 3 thousand tonnes.
2013 total consumption is likely to increase after several years of continuous decline thanks to higher availabilities implying relatively lower prices in 2013.