Another Challenging Year For The Global Beef Industry

UK - With the world’s economy facing a weak and fragile recovery from recession, 2010 is set to be another challenging year for the global beef industry according to GIRA, a leading international food industry consultancy.

19 March 2010

3 minute read

Europe

Consumer demand was clearly an issue in 2009 with consumers trading down in terms of meat type and beef cuts and GIRA are predicting that weak demand will continue to be a feature of the market in 2010. However, while the global beef market came under pressure because of the recession in 2009, the market was underpinned by tight global supplies and although prices fell from 2008 levels, they remained stronger than 2007 levels. This tight supply was exacerbated by reduced levels of international trade in beef due to the turbulent economic circumstances.

According to GIRA, global production of beef and veal fell in 2009 compared to 2008. Production was estimated to be down by three per cent in the US and a 1.5 per cent decline was estimated in the EU. Despite increases in production in Argentina, overall beef and veal production was down across the world by just over 100,000 tonnes (0.2 per cent) carcase weight equivalent (CWE) in 2009.

The decline in global production is a consequence of a decline in herd numbers. GIRA’s figures show the global herd down by 2.6 per cent between 2004 and 2009. In 2010 a further decline of five million head (0.5 per cent) is forecast, with the global cattle herd envisaged to be marginally more than 1 billion head this year. A large proportion of this decline will be in Argentina where producers have been reducing their herds due to tough trading conditions made worse by government policies aimed at keeping a lid on food inflation. In 2009, the Argentine herd declined by around two million head and it is forecast to fall by a further two million head in 2010.

The liquidation of the Argentine herd led to increased production in 2009, due to increased cull cow slaughtering. However, in 2010 this smaller herd will have a negative impact on Argentine production with GIRA forecasting that beef and veal output there will fall by nearly nine per cent this year (Figure 1). This forecast decline is significant. The Argentines have recently secured increases in their Hilton Beef Quota (an arrangement that allows specified countries to export a specified volume of premium beef to the EU under favourable trade conditions). Their ability to service this larger quota may be compromised if the forecast reduction in production is realised.

The decline in Argentine production, coupled with significant declines forecast for the USA, the EU and China (Figure 1) will drive a contraction in global beef production in 2010 with GIRA projections showing beef and veal production falling by 1.3 per cent (700,000 tonnes CWE) this year (note: Chinese figures should be considered with caution).

From an NI perspective, such a decline has some potential to create improved trading conditions for local producers, by raising the possibility of higher global prices and reduced availability of beef in our key target markets.

On a final note, the figures show that Brazilian beef production is set to increase in 2010 driven by an ongoing rebuilding of the Brazilian herd over the last few years. NI producers may look upon this as an ominous trend; however, GIRA forecasts that Brazilian exports of beef into the European market in 2010 will remain subdued relative to levels prior to the introduction of restrictions as strong domestic demand in Brazil and their strong currency render the EU market less attractive in 2009/10.