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AHDB European Market Survey


05 March 2012

AHDB European Market Survey - 2 March 2012AHDB European Market Survey - 2 March 2012

The results of the Irish December livestock survey show that total livestock numbers grew year on year.

AHDB

Irish livestock numbers increase

Cattle numbers were marginally higher year on year while sheep and pig numbers were noticeably higher.

Within the cattle herd the number of dairy cows continued to increase, recording a three per cent rise to 1.06 million head. This reflects the profitability of the dairy sector and its growing importance to the Irish economy. In the face of the expanding dairy sector, the beef herd contracted by one per cent with cow numbers falling to 1.06 million.

Falling herd numbers in recent years have resulted in the number of cattle aged between one and two years being considerably lower, with male numbers down nine per cent and female numbers down two per cent. However, numbers of younger cattle were higher, helped by lower cereals costs encouraging the retention of males from the dairy herd. There was a 15 per cent increase in the number of male cattle under one year of age and females in this age range were up six per cent. The total cattle herd numbered 5.93 million head, fractionally higher than a year earlier.

The higher finished prices on offer to sheep producers continued to encourage the rebuilding of the national flock. Overall the sheep flock rose by more than six per cent, to 3.32 million head, although this still represents a decline of almost a third over the past 10 years. The breeding component of the flock increased four per cent to 2.52 million head, fuelled by a 13 per cent increase in the number of younger ewes under two years of age. This indicates a large increase in the number of ewe lamb retentions over the past 18 months as producers responded to the increased optimism within the sector.

The number of other sheep, generally lambs, within the population was up 13 per cent at 797,000 head indicating increased availability in the early part of 2012. This is backed up by Bord Bia who indicate that lamb throughputs this year, up to 11 February, were eight per cent higher, despite live imports from Northern Ireland being lower.

While the dairy breeding herd and the breeding sheep flock grew, the pig breeding herd has contracted, largely due to the difficult financial situation in the industry over the last year. At 148,000 head the number of breeding pigs was two per cent lower year on year. All categories were lower with the exception of maiden gilts.

The overall number of pigs did increase, however, being up nearly four per cent at 1.55 million head, as the number of non breeding pigs rose. At 1.41 million head this category increased by more than four per cent, suggesting an improvement in sow productivity.

Australian beef exports increase in 2011

During 2011, Australian beef exports increased by over three per cent to total fractionally over one million tonnes, as tight supplies globally have generally encouraged strong demand for Australian beef. Australia was one of few important beef producing regions globally to record increased production in 2011, meaning many markets looked to Australia to make up the shortfall in supplies.

The higher beef production occurred despite a fall in the number of cattle slaughtered, which at 7.26 million was down three per cent year on year. The decline in throughputs failed to impact production as improved seasonal conditions allowed producers to finish cattle at heavier weights. At 287kg per head the average carcase weight recorded in 2011 was almost 10kg heavier than 2010 levels.

Despite overall Australian beef exports increasing, the volumes shipped to the two largest markets, Japan and the United States, fell by three and nine per cent respectively. This was mainly due to difficult trading conditions on these markets and the strength of the Australian dollar limiting the competitiveness of Australian product. In the case of Japan, the weakness of the US dollar increased the competitiveness of US product against Australian, pushing it out of the market to some degree.

Much of the decline in volumes to these two markets was offset by a 15 per cent increase in exports to South Korea. This growth came due to strong consumer demand as the economy continued to perform well, aided by a shortage of domestic beef and decreased competition from Japan. The destruction of animals (both pigs and cattle) in the wake of Korea’s FMD outbreak also pushed retail meat prices higher. This allowed increased volumes of Australian product to enter the market at a competitive price.

A number of other markets also recorded higher shipments, including the high value EU market where volumes were up 25 per cent as tight supplies from elsewhere, mainly South America, allowed increased Australian access. The Greater China region and many South East Asian countries took higher volumes as these economies perform well and demand for protein increases amongst the rising middle classes. There was also strong growth in the Middle East and Africa.

While exports of fresh and frozen beef overall were up, volumes of chilled product fell two per cent as this higher value product generally experienced lower demand, notably in Japan. With stronger global demand for cheaper manufacturing product being the main driver in the increased beef demand there was a six per cent increase in exports of frozen beef from Australia.

With no significant increase in supply coupled with the strong demand for exports, Australian farmgate cattle prices in 2011 were on average 6-12 per cent higher than 2010 levels. Although the strength of the Australian dollar has limited returns to some degree and prices have not risen to the same extent as in other regions such as the Americas and Europe. This increase in the cost of procurement was reflected in higher unit values for exports; at an average AU$4,700 per tonnes these values were four per cent higher year on year. Coupled with increased volumes these higher unit values pushed the overall value of beef exports seven per cent higher to total AU$4.7 billion.

US Farms, Land in Farms and Livestock Operations

According to a new USDA report, the number of farms in the US in 2011 was estimated at 2.2 million, down slightly from 2010 but a two per cent increase over the last decade. Total land in farms was 917 million acres, having steadily fallen since 2002, by an average 2.6 million acres a year. Average farm size has remained relatively stable at 420 acres since 2007.

In terms of US livestock, the number of cattle operations in 2011 was 922,000, a slight fall on the year. Beef cow operations, which made up almost 80 per cent of all cattle operations, were also slightly lower year on year at 734,000. More than 90 per cent of these had fewer than 100 cows and these smaller producers accounted for 45 per cent of the US beef herd. There were only 60,000 dairy cow operations but these tended to be larger, with over half the dairy herd in operations with 1,000 or more cows.

The number of pig operations was unchanged from 2010 at 69,100. Pig production was highly concentrated, with the 13 per cent of operations which had more than 2,000 head accounted for 87 per cent of the total US inventory. In fact, based on ownership, just 135 businesses had 50,000 head or more but they accounted for 58 per cent of all US pigs.

At 80,000, there were 1,000 fewer sheep operations in 2011 compared with the year before. Over 90 per cent of farms had fewer than 100 head, accounting for 36 per cent of the total US sheep flock. Only one per cent of operations had more than 500 head, but they accounted for 43 per cent of the total flock.

South American beef prices remain high

Prices for chilled and frozen beef exports from the main South American suppliers have remained at a high level throughout most of 2011. Across the year, export prices for Argentinean beef were 31 per cent higher than in 2010, while Brazilian and Uruguayan export prices rose nearly as quickly. This was due to a combination of tight global supplies, increased domestic demand and constrained production.

Beef production has declined across South America, primarily as a consequence of drought conditions in recent years, especially in Argentina and Uruguay. There has also been pressure from more profitable cropping enterprises which have replaced some beef cattle enterprises. Where cattle production continues, offtake has been constrained by herd rebuilding following earlier losses associated with the droughts. The high export prices have been exacerbated by increased demand from domestic consumers as incomes rise, particularly in Brazil.

These factors mean that supplies of beef available for export have been limited. As a result data from SAGPyA, part of the Argentine Ministry of Agriculture, show that exports of fresh and frozen beef from Brazil during 2011 were down by 14 per cent compared with 2010, while Argentinean shipments were down by 15 per cent following an even sharper fall the previous year. Similarly, Uruguay exported six per cent less beef than a year earlier.

In Brazil, export volumes recovered in the final quarter of the year, when they were 11 per cent higher than in the same quarter of 2010. This is reflected in export prices which were only slightly above year earlier levels as there was also some edging back in global demand.

The lower production and good export demand was also reflected in firm farmgate prices for cattle. For the year as a whole, average steer prices were more than 20 per cent higher than in 2010 across South America. Prices in Uruguay were up by almost a third to average over US$2 per kg liveweight. The average steer price in Brazil’s San Pablo state was higher still at US$2.09 per kg, 23 per cent more than in 2010. Prices elsewhere were also close to this level.

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