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AHDB European Market Survey


07 May 2012

AHDB European Market Survey - 4 May 2012AHDB European Market Survey - 4 May 2012

In its latest forecasts for the global livestock and poultry markets, USDA estimates a two per cent rise in meat production during 2012.

AHDB

Further modest uplift in EU male cattle prices

Male cattle prices in major producing countries have moved up steadily since reaching a low point last June. Much of this increase can be attributed to a year on year decline in male cattle supplies over this period, after having been at higher levels in the first five months of 2011. The wholesale market for male forequarters in the EU has been especially strong in the last year, reflecting consumers trading down to cheaper cuts, product shortages and steady demand from non-EU markets.

The R3 steer price in the EU increased by 16 per cent in the second half of 2011 and rose by a further two per cent in the early months of 2012. By the week ended 22 April it was 18 per cent higher than a year earlier. The UK and Ireland account for 80 per cent of steer beef production, with France the other major producer, and price developments have been similar in all countries. Prices have been especially firm in the UK and Ireland and by late April were up 22 per cent and 18 per cent year on year respectively. This is mainly the result of supply shortages but also steady demand, especially in the case of Irish exports. For the year to date, provisional slaughterings data for steers indicate a year on year decline of 28 per cent in Ireland and six per cent in Great Britain. In late April, the steer price in France was up 10 per cent year on year while steer slaughterings in the first quarter of 2012 were down 13 per cent.

Lower young bull supplies so far in 2012 contributed to a small rise in EU prices through to mid March but then a seasonal easing in demand led to an easing back of prices through to late April. The R3 young bull beef price for the EU in the week ended 22 April was down one per cent compared with the beginning of this year, although up 11 per cent on April 2011. Of the major producing countries, prices have largely held up in Germany and Italy and compared with late April 2011 were up 13 per cent and seven per cent respectively. These two countries are the largest producers of young bull beef, accounting for 42 per cent of the EU total in 2011.

However, in France which is the third largest young bull beef producer, the young bull price has weakened seasonally since mid March and by late April was down six per cent compared with the beginning of the year although still up 10 per cent year on year. In Germany, provisional figures so far for 2012 show a reduction of only one per cent in young bull slaughtering through to late April while French slaughterings in January to March were down 16 per cent compared with the first quarter of 2011. Prices for young bulls in Poland increased sharply in early 2012, helped by major shortages and the appreciation of the zloty, with male beef production in January and February 2012 down 25 per cent year on year. Prices have since fallen back though and the R3 price in late April was only up five per cent year on year.

Male cattle supplies in the EU are likely to remain tight during the reminder of 2012, suggesting that prices will remain firm even if there is some easing back in both demand within the EU and trade with non-EU markets.

Global meat production forecast to grow during 2012

In its latest forecasts for the global livestock and poultry markets, USDA estimates a two per cent rise in meat production during 2012. This is led by a three per cent growth in production of pig meat, with poultry meat forecast to be up by two per cent. Beef and veal production is also forecast to increase, albeit only marginally.

USDA forecasts that global pig meat production in 2012 will total 104 million tonnes, 2.6 million tonnes higher than in 2011. This is largely due to a recovery of production in China and South Korea. In China, production is forecast to rise by four per cent to 51.6 million tonnes as milder weather conditions mean that there have been fewer disease outbreaks and better profitability has encouraged expansion. In Korea, production is projected to grow by 17 per cent as the industry recovers from the FMD outbreak which began in late 2010. However, this is still 12 per cent below its 2010 level. Elsewhere, production in Russia is expected to increase by five per cent due to expansion of modern, large-scale operations aided by government support. Most other major producing countries are expected to record little change in production between 2011 and 2012.

Global production of beef and veal is forecast to total 57 million tonnes in 2012. This represents a marginal increase compared with estimated production during 2011. Brazil, is expected to increase production by around two per cent to 9.2 million tonnes. Otherwise, the only major producer expected to increase production significantly is India, forecast to rise by 11 per cent to 3.5 million tonnes. This is all made up of buffalo meat since slaughter of cattle is not permitted in India. The increase is the result of an expanding dairy herd, increased slaughter and price competitiveness in the global market, with nearly half of production destined for export. As a result, India is projected to become the world’s largest exporter of beef in 2012. Balancing this increase, production in the US, the largest beef producer, is forecast to fall by four per cent to 11.5 million tonnes, largely as a result of lower cattle numbers due to drought conditions during 2011.

Poultry meat production is forecast to rise by two per cent to 87 million tonnes. Broiler meat makes up 94 per cent of this and most major producing countries are expected to increase production during 2012. The main exception is the US where high feed costs are limiting any expansion plans and high meat prices are set to reduce domestic consumption. Again, India is among the fastest growing producers, forecast to rise by 10 per cent as greater vertical integration and increasing demand from an expanding middle class support increased production.

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