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AHDB European Market Survey


21 May 2012

AHDB European Market Survey - 18 May 2012AHDB European Market Survey - 18 May 2012

According to the FAO’s Food Outlook for May 2012, global meat output is set to expand by nearly two per cent in 2012 to 302 million tonnes, driven by increased poultry and pig meat production.

AHDB

Male cattle kill boosts Australian beef production

Australian beef production in the first quarter of the year was almost two per cent above 2011 levels and totalled 505,000 tonnes. Overall cattle slaughterings, at 1.75 million head, were one per cent higher than 2011 levels. This was solely driven by increased numbers of male cattle, up two per cent at 975,000 head. The upturn in male cattle reflects the growth in the breeding herd and increased productivity stemming from its younger age profile. Throughputs of female cattle remain low, with numbers down marginally on 2011 levels at 770,000 head, given the rebuilding intentions currently prevalent in the sector following the breaking of the drought.

There was considerable variation in throughputs for individual months, with the number of cattle killed in January 17 per cent higher year on year. The main reason for this was that in January 2011 severe flooding disrupted cattle supplies. Numbers in February 2012 were down four per cent as flooding affected trade and restocking intentions combined with lower prices to discourage cattle marketings. Rain continued to disrupt the trade, with numbers in March down two per cent on the year.

The increased production in the first quarter of the year has also been helped by further increases in carcase weights, up two kilogrammes year on year, as seasonal conditions have remained excellent due to high rainfall. There was also an increased proportion of heavier male cattle in the kill and higher availability of feed grains.

The higher throughput is expected to continue throughout the rest of 2012 taking the total cattle kill for the year to 7.55 million head, an increase of three per cent on 2011, based on the latest forecasts from Meat and Livestock Australia. However, this should be seen in the context that the 2011 cattle kill was the lowest since the mid 1990s and slaughterings in 2012 are only expected to return to 2010 levels.

While much of the expected two per cent increase in beef and veal production for 2012 is attributed to the larger breeding herd, better conditions and ample feed availability, the other factor in play is the live trade. Expectations are that the cattle that could not be exported live in 2011 due to the Indonesian ban will start to enter the market later in 2012, which could increase the kill by as much as three per cent. Expectations are that these cattle will be in very good condition and may be highly sought after as processors look to increase throughputs.

Higher Australian production is resulting in increased export availability, as the domestic market only accounts for one third of production. This increase may help to overcome the tight global supply situation which seems likely to continue due to events in other countries. With global supplies finely balanced, demand will be closely tied to the global economic situation. Further economic growth, especially in emerging markets, should benefit Australian producers as they ride the better conditions, post drought, and increase production. On the other hand a check to the industry is likely to be the continued strength of the Australian dollar which has been limiting returns.

Contrasting trends in US pork and beef exports

In the first three months of 2012, US fresh and frozen beef exports were down 12 per cent on the same period of 2011. This reflects an easing back in demand on some markets and a small fall in domestic production. This follows an increase in export volumes of 22 per cent for 2011 as a whole. Unit prices for fresh and frozen beef exports were up 17 per cent in US dollar terms compared with the first quarter last year.

The decline in beef exports was largely the result of a fall in shipments to Mexico and South Korea, down 11 per cent and 38 per cent respectively; trade was affected by higher domestic beef production in both countries. There were also smaller falls in shipments to the other major markets of Japan and Canada. In Japan, the Food Safety Commission is continuing to monitor BSE related age and product restrictions on US beef. Despite the overall fall in US beef exports there were significant increases in trade with Vietnam and Russia. An expanded tariff rate quota in Russia, up to 60,000 tonnes from 41,700 tonnes last year, has created an additional opportunity for US beef in 2012.

In contrast, US fresh and frozen pork exports continued to increase, up 20 per cent on the same quarter last year as global demand remained strong. This continued the growth of 2011 when shipments were up by a quarter on 2010. Shipments to Japan, the primary destination for US pork were little changed in the first quarter 2012 but exports to Mexico and China were up 58 and 109 per cent respectively. There were also small increases in exports to Canada and Australia. Canada’s strong dollar is increasing demand for relatively cheap US pork. Shipments to South Korea which had grown strongly in 2011 due to outbreaks of FMD and product shortages in that country, declined by 17 per cent. Prices for fresh and frozen pork exports were up three per cent in US dollar terms.

The USDA is forecasting that in 2012 US beef production will fall by around four per cent. Largely as a result of this, exports will decline by around one per cent as the beef market is expected to tighten in the second half of the year. They forecast that pork production will be up two per cent in 2012 but any increase in exports will be small, reflecting some easing back in export demand as the year progresses.

FAO Food Outlook forecasts expanding global meat production

According to the FAO’s Food Outlook for May 2012, global meat output is set to expand by nearly two per cent in 2012 to 302 million tonnes, driven by increased poultry and pig meat production. As production in developed countries continues to be affected by high input costs, limited growth in domestic meat consumption and increased competition from developing countries, most of the increase in meat output is likely to originate from developing countries. Competition for export markets is expected to increase in 2012 as key importing countries raise their own domestic production.

Global beef production is expected to remain unchanged from the previous two years at 67.5 million tonnes, as growth in developing countries is offset by falling production in developed countries, particularly the US and EU. However, despite this, global beef trade is anticipated to increase by four per cent to 8.1 million tonnes, driven by higher import requirements in the US and EU in response to short domestic supplies. Shipments to Russia are also expected to increase as falling domestic production is combined with an increase in Russia’s import quota of reduced-tariff beef due to its accession to the WTO.

After last year’s fall, global pig meat production in 2012 is forecast to rebound by three per cent to 111.7 million tonnes, underpinned by falling incidence of disease in Asia. Growing investment and favourable market returns in the region, particularly in China, are expected to result in a four per cent expansion in the region’s output to 62.8 million tonnes. In contrast, the anticipation of new EU welfare regulations, that will take effect from the start of 2013, may result in fewer pigs and lower production in the EU in 2012. FAO forecasts suggest a marginal fall in EU pig meat production to 23.0 million tonnes, down from 23.2 million tonnes in 2011.

Sheep meat supplies are expected to increase slightly, up one per cent to 13.6 million tonnes, with the higher output expected to relieve some of the tightness in global supplies and ease upward pressure on prices. Most of the increase is expected to originate from non-meat trading countries in Africa and Asia. Favourable conditions in Australia and New Zealand are expected to increase production in the region by three per cent to 997,000 tonnes. Sheepmeat production in the EU is expected to fall slightly to 968,000 tonnes.

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