30 November 2009

9 minute read

Summary 2007-2008

During 2007 and 2008, the long term trend of contraction of the cattle herd was temporally halted mainly as a result of the high beef and milk prices. The high beef prices caused a peak calf crop in 2007, while the high milk prices induced farmers to hold to their dairy cattle by which slaughter was reduced.

During the last quarter of 2008, however, milk prices plummeted, reflected in the reduced prices for milk cows. The reduced milk prices, in combination with relatively high carcase prices, elevated cow slaughter. Another factor which triggered farmers to slaughter their cattle was the high feed prices. Increased slaughtering mainly took place in France, Germany, the Iberian Peninsula, and the New Member States (NMS). This peak slaughtering of cows and other cattle took place at an earlier stage than anticipated in the Semi-Annual Livestock Report (E49019).

Forecast 2009-2010

After the temporary peak in 2008, the EU cattle herd is forecast to resume its long term trend of contraction. This trend is mainly a result of increasing costs for land, feed and energy, lagging beef and milk prices, and restricted government support.

After a reduction of 1.6 per cent in 2008, the calf crop is expected to decline 1.3 per cent in 2009 and 1 per cent in 2010. During 2009 and 2010, major reductions are forecast in Germany, Italy, France and Romania.

Throughout the EU, the smaller farms with only a few cows are abandoning the sector, while the biggest and most efficient farms are expanding.

Due to the plummeting milk prices, the dairy herd is expected to be cut by 1.4 per cent, with cuts throughout the EU, except in Denmark and Poland. The lower milk prices are also expected to have a downward effect on the calf/cow ratio, while the cattle loss will be lower due to the fading effect of bluetongue disease.

The beef cow herd is expected to shrink only 0.15 per cent during 2009. Carcase prices are supported by the limited beef supply from Brazil, which benefitted beef intra-trade, and beef export opportunities to Switzerland and Russia.

While the calf crop and cattle herd is expected to shrink in most Member States, a recovery of the calf crop is projected in Poland and the Iberian Peninsula. In Poland, cattle inventories are expected to increase due to higher dairy quota and continuing export demand for beef. In Spain and Portugal the crop is expected to recover slightly after been heavily affected by the high feed prices during 2008. With the lower calf crop, EU calf slaughter will decline during 2009 and 2010. The slaughter of cows is expected to stabilize after the peak slaughter in 2008. An exception is France, where the peak slaughter is forecast to take place in 2009.

EU cattle exports are expected to decline due to the financial crisis and veterinary barriers, still in place after the spread of bluetongue disease. During 2009 and 2010, the EU cattle stock is projected to fall from 88.9 million head to 88.3 million head.

EU disease situation

The bluetongue disease situation in the EU continues to evolve. In the autumn of 2008, the various bluetongue virus types have continued their geographical spread in Europe.

BT-8 extended into the United Kingdom, Sweden and Norway, Hungary and throughout Spain. In The Netherlands, Germany and Belgium, virus types BT-6 and BT-11 were discovered, but their genetic resemblance to known South African laboratory strains suggested that the accidental contaminations were provoked through vaccination with a vaccine against BT-8.

The vaccination campaigns and previous infections that affected large numbers of farms in the infested areas have allowed virtually all animals to build immunity to the disease.

The BSE situation in the EU further improved in 2008 to a level that the EC agreed to lift the mandatory age for BSE testing at slaughter to 48 months in the old Member States of the EU-15.

Beef

As a result of reduced production and imports, the domestic EU beef supply fell by about 280,000 MT in 2008. The limited imports were due to restrictions laid down by the European Commission (EC) on EU beef imports from Brazil. On 31 January, 2008, the EC imposed stricter traceability requirements for Brazilian beef imports, which in practice banned Brazilian beef from the EU market. None of these beef products can be supplied by another producer in a sufficient volume.

Minor increases were reported for imports from Uruguay, Australia, New Zealand and the United States. The elevated beef prices significantly reduced beef consumption throughout the entire EU. Despite the limited availability of beef, EU beef exports increased from 140,000 MT in 2007 to 204,000 MT in 2008. EU exporters benefitted from the limited supply of Brazilian fresh beef to Switzerland and the increased demand for frozen beef in Russia.

Lower production and limited imports ar expected to tighten supply further in 2010. The EU Food and Veterinary Office (FVO) executed a new audit in Brazil in January of 2009. Currently, the FVO relisted between 1,300 and 1,400 farms as being eligible to produce for the EU market. This is, however, only a fraction of the 6,780 Brazilian farms which had been certified during 2007.

Importers comment that beef imports from Brazil will remain constrained during 2009, but anticipate a recovery in 2010. During 2009, the supply from Argentina, Uruguay, Oceania and the United States is expected to grow, which will partially compensate for the lower supply from Brazil. As a result of lower EU slaughtering, domestic beef production is expected to decrease to below 8 MMT in 2010.

Lower production is expected in particularly Germany, the UK and Italy. The falling beef production, together with the restricted imports will tighten the supply of beef on the domestic market further. As a result, prices are forecast to remain on a high level. The high price level, in combination with the current economic climate, will further reduce beef consumption, and shift consumption to the cheaper cuts. Consumption is expected to fall mostly in the four main markets, France, Italy, the UK and Germany.

Another factor for the stagnating beef consumption in these countries is the increasing popularity of poultry meat for its low price, leanness and conveniencE. As a result of the financial crisis, the export boost in 2008 is not expected to be continued during 2009 and 2010. Exports to Russia are forecast to be cut the most.

US/EU beef quota agreement

The EC proposal COM(2009) 275 for a quota for US high quality beef as compensation for gradual lifting of the US retaliatory duties in the hormone case was published on 11 June, 2009. The 20,000 MT quota is a small part of EU beef consumption, but it is a significant opening into the high-end beef market.

The deal was formally approved in Council Regulation (EC) No 617/2009 , published in the Official Journal on 15 July, 2009. The details for the administration of this new beef quota were published simultaneously in Commission Regulation (EC) No 620/2009.

Brazilian beef exports to the EU

Exports of beef from Brazil to the EU remain below past levels, as the number of EU approved farms has been slowly increasing. It seems that Brazilian farms have a hard time meeting the strict EU traceability standards and many farms are reluctant to implement costly requirements to that end.

In a July 2009 audit report on a visit to Brazil in January-February of 2009, the EU Food and Veterinary Office (FVO) reports that progress has been made but remains critical of the Brazil animal identification and traceability system.

Further Reading

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