FAO Food Outlook: Meat And Meat Products

High feed prices, adverse weather, disease outbreaks and livestock herd rebuilding have kept meat prices at record levels in 2011, according to FAO's Food Outlook 2011.
calendar icon 14 November 2011
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INTERNATIONAL PRICES

Meat prices ease in recent months but remain at historically high levels

In April, the FAO meat price index rose to 180 points, the highest value registered in its more than 20-year existence. Since April, prices have eased, and as of October 2011, the FAO meat price index was down to 177.

However, despite the softening, meat prices remain 12 per cent above October 2010. Price gains have points the highest for sheep meat, up 35 per cent, followed by poultry and beef, up 16 and 12 per cent respectively.

The price strength principally reflects robust import demand, particularly from Asian markets and the Russian Federation, which have propelled world meat trade up by 3.6 per cent, to 27.4 million tonnes.

BOVINE MEAT

Declining cattle inventories in major exporting countries portend a continuation of high beef prices

Constrained by low cattle inventories, drought and animal restocking initiatives, global bovine meat production is expected down marginally to 65 million tonnes in 2011. Output by Brazil and the United States, which together supply one-third of global beef production and exports, is expected to contract.

In the United States, beef output is declining despite increased herd liquidation, due to an historic drought that has affected major grazing areas, with the lack of precipitation inducing a reduction in cow herds to the lowest level since 1950.

As a result, United States beef supplies are likely to be limited in the next few years, a prospect also expected in drought-affected Mexico. Drought conditions also persist in the Horn of Africa, home to Africa’s largest cattle herds, with a progressive deterioration of forage in Ethiopia, Kenya and Somalia leading to poor animal conditions and high mortality rates.

In South America, low cattle inventories are undermining prospects for output, now set to decline for the second consecutive year. In Brazil, production is being hindered by limited availability of quality animals, competition in domestic markets from cheaper alternative meats and slow exports.

In neighbouring Argentina and Uruguay, cattle numbers have declined to their lowest in a decade, with Argentina’s downfall linked to government slaughter weight and export restrictions which, despite high prices, have eroded both production and investment in the sector. Early 2011 droughts in Uruguay and high live cattle exports are resulting in reduced slaughter numbers and output in the country. Paraguay, previously expected to benefit from its newly acquired OIE disease-free status, is reeling from an outbreak of foot-and-mouth disease (FMD) in mid- September, which is expected to cut slaughter and depress exports by 16 per cent.

Canada’s cattle numbers are the lowest since 1994 and herd rebuilding is leading to a nearly 10 percent output decline in 2011. Industry prospects are also pressured by a 40 percent fall in live cattle exports, following the introduction of a country-of-origin meat- labelling law (COOL) by the United States, a policy currently in dispute in the World Trade Organization (WTO).

In Europe, dairy herd restructuring in the EU and the Russian Federation, and the EU’s policy reform, which has progressively reduced support to the beef sector, are resulting in falling cattle numbers and constraining production gains. Conversely in Kazakhstan, herds and output are expanding, sustained by government subsidies on breeding animals and feed, as well as favourable credit packages for producers.

In Asia, India, now the fifth largest beef producing country, has benefited from adequate supplies of cattle for slaughter, partly due to development of the country’s dairy sector which has resulted in a growing number of male animals. However elsewhere in the region, high feed prices and policies continue to put downward pressure on output.

For instance, in the Republic of Korea, the Government’s calf price stabilization, introduced after the country’s worst ever outbreak of FMD, will encourage producers to keep animals for restocking, limiting the potential for output gains. In Indonesia, an animal welfare-related ban, imposed by Australia on live cattle exports to that market, is likely to result in lower cattle slaughter numbers and beef production.

Cattle losses associated with natural disasters in both Pakistan (2010, 2011) and Japan (2011) are estimated to have depressed beef output in those two countries, while high feed prices are curtailing output in China. In Oceania, beef output is forecast to grow in Australia, after several years of herd rebuilding.

Import demand grows despite higher prices

Reduced supplies in traditional importing markets, such as Indonesia, Japan and the Russian Federation, are pushing up imports in 2011 to 7.6 million tonnes.

Accounting for half of global imports, countries in Asia are expected to raise their beef imports by nearly 10 percent to 3.5 million tonnes, with higher deliveries to Hong Kong SAR, Malaysia, the Philippines and the Republic of Korea. In Japan, the finding of radioactive contamination in cattle that consumed rice straw in the area near the site of the nuclear accident has stimulated demand for imported beef.

A lifting of Viet Nam’s eight-year ban on Canadian cattle and beef is supporting imports, which have risen 100-fold over the past five years. Elsewhere, a near doubling of beef imports is expected in Turkey despite a mid-year reversal of previously reduced duties for beef cuts and feeder and slaughter cattle. The Australian ban on live cattle exports to Indonesia will likely stimulate a shift of import demand towards beef in this country.

Meanwhile, in the Chinese Province of Taiwan, regulations imposing testing on ractopamine, an authorized drug in many countries, are slowing deliveries. Shipments to Egypt, a major market in the Middle East, are forecast to decline, reflecting disruption of trade due to political unrest earlier this year. Regional imports by Central America and the Caribbean are down for the third successive year, as demand for imported products in Mexico was reduced when a drought-induced increase in slaughtering led to increased domestic availability.

Benefiting from favourable exchange rates and a re-opening of markets previously closed due to concerns over bovine spongiform encephalopathy (BSE), the United States beef exports are increasing at a rapid pace. Under the expected 20 percent jump in shipments to 1.3 million tonnes, the country would emerge as the second largest world beef exporter after Brazil.

Although still standing as the world’s largest beef importer, the United States has moved into an unprecedented net export situation. Conversely, battling unfavourable exchange rates and limited cattle availabilities, shipments from South American and Canadian suppliers are set to slip by 10 and 20 percent respectively, reflecting smaller deliveries from Brazil as well as Argentina, Paraguay and Uruguay.

In Europe, euro weakness is facilitating beef sales from the EU to the Russian Federation and to many Middle Eastern markets, in particular Turkey. Conversely, the strength of Australian and New Zealand currencies is expected to depress exports from the two countries. This would allow India to move up, becoming the fourth largest exporter of beef, as strong demand for low-priced buffalo beef in Southeast Asian countries, such as Malaysia and the Philippines, fosters an increase of bovine meat, including buffalo, sales abroad.

November 2011
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