12 May 2012

5 minute read

Meat prices hover at near record levels

Global meat markets are likely to face heightened trade competition in 2012, at the same time that recovering meat production in Asia is set to dampen growth in global import demand. Overall, meat trade is expected to expand by 2 per cent, to 29.2 million tonnes, much of which is anticipated to be taken up by developing country exporters, which could increase their share of the global trade to 44 per cent.

Disease outbreaks in 2011, drought-reduced cattle inventories and high feed costs sustained international meat prices to near record levels in the first quarter of 2012. In April, the FAO meat price index edged up to 182 points, surpassing the record 181 points registered in November 2011.

Variable feed prices influence pork and poultry price movements

World meat market at a glance

Indications of slowing import demand, especially for pig and poultry meats, portents a potential moderation of meat prices in the coming months, which, along with high feed costs, is raising concern about the profitability of the meat sector in 2012.

Bovine Meat

Drought and low animal numbers constrain bovine meat output

Global beef production is forecast to stagnate at around 67.5 million tonnes in 2012, as progress in developing countries is offset by contraction of output in developed countries. Much of the world increase is expected in Asia and Latin America and the Caribbean, with some gains also foreseen in Oceania. Beef production is forecast to decline in North America and in Europe.

In Asia, India is foreseen to lead a beef expansionary drive thanks to three new export-oriented slaughter and processing facilities opened in 2011. In the Republic of Korea, government incentives to slaughter low-performing cows are behind an anticipated 27 per cent jump in beef output this year. On the other hand, a self-sufficiency policy stance in Indonesia has led to the halving of the live cattle import quota, a move that may stifle production growth this year. After two years of decline, output in Latin America and the Caribbean is set to rebound in 2012 on the heels of recovering output in Brazil. In Argentina, despite the closure of almost one-fourth of its meat plants over the past three years and a drop in cattle numbers to their lowest since 2007, a drought-induced rise in slaughter numbers may prompt a 3 per cent production increase. In Uruguay, tight cow supply and a lack of suitable steers have reduced slaughtering to a 4-year low, while Paraguay is struggling in the wake of last year’s foot-and-mouth disease (FMD) outbreak. In Africa, prolonged drought has meant reduced foliage and pastures in the eastern and, increasingly, western parts of the region, leading to high livestock mortality and disease outbreaks. In Egypt, the spread of a new strain of FMD is resulting in animal culling and restricted animal movements, which may depress output in the country by 12 per cent and suppress production growth in the Africa region in 2012. Among developed countries, a mild winter in Canada and favourable pasture conditions in Australia and New Zealand are expected to raise carcass weights and boost beef production. By contrast, a decade of policyinduced cuts in cattle numbers in the EU, the Russian Federation and the Ukraine are forecast to depress output in 2012. This, combined with the worst drought on record in the United States, which has cut cattle herds to the lowest since the 1950s, is set to reduce developed country output by 2 per cent to 29.4 million tonnes.

Short supplies in major markets buoy beef trade prospects

Contrasting with lackluster production prospects, the outlook for beef trade is favourable, with an anticipated 4 per cent increase in 2012, to 8.1 million tonnes. Much of the growth relies on expectations of larger imports by the United States and the EU, two key traditional beef exporters, in response to short domestic supplies. Exports from the United States, expected down, may be additionally pressured by the recent discovery of a BSE cow in California. Falling production in the Russian Federation, the second largest beef importer, will combine with a WTO-induced increase in the country’s tariff-rate beef import quota, to reverse four years of declining purchases. Growing demand in the Far East and Middle Eastern markets, in particular Viet Nam, Malaysia, Saudi Arabia, Egypt and the Philippines, are forecast to boost their imports, especially of low-priced buffalo meat originating from India, while Venezuela’s imports will be buoyed by recently signed trade agreements. Japan’s purchases, which rose in 2011 despite a slow economy and food safety concerns related to the nuclear disaster, are expected to stay stable, while demand from China will be dampened by the relative high international beef prices as compared with pigmeat.

Beef prices strong while easing feed prices translate into lower pigmeat and poultry prices

Despite expectation of slight increases in exports from Australia, New Zealand and Canada, most of 2012’s trade increase is expected to be captured by developing countries, particularly Brazil and India. In fact, developing countries are expected to supply more than half of the global market in 2012, signaling a historic reversal in the pattern of bovine meat trade. Brazil’s position as the world’s largest beef exporter will be buoyed by a gradual re-authorization of plants to export to the Russian Federation. Argentina may also ship more, subject to the government’s issuance of export licenses. Competitive prices and growing export availabilities, on the back of an expanding dairy sector, could also increase exports from India by 20 per cent to 1.3 million tonnes, which would make it rival the United States as the third largest beef exporter after Brazil and Australia. For the third consecutive year, beef exports may decline in Uruguay, constrained by drought-reduced cattle inventories, while high international prices will facilitate deliveries by smaller non-traditional beef exporters, such as Mexico, Nicaragua and Costa Rica.

Further Reading

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