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AHDB European Market Survey

02 May 2012

AHDB European Market Survey - 27 April 2012AHDB European Market Survey - 27 April 2012

EU export refunds on beef and veal and pig meat have been cut with effect from 20 April 2012. These take into account changing global market conditions.


Steady EU Veal Market

The white veal market in the EU in 2011 showed no major change, with the market being largely in balance. EU production (from calves under eight months) based on data from Eurostat amounted to 644,000 tonnes, down one per cent on 2010.

EU Veal Calf Prices

France is the largest producer and output was down two per cent at 194,000 tonnes, given the end of the EU calf slaughter premium with some producers ceasing. Demand was also lower in France, the largest veal market in the EU, with household purchases down almost five per cent compared with 2010. This, in turn, resulted in lower import demand for Dutch veal. Per capita consumption in carcase weight equivalent has now fallen to below four kilogrammes with the total market now amounting to below 250,000 tonnes, based on data from the Institut de l’Elevage.

In contrast to France, 2011 production in the Netherlands, the main exporter in the EU, was up three per cent at 181,000 tonnes. This growth, however, was less than in 2010 as production costs were higher and so profitability under pressure. Carcase weights in 2011 were lower because of the higher feed costs. Data from the Dutch Product Board for Livestock, Meat and Eggs, PVE, indicated that exports were unchanged in 2011 after increasing by seven per cent in 2010. Neither production nor exports are expected to increase in 2012. Belgium is a much smaller exporter and production in 2011 was up four per cent on 2010 at 51,000 tonnes.

Italy is the other major producer and also the second largest consuming country but lower domestic demand and higher production costs contributed to the fall of six per cent in output in 2011 to 117,000 tonnes. Italy is the largest market for Dutch veal but trade fell in 2011 and so total Italian consumption was down around five per cent in the year.

The steady EU market in 2011 resulted in no major price changes in the major producing countries during the course of the year although demand increased seasonally in the second half. However, prices in the major producing countries have fallen back in the first three months of 2012 with demand weakening, a situation not helped by the more difficult economic climate in the EU.

In mid April the EU average veal calf price was down two per cent year on year and was five per cent lower than at the beginning of 2012. In Italy the veal calf price in mid-April was down six per cent year on year with the Dutch price seven per cent lower. In the largest consuming country, France, household purchases were down nine per cent in the 12 weeks ended 18 March although last year there were more promotions over this period. This in turn resulted in lower French demand for Dutch veal.

Contrasting Trends in South Korean Pork and Beef imports

South Korean pork imports increased by 17 per cent in the first quarter of 2012 compared with a year earlier. This continues the trend of 2011 as a whole when pork imports were up 68 per cent on 2010, largely due to the effects of the FMD outbreak and resultant major shortages of domestic product (see EMS 12/05). The average unit price of imports in the first quarter of 2012 was up around a quarter in both US dollar and Korean won terms.

South Korea Pork Imports, Jan - Mar

The growth was largely the result of increased shipments from the EU, which were up 48 per cent on the same quarter last year; the EU market share went up from 35 per cent to 44 per cent. Imports from Germany rose nearly five-fold while trade with Poland was up by 175 per cent. Shipments from Spain and the Netherlands were also up on the year. This growth in trade can be partly attributed to the weakening of the euro against the won contributing to the strong price competitiveness of EU product. In contrast imports from non-EU markets were largely unchanged. Shipments from the United States increased five per cent but trade with Canada and Chile fell.

Forecasts made by the USDA in March indicate that South Korean pig meat imports will fall by 18 per cent in 2012 as a whole but they would still be considerably higher than in 2010. This reflects the fact that while domestic pig meat production is forecast to recover by 17 per cent in 2012 it would still be 12 per cent lower than in 2010. However, import levels will still partly depend upon Government policy towards imports of tariff free product (see EMS 12/15).

Beef imports into South Korea in January to March 2012 totalled 64,000 tonnes, down eight per cent on the same quarter last year, with falls from all key supplying nations. This followed a rise of 18 per cent in 2011 as a whole as shortages of pig meat encouraged consumers to switch to beef. From January 2012, Canada has been able to resume shipments to South Korea ending a ban imposed in 2003 because of the outbreak of BSE there. However, in the first quarter of 2012 less than 300kg of Canadian beef reached Korea. In 2002 Canada supplied 14,000 tonnes.

In brief...

.… EU export refunds on beef and veal and pig meat have been cut with effect from 20 April 2012. These take into account changing global market conditions. For live cattle and fresh/chilled and frozen beef they have been reduced by one third by Commission Regulation 343/2012. For pig meat all refunds on prepared pig meat products have been set at zero which brings them in line with chilled and frozen pork (Commission Regulation 342/2012). For the new export refunds see pages 9 and 10 below.

Currency Update

Recent weeks have seen sterling continue to strengthen against both the euro and the US dollar. By Tuesday 24 April, the pound hit highs against the euro not recorded since August 2010 with one pound buying €1.23, and pushed to a five-month high against the dollar at £1=US$1.61. The pound also experienced a gradual strengthening against both the Australian and New Zealand dollars from mid-February, rising to £1=AUS$1.57 and £1=NZ$1.98 respectively.

Sterling-Euro Exchange Rate

For the same quantity of goods, an increase in the value of the pound relative to other currencies means UK exports become more costly while imports become less expensive. As such, this reduces the relative competitiveness of exports while increasing competition from foreign products in domestic markets.

The appreciation in recent weeks has followed growing confidence in the UK economy and increased demand for the currency as investors have sought protection against the ongoing turmoil in the Eurozone. The most recent strengthening followed news that the Bank of England’s Monetary Policy Committee had voted in favour of maintaining current levels of quantitative easing, without the need to further increase bond purchases, suggesting that the UK was perhaps on the road to recovery. In comparison, the euro has continued to be held back by concerns over the Eurozone’s ability to contain the sovereign debt crisis. A report last week from Moody’s Investors Service indicated that fiscal problems in Spain and Italy have driven their borrowing costs beyond sustainable levels with no lasting solution in sight.

The value of the pound saw a slight fall against all major currencies on 25 April as markets reacted to news that the UK economy had returned to recession following two successive quarters of contraction. The pound fell roughly half a percentage point against the euro and a quarter of a point against the dollar. According to preliminary figures released by the Office of National Statistics, the UK economy contracted in the first quarter of 2012 by 0.2 per cent. This followed on from the fourth quarter of 2011, when the economy shrank by 0.3 per cent.

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