|CCP: ME 02/2 |
COMMITTEE ON COMMODITY PROBLEMS
INTERGOVERNMENTAL GROUP ON MEAT AND DAIRY PRODUCTS
Rome, 27-29 August 2002
1. The global livestock economy over the past decade has been characterized by the fastest consumption and trade growth of all major agricultural commodities. Growing numbers of quality-conscious urban consumers in developing countries have spurred global demand for meat and dairy products which, increasingly, has shifted from bulk meat and dairy product trade to more specific value-added products and, in the case of meat, specialised cuts. Much of this demand has been met by increased output in developing countries themselves, where relatively low feed prices, technology transfers, and increasing vertical integration and concentration have combined to keep prices relatively low for consumers.
2. Among the major factors that have influenced the global livestock sector over the 1990s, the following were of particular relevance. Many of these factors are expected to continue to shape and influence markets over the next decade.
3. By the year 2010, global output of meat is projected to grow to 283, up 60 million tons, or 27 percent, over the 1998-2000 base period, with nearly three-quarters of these gains concentrated in developing countries. Although an average annual growth of 2.2 percent in the global meat sector will be possible given the technical innovations and restructuring in the poultry and pigmeat sectors, it is slower than the 3 percent average annual gains observed during the 1992-2000 period. In developing countries, meat output is projected to grow 3 percent annually, compared to only 1.2 percent for developed countries. These trends continue the shift in world animal production from developed to developing countries which has characterised the past twenty years of livestock development, reflecting the changing patterns in demand. By 2010, nearly 80 percent of ruminant animals will be reared in developing countries, while the share of poultry and pigmeat will be slightly less, at 70 percent. Correspondingly developing country share of global animal production is projected to increase to 59 percent, up from 54 percent in the base period and 46 percent in 1992.
4. As happened during the past decade, the poultry sector will be the most dynamic, growing at an annual rate of 3 percent and generating over 40 percent of the 60 million tonne increase in global meat production. Pigmeat and beef will account for approximately 38 and 17 percent of the remaining output gain. Developing countries are expected to contribute three quarters of the 24 million tonne increase in poultry meat output over the projection period and account for 56 of total production by the end of the projection period. Meanwhile, similar trends of increasing concentration and integration of the pigmeat industry with the feed and processing industries in many developing countries, such as China and Brazil, are supporting a 2 percent gain in output to 112 million metric tonnes. Production by developed countries is expected to reach 34 million tonnes by 2010, only 3 million tonnes above the base year level. Capturing three-quarters of the growth in pigmeat production over the projection period, output in developing countries is likely, based on increasing productivity and an expansion in animal slaughtered, to reach 70 million tonnes and constitute 63 percent of global output, up from 58 percent in the base period.
5. Growth in beef and sheepmeat, constrained by the small size of farms and slow growth in technical innovations and restructuring, is projected to increase less than 2 percent over the next decade but at a slighter faster rate that the previous decade. Developing countries are expected to supply 80 percent of these gains, with the expansion in production projected to rely both on an expansion in slaughtering and on rising average carcass weights stemming from genetic progress and improved management practices. Developing countries would account for 8 out of the 10 million tonne expected increase in world beef production and the major share of the 3 million tonnes increase in world sheep meat production. These increases would come particularly from Asia, the largest producing region.
6. Relatively strong economic growth over the projection period is expected to prompt a 2.2 percent annual rise in total meat consumption, with increases in per caput disposable income and the influences of changing dietary habits and food consumption patterns facilitating growth in developing countries. Despite projected per capita annual GDP gains of 3.1 percent in developing countries, aggregate meat consumption in these countries is projected to grow at an annual rate of 2.9 percent, less than half of the rate over the decade of the 1990s.3 Meat consumption gains for developing countries over the projection period will be more than double of that in developed countries where already high per caput levels are expected to limit annual gains to 1.2 percent. As a result, developing countries would account for a larger share of global meat consumption, increasing from 47 percent in 1992 to 55 percent in 1999 and an estimated 60 percent in 2010.
7. In line with historical trends, the share of poultry in total meat consumption would continue to expand at the expense of other meats. Low prices of poultry relative to other meats, widespread consumer perception of poultry as a safer meat, and its acceptability by most cultures and religions are expected to push its share in global meat consumption from 25 percent in 1992 to 32 percent by 2010. Per caput poultry consumption is projected to rise from 11 kg/caput in the base period to 13 kilograms in 2010. Although per caput consumption of pigmeat, projected at 16.3 kg/caput by 2010, would continue to exceed that of poultry, overall consumption growth of 2.1 percent is expected to trail that of poultry. Beef consumption, growing marginally faster than population growth, is set to increase only slightly to 10 kg, while global per caput consumption of sheep and goat meat is projected to rise from 1.8 kgs to 2 kg with the increase concentrated in Asian countries. Per caput consumption in Africa, where sheep and goat meat account for more than one-fifth of total meat consumption, is expected to slip maginally to 2.2 kg/caput. However, higher expectations of per capita income in this region is expected to push up per capita meat consumption to 11.1 kg/caput.
8. The dynamic growth in global meat trade, stimulated in the 1990s by increased market access provisions, growing meat demand in developing countries and increasing specialisation of production/processing operations, is expected to slow from a 7.3 percent annual rate to an average 2.7 percent over the projection period. Nearly half of the meat trade gains witnessed in the 1990s can be attributed to increased imports, mainly of poultry meat, by two countries-the Russian Federation and China. This trend is unlikely to be replicated over the projection period.4
9. Projected to reach 21 million tonnes in 2010, meat trade is set to rise 5 million tonnes over the base period, more than half of which will be destined for developing countries. Robust meat output gains in developing countries, as well as countries in transition, such as many CIS countries, however, are expected to limit meat imports as a share of global consumption to 7 percent, unchanged from the previous decade.
10. Growth in poultry meat trade, while outpacing that of other meats, is expected to slow to 3 percent, a significant decline from the 16 percent gains witnessed over the 1990s when both China and Russia emerged as major poultry meat markets. While this growth falls short of that witnessed in the 1990s, the favourable relative price and cultural preferences for poultry, combined with increasing specialisation of preferred cuts, could push poultry trade up 40 percent to 9.5 million tonnes. In the 1990s, surging poultry meat shipments accounted for more than 70 percent of the gains in global meat trade; however, poultry could account for only half of growth in total meat trade over the projection period. By contrast, gains in pork and beef trade are projected to account for a respective 20 and 26 percent of the growth in overall trade.
11. Corresponding to historical trends, more than 60 percent of the increase in meat import demand over the projection period is expected to stem from developing countries, with Asia the recipient of nearly half the growth in trade. Strong demand growth in this area as well as in Central America, Mexico in particular, is projected to push meat imports of developing countries to 10 million tonnes. As a result, the share of global imports of developing countries would rise by 5 percentage points to 46. On the export side, in contrast to the previous decade when developed countries, benefiting from favourable natural resource endowments, combined with sophisticated processing and marketing structures, supplied nearly two-thirds of the growth in trade, half of the export gains over the projection period will originate from increasing supplies from developing countries, such as Brazil, Thailand and China. Increasing intensification of poultry and pork production, combined with extensive beef production in land-abundant Latin America, is expected to push up developing country exports to 33 percent of global totals, up from 27 percent in the base period.
12. Given the developments foreseen in the feed markets, assumed economic growth and increases in productivity in the livestock sector, real meat prices are projected to remain below the level of the early 1990s with the exception of sheep meat, the slight price increase of which mainly reflects constraints on the supply side.
13. Milk production is expected to shift from high-cost to low-cost countries, and output growth will increasingly be located in regions with rising demand for milk and milk products; continuing a trend evidenced in the 1990s. As a result, the proportion of world milk production originating in the developing countries is projected to increase. While some developing countries are projected to become more active in export markets, the developing countries as a whole would remain substantial net importers of dairy products.
14. World production of milk is forecast to rise to 665 million tons by 2010, representing an average annual increase of 1.5 percent, compared to an annual average growth rate of 1.0 percent during the 1990s. Milk production is projected to grow in each of the major country groupings (developed, transitional and developing); however, the largest increment is expected in the developing countries. In these countries, output of milk is projected to rise by 71 million tons to reach 293 million tons. As a consequence, the share of developing countries in world milk production is expected to rise to 44 percent (against 39 percent in the base period and 32 percent at the start of the 1990s). Conversely, while production in the developed countries and that in transition economies is projected to rise, the relative share of world milk production is expected to decrease in both groups.
15. At the global level, the increase in milk production is anticipated to stem from both an increase in the number of milking animals and higher yields, with most growth coming from higher yield per animal as a result of improved nutrition and breeding. Confirming a trend established in the 1990s, production is projected to rise primarily in the same areas as consumption and in a limited number of low-cost producing countries that are able to export dairy products without the use of subsidies. In particular, in Asia, strong demand is likely to stimulate milk production. In absolute terms, milk output is projected to experience the greatest expansion in India, growing by 27 million tons: despite this strong rise, this would imply a slowing of the rate of production growth compared to the 1990s. Other countries in the region will also register substantial increases in milk output, in particular Pakistan and China. Production growth is also projected for the Latin America and Caribbean region, where output is expected to rise by 19 million tons, a 33 percent increase over the base period, although this would imply a slower rate of annual growth than that seen in the 1990s. The main driving force behind higher national output in this region will be expansion in domestic demand, most notably in Brazil; however, for some low-cost producing countries in the southern cone, the increase is likely to be export-led. In Africa, milk production is projected to grow at a slower rate than in other developing regions, reflecting difficult economic conditions and, in some countries, climates not well-suited to dairying.
16. In the developed countries, milk production is expected to rise by 20 million tons to reach 267 million tons in 2010; average rates of annual growth in milk production would be similar to those seen during the 1990s. In Oceania, output is projected to increase by 11 million tons, or 53 percent, over the projection period in response to demand from abroad; thus, sustaining the strong growth in this region experienced during the 1990s. In the United States, output would probably increase in line with domestic demand to reach 82 million tons by 2010, as was the case in the 1990s. Elsewhere, Canada and western Europe are assumed to continue to impose production restrictions and, consequently output of milk would change little over the projection period, representing a continuation of the trend evidenced in the 1990s. In Japan, milk output is not expected to increase, potentially opening the way to some increase in imports of dairy products by that country. In the countries in transition, milk production for this group as a whole in 2010 is projected to be 9 million tons higher than in 1999, mainly as a result of an anticipated increase in output in the CIS. This would be in contrast to the 1990s when production amongst this group of countries fell sharply following economic reforms and agricultural policy changes.
17. Strongest growth in demand for milk and milk products is anticipated to come from the developing countries, where it is projected to grow at the rate of 2.5 percent per year, broadly comparable with the growth rate during the 1990s. For the countries in transition, little growth (0.9 percent per year) over the 1999 bench-mark is projected; however, this would be a substantial improvement over the 1990s, when consumption dropped at an average annual rate of 3.3 percent in this group of countries. In the developed countries, consumption of milk and milk products is also expected to show only limited growth (0.5 percent per year - a similar level to that experienced during the 1990s).
18. Amongst the developing countries, as was the case in the 1990s, consumption of milk and milk products is expected to grow most strongly in Asia, which is projected to account for almost 52 percent of growth in world demand. Significant growth in demand, 18 million tons, or 18 percent of the projected rise in the world total, is also expected in the Latin America and Caribbean region. Within this region, Brazil and Mexico are anticipated to see the largest increases in consumption. Africa is expected to register the smallest increase in demand amongst the developing country regions, as was the case in the 1990s, and in many countries in this region this will represent a growth rate slower than that for the population.
19. For most developed countries, indications are that the current levels of consumption of milk and milk products are near saturation. Consequently, any growth in consumption is expected to be marginal and mainly associated with changes in the type and form of dairy products consumed and limited population growth - a trend already evident in the previous decade. As a result, while continuing to represent an important share of world consumption in 2010, this group of countries is anticipated to account for only 13 percent of the growth in world demand for milk. The countries in transition are expected to constitute 10 percent of the estimated increase in world demand over the projected period. This would contrast with a fall in total milk consumption experienced by this group of countries during the 1990s.
20. At the global level, import demand for dairy products could reach 51 million tons in 2010, an increase of 12 million tons over the base period, a similar proportional increase to that seen in the 1990s. This would imply that the proportion of total milk traded (excluding EU-intra trade) would remain small - 8 percent of world production.
21. Approximately 85 percent of the increase in import demand is projected to come from the developing countries, confirming a trend evident during the 1990s. While exports of dairy products from the developing countries are also expected to increase, the projections of consumption and production suggest that this group of countries as a whole will face a growing trade deficit in dairy products. While highest growth in import demand is projected for South East Asia, imports are anticipated to increase in all developing country regions. However, very few developing countries will be net exporters of dairy products in 2010; these would include Argentina, Chile, Uruguay and India.
22. The developed countries are projected to continue to account for the bulk of exports of dairy products in 2010 - three-quarters of trade, only a slightly smaller proportion than at the start of the 1990s, when developed countries accounted for eighty per cent of world exports; however, a shift in the relative importance of different regions is foreseen. The proportion of world exports supplied by New Zealand and Australia are projected to increase substantially, while those originating in Europe will decrease and the situation in North America will change little. The imports of the developed countries are projected to change little over the projected period. For the countries in transition, limited growth in milk output and some increase in domestic demand are expected to inhibit export growth, and improvements in domestic processing capacity should act to curtail import demand.
23. International prices for dairy products, measured by an index grouping the single commodities traded, are not expected to increase in real terms over the next decade. However, it is anticipated that, even at these price levels, there would be enough income growth in importing countries to stimulate production for export in low-cost milk producing countries.
24. Growth in livestock industries around the globe is expected to continue to exceed that of many agricultural commodities. The strongest production and consumption gains are projected in developing countries, while trading patterns would favour low cost exporters particularly developing countries, reflecting expectations of enhanced on-farm productivity gains and increased specialisation in product processing.
25. Much of the expansion in global livestock industries is expected to come from poultry and pigmeat with the process of vertical integration in these industries facilitating a more efficient conversion of feed into meat and contributing to an increase in the competitiveness of these industries compared to that of beef and sheepmeat production. Meat output of ruminants is expected to trail that of the other sectors, limited by smaller farms and limited technical innovations. Milk production will grow at a faster rate than in the 1990s, mainly as a result of continued expansion in developing countries and a recovery in output in the countries in transition.
26. The results of this projection exercise are subject to a number of uncertainties specific to the livestock sector:
1 The medium term projections covering the basic food commodities are generated using the FAO's World Food Model (WFM), which allows for the simultaneous determination of supply, demand, trade, stock levels and prices for all the commodities covered. Assumptions regarding economic and population growth, technological change, weather and agricultural policies are used to prepare a "central or baseline" scenario for individual commodity production, demand and trade projections. It should be stressed that projection results are indicative of what would happen under specified macro-economic, demographic and commodity-specific assumptions, all of which are subject to uncertainty. The current commodity projections to 2010 are based on the United Nations' medium variant population growth scenario and the World Bank's world gross domestic product projections, assumptions of normal weather conditions and a continuation of present policies.
2 Please note that these are preliminary results, the final projections will be presented to the CCP in 2003.
3 The decline in growth is solely due to slower consumption growth in China in recognition that the Chinese meat consumption data in the 1990s was over-estimated. In fact, if China is excluded from the total for developing countries, there is a slight increase in the rate of growth of consumption over the projection period.
4 The decade-long structural decline in the livestock sector in the Russian Federation is expected to slow, with poultry and pigmeat output expected to rise over the projection period.