FAO/GIEWS - Food Outlook No.3 - June 2001 p. 12

Meat and Meat Products

• Growth in meat production constrained by lower beef supplies
• Per caput meat consumption to rise marginally
• Meat trade prospects lacklustre as supply growth slows and prices rise

International meat markets in 2001 are witnessing some price strength, as indicated by the nearly 4 percent increase in the FAO index of international meat prices during the first quarter of the year. This is largely in response to a slow-down in meat output growth from the previous year's levels and market closures to EC beef and increasing Foot and Mouth Disease (FMD) outbreaks in Argentina, Uruguay, and, most recently, Brazil. These and similar animal disease outbreaks elsewhere in late 2000 have also caused noticeable increase in price volatility, particularly for pigmeat.

Restrictions on bovine and pig meat exports as a result of disease outbreaks are likely to continue supporting world prices in 2001, despite only marginal gains anticipated for world import demand. The general price outlook, however, continues to be clouded with uncertainties related to consumer responses to BSE concerns, despite some signs of recovery in European countries. Poultry meat prices and those of ovine meats are likely to continue trending upward, pulled up by increasing demand, particularly in a context of only limited growth in meat supplies and higher prices of pigmeat and beef.

Growth in meat production constrained by lower beef supplies

Global meat output in 2001 is forecast at 237.5 million tonnes, up only 1.5 percent from the previous year and the slowest annual gain in world meat production since 1996. A decline of 1 percent in global beef production would be more than offset by forecast expansions in the world pigmeat and poultry sectors by over 2 percent each to 93.4 million and 68.8 million tonnes respectively. Production uncertainties are heightened in many of the disease-infected countries, where final animal inventory and production figures will only be determined when the measures underway to eradicate and control disease outbreaks are no longer needed.

World Meat Production

Pressured by herd rebuilding in the major cattle producing countries in North America and Oceania and reduced cattle slaughter, bovine meat production in developed countries is set to decline nearly four percent in 2001. The EC beef industry, influenced by policy measures such as the "purchase for destruction" and the "special purchase scheme"^1/ and, to a lesser degree, FMD induced cattle culls, is anticipating both lower cattle inventories and production. Meanwhile, output in developing countries, estimated at 30 million tonnes in 2001, is set to surpass that in developed countries for the first time. Expected output growth of 2 percent is slower than the previous 5-year average of 3.5 percent, due to output declines anticipated for Argentina and Uruguay, both afflicted by recent FMD outbreaks, and, consequently, deprived of the valuable certification of FMD-free vaccination status from the World Animal Health Organization (OIE).

Robust demand and continued low feed prices are supporting global poultry meat output growth, which is expected to be up 3 percent in 2001 with the strongest growth expected in South America, the Caribbean and the EC. European poultry meat remains relatively unscathed by recent disease outbreaks and prices have been supported by increased demand for white meat. In the ovine market, strong output gains in developing countries, particularly China and Pakistan, are expected to offset an anticipated 3-percent reduction in sheep/lamb availabilities in developed countries. Ovine meat production is estimated at 11.6 million tonnes in 2001, up 1.5 percent from the previous year. Reduced sheep supplies in Australia, combined with continued contraction in the United States and EC, are expected to more than compensated by higher drought-induced slaughter in New Zealand.

Global pigmeat output is expected to increase 2.3 percent in 2001 despite a stagnant outlook in developed countries, influenced mainly by the expected reduction in EC output. Structural changes in the United States pigmeat industry, induced in part by low prices in 1998, have led to a reduction in the number of small producers. As a result, despite rising prices and favourable returns, only slow growth in United States output is expected with capacity constraints in larger operations as the main cause. In Canada, however, increased slaughter and processing capacity is facilitating an estimated 4 percent increase in output. Meanwhile, output in developing countries is expected to grow 4 percent in 2001, being led by growth in China, where robust demand is maintaining producer returns despite higher domestic grain prices.

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1/ Programmes enacted by the EC Commission to remove from the market beef from animals aged more than 30 months of age. The "special purchase scheme", unlike "the purchase for destruction", allows beef from these BSE-tested cattle to be stored and eventually consumed domestically or exported.

Per caput meat consumption to rise marginally

Despite a forecast 1 kg drop in per caput meat consumption in developed countries, to 77 kg, global per caput availability in 2001 is inching up to 38.6 kg. Sliding meat intake by consumers in developed countries over the past two years is prompted by reduced beef consumption, due to lower availabilities, higher prices, and BSE concerns, particularly in the EC. Per caput beef consumption in developed countries is expected to drop by 3 percent, for the second year in a row, to an estimated 21.9 kg per person in 2001. Food safety concerns in the EC are prompting a reversal in per caput beef consumption levels which, by 1999, had returned to the pre-BSE levels of 1995. EC beef intake dropped 9 percent in 2000, with per caput consumption in 2001 estimated at 17 kg, 3.6 kg below that recorded in 1999.

Meanwhile, consumers in developing countries are set to expand meat intake by only 1.5 percent in 2001, mainly pig and poultry meat. The strongest growth is expected in Central America and Asia, where consumption is likely to increase between 2-3 percent. However, growth in Asia is anticipated to be slightly lower that that observed in 2000, as output slowdowns and prices increase.

Meat trade prospects lacklustre as supply growth slows and prices rise

World meat trade in 2001 is estimated at 17 million tonnes, virtually unchanged from the previous year's level. However, considerable uncertainty is likely to characterize international meat markets in 2001, with more than 40 markets around the globe restricting market access to potentially FMD-infected meat from the EC and Latin America, suppliers of nearly one-quarter of the world beef exports and nearly 40 percent of pigmeat shipments While the embargoes are not expected to last long term duration, short term market disruptions and unclear trade prospects make decision making extremely difficult.

World Meat Exports ^1/

Robust consumption gains for poultry meat, particularly in Russia and markets in Asia, are prompting gains of 3 percent in poultry trade, pushing up poultry's share of global meat trade by 1 percent to 44 percent. Poultry's trade gains are not expected to be replicated in the beef and pigmeat sectors where shipments are anticipated to drop 1.5 and 1.7 percent respectively. Continued strong demand is anticipated in North America and Mexico. On the other hand, import demand for pigmeat is estimated down in Asia, while regional demand for bovine meat imports expected up only 1 percent, after significant gains in the preceding two years. This is a region which accounts for nearly half of world meat imports. Meat imports by Japan, the world's largest meat market accounting for nearly 20 and 27 percent of global bovine and pigmeat imports, respectively, in 2000 - are expected to remain unchanged. However, bovine meat imports by the Philippines are expected to drop. In the Republic of Korea, higher meat stocks are likely to limit imports of both bovine and pigmeat, while the country's exports of pigmeat are expected to plummet by 50 percent in response to the FMD crisis in 2000.

International Meat Prices

Reduced supplies and restrictions on exports from the EC are expected to reduce developed countries shipments of bovine meat and pigmeat by 1.4 and 4.2 percent respectively. Meanwhile, previous expectations that meat exports from Latin America would expand significantly have been forestalled by regional FMD outbreaks. Beef exports from this region are anticipated to fall by 4 percent. Some gains in shipments, however, are expected by smaller beef exporters in Central America, such as Nicaragua, which is negotiating sales contracts with the China Province of Taiwan and the EC, and Panama. However, cattle populations in this region are too small to be able to cover shortfalls developing in major cattle-exporting countries in the region. Reduced competition from South America and the EC, combined with higher prices on international beef markets, are expected to result in record shipments from the United States, Australia and New Zealand. This is despite original expectations of lower shipments from these markets due to reduced supply availabilities.

Ovine meat prices continue to be pressured upward, despite expectations of only small trade gains, as production growth slows. Slightly higher EC demand, as sheep inventories contract in response to FMD slaughtering and continued structural changes in the industry, will provide some support to ovine meat trade, estimated at 772 000 tonnes in 2001, 1 percent higher than previous year's level. Global import demand could potentially increase even further as a result of the May 1 ruling by the Appellate Body of the WTO which upheld the WTO's original ruling that U.S. import safeguards on lamb imports were in violation of the appropriate rules governing safeguard implementation.