MEAT

• OUTLOOK FOR 1996
• POULTRY MEAT
• PIG MEAT
• BOVINE MEAT
• SHEEP AND GOAT MEAT

OUTLOOK FOR 1996

Prospects for steady or strengthened economic growth in most regions should contribute to increased per caput demand for meat products in 1996, in the Far East, Latin America and the Caribbean, North America and Oceania. Market expansion is anticipated to be less pronounced in Africa and the Near East, where demand may be constrained by relatively high domestic meat prices this year. Aggregate meat demand is forecast to decline in Europe and in the CIS.

Global meat production and consumption are expected to rise by three percent to 211 million tons, with increases foreseen for all meat categories. However, the evolution of the world feed situation will be critical to the meat economy this year, as prospects for high feed prices have already induced some major producing countries to revise production forecasts downward. Another major source of uncertainty concerns the recent crisis in the EC, which was prompted by fears that consumption of beef from animals infected with Bovine Spongiform Encephalopathy (BSE) could affect human health. The immediate impact of the crisis on beef demand has been very strong, especially in the EC. However, such a development is expected to have only a limited depressing effect on overall meat consumption in 1996, especially as demand for beef started to recover in several countries and consumers shifted towards alternative meats (see Box on BSE).

Preliminary forecasts for global average per caput meat availability in 1996 point to a half a kg increase to 36.0 kg, reflecting gains in the developing countries to 24.6 kg in 1996 compared with 23.8 kg last year. In the developed countries, per caput meat availability is anticipated to fall from 76.7 kg to 76.5 kg, mainly reflecting a reduction in CIS countries and in the EC

Improved access to import markets following the Uruguay Agreement (URA) should contribute to a further expansion in world meat trade, which is currently forecast to reach 13 million in 1996, or three percent more than last year.

WORLD MEAT PRODUCTION

POULTRY MEAT

Global poultry meat production in 1996 is put at 56.5 million tons, 5 percent above the 1995 level. Large increases are again expected in the United States, China and Thailand, which should all benefit from buoyant domestic and foreign demand, while modest growth is anticipated in Brazil and the EC. By contrast, production is likely to decline in Japan, influenced by rising feed costs, and in the CIS. However, in the latter, the contraction may be less pronounced than in 1995, following reduced competition from imports and increased government support to producers in the Russian Federation.

Trade in poultry meat is forecast to rise by 5 to 6 percent to 4.5 million tons. Increases in imports are likely to reflect larger purchases by countries in the Far East, especially China and Japan. Purchases by Mexico are also anticipated to grow, reflecting increased duty-free access under the North America Free Trade Agreement (NAFTA) and improved economic prospects. By contrast, an increase in tariffs together with the introduction of a minimum import price and a tightening in sanitary import requirements by the Russian Federation may result in reduced deliveries there. Smaller shipments are also forecast to Saudi Arabia, following increased domestic production.

Most of the expansion in poultry trade should be met through larger sales from the United States, China, Brazil and, to a lesser extent, Thailand. By contrast, exports from the EC are forecast to decline, reflecting the URA commitments on subsidized sales, although increased deliveries are expected to be made on commercial terms.

International poultry prices showed a marked tendency to increase over the first few months of 1996. Such a trend is anticipated to be maintained over the rest of the year, influenced by the relatively high feed costs incurred by producers and strong import demand.

WORLD MEAT EXPORTS 1/

PIG MEAT

Global pig meat production is forecast to increase by three percent in 1996, to 84 million tons. The major contribution to this expansion is expected to be made by China, where a situation of oversupply may arise during the second half of the year, possibly triggering provincial government intervention through purchases and storage, as in 1995. Expansion should also occur in the United States, reflecting favourable prices to producers, and in Brazil, where demand should remain firm. Similarly, in the Republic of Korea output growth is likely to rebound, following increased pig numbers. Output is also anticipated to expand in the Philippines and Viet Nam, boosted by buoyant domestic demand. By contrast, output is forecast to drop in the EC, reflecting a contraction in the breeding herds, as well as in Japan, Hong Kong, Mexico, Poland, Romania and in the CIS, reflecting, in most cases, increased feed costs and, in others, the dampening effects of environmental regulations.

Trade in pig meat is estimated to increase to 2.4 million tons in 1996, up 1 percent from last year. The expansion should be driven by a recovery in imports by Mexico and increases in Hong Kong and the CIS. For the first time in a number of years, imports by Japan may remain at a standstill, reflecting the slowing down in deliveries during the first quarter when the minimum import price was raised by 24 percent under the URA safeguard clause, and the possibility of this clause again being triggered later in the year. Imports to the Republic of Korea are expected to decline, in line with the anticipated expansion in production. Reduced purchases are also likely to be made by Poland, despite a likely fall in output, as supplies could be released from intervention stocks built in 1995.

International prices of pig meat strengthened in early 1996. However, this trend may be dampened later during the year by the anticipated lack of growth in demand for imports by Japan. Moreover, the average export unit value may fall, reflecting the rising share of low value cuts in trade.

BOVINE MEAT

Global output of bovine meat in 1996 is put at 56.5 million tons, two percent more than last year. Production is expected to recover in Africa, reflecting larger cattle herds and higher off-take rates, following attractive producer prices. Increases are forecast in the United States and especially in Canada where cattle numbers have reached record highs. However, the anticipated increases in North America may underestimate the expansion that might occur should a herd liquidation process be initiated in response to continued low domestic cattle prices and high feed costs. Output should increase substantially in Brazil and Uruguay, fostered, in the former, by a firm domestic market and, in the latter, by buoyant export prospects, enhanced by its recognition as a foot-and-mouth disease-free country. Little change is anticipated in Argentina. In Asia, increased bovine meat output is likely in China, the Republic of Korea and Pakistan, boosted by an expansion in domestic demand. In Mexico, production is anticipated to fall, following the sharp reduction in cattle numbers last year.

A modest increase in bovine meat output should occur in the EC, which along with the current tendency towards reduced net exports and falling consumption, may lead to declining domestic prices and a surge of intervention purchases this year. Some of these tendencies, in particular that concerning consumption and stocks, could be amplified in the short term by the recent crisis which had stricken the sector when the public was informed that the discovery of a new strain of the human Creutzfeldt Jakob Disease (CJD) could be linked to Bovine Spongiform Encephalopathy (BSE) (see below). This announcement had a strong negative impact on consumers' demand for beef in March and April, but this started recovering thereafter in various member countries, including the United Kingdom, where the majority of BSE cases has been recorded.

In eastern Europe, herd rebuilding will continue to constrain output, while in the CIS, a further reduction is forecast, though less marked than in 1995. In Oceania, poor export prospects again this year are likely to bring about another contraction in Australia, while some increase may take place in New Zealand, especially if producers react to continued low prices by culling their breeding herds.

Trade in bovine meat is forecast to expand by about three percent to over 4.8 million tons in 1996. This rise should be sustained by increased purchases by Japan, which has been a major growth market in recent years, supported by the lowering of tariffs to 46.1 percent in April 1996. These were reduced already from 50 percent to 48.2 percent in April 1995, but tariffs on frozen beef reverted back to 50 percent from 1st August 1995 to 31st March 1996 under the safeguard clause, following an upsurge in deliveries during the first half of 1995. Imports are also set to rise in China, Chile, Egypt, the Republic of Korea, Malaysia and the Republic of South Africa, spurred by rising domestic demand. Larger purchases are also expected to be made by Mexico, to compensate for domestic supply shortfalls. These increases should be partly offset by a contraction in purchases in the United States and Canada, in line with rising production. Little change in imports by the EC and the CIS are currently anticipated.

Most of the expansion in trade will be met through increased exports from the United States, Canada, Brazil and Uruguay. At the same time, shipments from the EC and Australia, the two largest bovine meat exporters, are again forecast to contract, the first restrained by the URA commitments on export subsidies and the second by low international prices. The decline in EC exports, however, might be less than that envisaged for subsidized sales as shipments made under commercial terms might increase following the recognition of all EC members as FMD-free countries, which should open them access to the remunerative Pacific markets.

INTERNATIONAL MEAT PRICES

Beef prices in the Pacific market are likely to be under downward pressure during 1996, for the third consecutive year, reflecting large supplies in North America and intense competition among exporters in the Far East. Prices in the Atlantic market, on the other hand, may tend to rise, in parallel with the reduction in sales from the EC. Thus, the difference in international prices for beef in the Atlantic and Pacific markets is expected to narrow further in 1996, eroding the basis for a demarcation of the two markets. This convergence would reflect not only the gradual reduction in export refunds by the EC but also the change in status of major producing countries, or part of their territory, regarding foot-and-mouth disease.

SHEEP AND GOAT MEAT

Global sheep and goat meat production is forecast to reach 10.6 million tons in 1996, 3 percent more than last year. Underlying this trend is a sharp expansion in China, sustained by the rising demand and relaxation of domestic marketing constraints over the past few years. In the same region, increases are expected in Bangladesh and Pakistan. Output should also expand in Africa, reflecting developments in Sudan and Kenya, but also in the Republic of South Africa where production should recover in parallel with flock sizes. In Latin America, some recovery is also expected in Argentina, where substantial sheep losses were recorded last year as a result of snow storms, while a decline may take place in Mexico and in Uruguay, following increased retention of sheep to rebuild flocks.

Production is anticipated to contract in most developed countries. In the EC, limits on the number of ewes eligible for annual premiums should continue to constrain growth. The contraction in flock numbers in the CIS is expected to bring about a further decline in production. In Australia, continued retention for flock rebuilding should again result in reduced output. A similar trend is foreseen in New Zealand, reflecting poor price prospects in the EC, its major market.

Trade in sheep and goat meat in 1996 is estimated to decline again this year, to 644 000 tons. This would reflect falling import demand in the United States, Mexico, and in Near East countries, especially the Islamic Republic of Iran. By contrast, some increase in imports may take place in the EC. The decline in import demand would be largely reflected in reduced exports from both Australia and New Zealand.

International prices of mutton in 1996 are expected to strengthen, in line with reduced supplies from Australia. Prospects for lamb prices are still uncertain, as they will depend on the pattern of demand in the EC, the largest import market.