FAO/GIEWS - Food Outlook No.1 - February 2000 p. 9

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MEAT AND MEAT PRODUCTS

The world meat market has been influenced in 1999 by low feed prices, a recovery in Asian meat import demand, wide currency exchange rate fluctuations, particularly of the Brazilian Real, and increasing use of export programmes, encompassing export subsidies, food aid and credit packages, by the developed countries. Animal disease and food safety issues had only a limited impact on the global meat economy in 1999 as aggregate meat output and consumption expanded by 2 percent in 1999 to 227 million tonnes, supported by continued strong gains for the poultry sector and moderate growth for the beef, pigmeat and sheep sectors.

Two-thirds of the growth in meat production in 1999 was realized by the developing countries, bringing their share in total output to 54 percent, up from 33 percent in 1970. Per caput meat consumption in the developing countries in 1999, estimated at 26.6 kg, is up only slightly from 1998; however, aggregate levels for the developing countries mask significant differences among regions, with per caput availability in South America, a large meat producing area, estimated to have increased by 2 percent to 62 kg in 1999 while that of Africa stagnated at 14.5 kg. Consumption in the developed countries, despite a decade-long decline in per caput meat intake, increased by 2 percent to 79 kg.

Recovering from the stagnation that characterized the international meat market in 1998, a double-digit jump in Asian demand in 1999 prompted global meat trade to grow 5 percent to 15.8 million tonnes. Unlike in the past 8-year period, when poultry meat contributed over 50 percent of the growth in trade, 1999 witnessed a resurgence in both bovine and pigmeat exports induced by economic recovery in Asia and exporter programmes which facilitated product movement, specifically high EC export subsidies, EC and the United States food aid programmes and the United States credit facilities to the Republic of Korea for the purchase of red meat imports.

The FAO international meat price index witnessed a hesitant but sustained reversal from the declining trend which has characterized meat prices since the mid-1990s. However, the gains were mixed for the various meats with none of the meat prices, except manufacturing grade beef, recovering to 1998 average levels. Upward price pressure was revealed over the course of the year as import demand strengthened in the wake of the Asian economic recovery and red meat supplies gradually contracted in exporting countries. Price recovery for most meats in 2000 is expected to be supported by tighter supplies.

Bovine meat output grew marginally to 58.7 million tonnes in 1999, despite expectations early in the year that reduced cattle inventories and herd rebuilding in the major producing countries, together with continued structural downsizing in the CIS countries, would lead to an overall decline in production. Output expansion in the developing countries more than offset a fall in production in the developed countries. Negative growth in the latter, despite record beef production in North America, was mainly the result of the implementation since 1996 of measures to fight the Bovine Spongiform Encephalopathy (BSE) in Europe and of structural adjustment of the meat industries in the CIS and central and eastern European countries.

World Meat Production

  1998 1999 2000 estim.
  ( . . . . million tonnes . . . . )
WORLD TOTAL 222.3 227.1 229.2
Poultry meat 61.3 63.7 65.6
Pig meat 87.4 89.1 89.5
Bovine meat 58.2 58.7 58.2
Sheep meat and goat meat 11.4 11.5 11.7
Other meat 4.0 4.1 4.2
DEVELOPING COUNTRIES 119.0 122.0 124.9
Poultry meat 30.8 32.1 33.0
Pig meat 50.0 50.9 52.1
Bovine meat 27.8 28.4 29.0
Sheep meat and goat meat 8.0 8.2 8.4
Other meat 2.4 2.4 2.5
DEVELOPED COUNTRIES 103.3 105.1 104.3
Poultry meat 30.5 31.6 32.5
Pig meat 37.4 38.2 37.4
Bovine meat 30.4 30.3 29.3
Sheep meat and goat meat 3.3 3.3 3.3
Other meat 1.6 1.7 1.7

Bovine Meat

Economic recovery in Asia and unexpectedly large shipments to the Russian Federation - still one of the most important beef markets - supported a 6-percent expansion in bovine meat trade in 1999 to 5.4 million tonnes. Imports by the Republic of Korea soared while high prices in the United States for manufacturing grade beef prompted higher United States imports. Bovine meat shipments to the Russian Federation in 1999, expected to be limited to the 270 000 tonnes originally programmed in late 1998 in the EC and United States food aid packages, are estimated to have matched 1998 levels of 535 000 tonnes, as increased subsidies for EC beef allowed cash-strapped Russian importers access to low priced commercial shipments. Increased exports were supported by record supplies in the United States and Canada and by more competitively-priced shipments from Australia and Brazil. EC food aid shipments to Russia and an escalation of export refunds supported a 30-percent jump in EC exports. Such a performance is unlikely to be replicated in 2000 especially as the large 1999 sales have substantially depleted intervention stocks. Meanwhile, shipments from other traditional exporters, such as New Zealand and Uruguay, were constrained by lower exportable supplies and, in the case of Uruguay, also by reduced demand in neighbouring Mercosur markets. International beef meat prices are likely to be pressured higher in 2000 as herd rebuilding progresses in some exporting countries.

Pig Meat

More than a year after hog prices dropped 20 percent to hit near-record lows in late 1998, a very gradual reduction in the breeding herds in major exporting countries is finally signalling a slow-down in global production growth, from 6 percent in 1998 to a more moderate 2 percent increase in 1999 to 89.1 million tonnes. Industry contraction, particularly in the EC and the United States, was delayed by low feed prices and increased concentration and vertical integration which allowed producers to maintain production despite low pigmeat prices. While very low prices early in the year induced some later-year cut-backs in breeding stock in the EC and United States, increasing pigs per litter and heavier weights maintained production gains. Meanwhile, in Canada surge of an 11 percent in output was made possible by a rapid expansion in slaughter and processing capacity. Production gains by the developing countries, which account for 57 percent of world output, slowed in 1999 to less than 2 percent. Dominating the outlook for both the developing countries and the world, China's pork output is estimated to have expanded less than 2 percent, constrained by low prices as consumer buying was weakened by economic uncertainty. Elsewhere in Asia economic recovery in the Philippines, Republic of Korea, and Thailand was accompanied by a rebound in production which was only slightly tempered by disease-induced hog slaughter in Malaysia.

Characterized by a high degree of concentration of importers and exporters, global pigmeat trade was shaped in 1999 by economic recovery in Asia and an intensive use of export programmes to move products to the Russian Federation. World trade in pigmeat is estimated to have surpassed 3 million tonnes in 1999, up 7 percent over 1998. In Asia, the largest regional pigmeat market, imports jumped by over 20 percent, supported by robust buying by Japan and the Republic of Korea, which also helped push up international pigmeat prices as reflected by an increase of 12 percent in the United States per unit export values for frozen pigmeat since January 1999. Export programmes also played a critical role in underpinning pigmeat trade in 1999. In particular, deliveries to the Russian Federation, the second largest pork import market, were sustained by food aid packages from both the EC and the United States and strong use of EC export restitutions. The reactivation of EC export subsidies for all pigmeat cuts in late 1998, a near doubling in export subsidies for product destined specifically to the Russian Federation, and the use of the WTO-sanctioned roll-over provision allowed EC shipments to this market to exceed the 1997 record shipments. Exports from Canada jumped 30 percent, benefiting from strong Asian demand, while growth in shipments from the United States, disadvantaged by a strong currency and low-priced subsidized EC products, slowed from 11 percent gains witnessed in 1998.

World Meat Exports 1/

  1998 1999 2000
estim.
  ( . . . thousand tonnes . . . )
WORLD 15 097 15 835 15 846
Poultry meat 6 163 6 395 6 483
Pig meat 2 882 3 080 2 983
Bovine meat 5 126 5 417 5 423
Sheep meat and Goat meat 676 690 691
Other meat 251 252 266

Sheep and Goat Meat

Global sheep meat output in 1999 is estimated to have expanded by less than 2 percent to 11.5 million tonnes. Supply reductions in the developed countries were more than offset by production gains in the developing countries, especially in Asia, a region which accounts for almost 50 percent of global sheep/goat inventories and production. In China, the largest sheepmeat market, growth in output slowed from the strong gains witnessed in the two previous years, while Pakistan, the second largest market, registered modest output gains as did India, Bangladesh and the Islamic Republic of Iran. Output gains in Africa, a region where sheep and goats industries play an important role in food security, were underpinned by growth in Algeria and Nigeria. Aggregate output growth in developed regions was under pressure as the continued contraction of the sheepmeat sector in CIS countries was mirrored in the United States due to low wool prices. In New Zealand, despite drought-reduced inventories going into 1999, favourable weather and near record lamb birth rates resulted in only a marginal output decline, while output in the EC and Australia expanded.

World trade in mutton and lamb is estimated to be up 2 percent in 1999 to 690 000 tonnes. Mutton and lamb are very thinly traded with only 6 percent of global output destined for the international market. While nearly three-quarters of total output is located in developing countries, global trade occurs mainly among developed countries and is characterized by a high degree of concentration. Imports by the EC, which account for one-third of global imports, were lower in 1999, depressed by higher domestic output and low domestic prices. Purchases by the United States, a high-value lamb market, were also depressed as deliveries slowed after the implementation of safeguard measures in July 1999 following an alleged surge in its imports. Stronger import demand in 1999, however, originated from the developing countries, particularly in the Middle East. Shipments by the two largest exporters, New Zealand and Australia, expanded slightly in 1999, while exports from the Sudan recovered, most of which moved into adjacent African countries. Meanwhile, product movement from Uruguay dropped in response to lower exportable supplies and weak import demand from recession-plagued neighbouring countries.

Poultry Meat

Buoyed by low grain prices, global poultry meat output in 1999 increased 4 percent to 63.7 million tonnes. While slowing from the average 6 percent/year growth over the 1990-1998 period, poultry meat output gains outpaced that of other meats, broadening it's share of total output to 28 percent from 23 percent since the early-1990s. Both the developed and the developing countries registered large output gains; however, the developing countries expanded faster, pushing up their share of global production to over 50 percent. Brazil witnessed double-digit output gains as its currency devaluation strengthened demand from other countries. Meanwhile, economic recovery in many parts of Asia, particularly in Indonesia, the Republic of Korea and Thailand, was accompanied by rising production. However, overall regional growth in Asia was constrained by a production slowdown in China in response to lower overall meat prices and hesitant consumer demand. Favourable producer margins in the United States, helped by rising red meat prices, induced output gains of nearly 6 percent in 1999, while growth in the EC was less than 2 percent as overall meat prices remained low and demand suffered from the dioxine1/ problem. Rising grain prices in the Russian Federation led to an output decline, despite increased foreign investment and higher prices for domestic product in the aftermath of the 1998 currency devaluation.

The volume in international poultry trade2/ which was artificially boosted in 1999 by increased product movement through transshipment points reached 6.4 million tonnes, or 3 percent more than in 1998. Trade flows to final destinations, however, revealed a lack of real growth in the world poultry market. In fact, shipments from the United Sates, which supplies 40 percent of international trade, fell for the second consecutive year. While shipments from Brazil soared on the heels of its currency devaluation, the competitiveness of EC exports suffered from increased competition from Brazil in Middle Eastern markets and lower WTO ceilings on subsidized exports in 1999. On the import side, purchases by the Russian Federation fell by over a quarter, squeezed by consumers' lower disposable incomes and the availability of competitively priced EC pigmeat. This decline was offset, however, by increased buying by many markets, particularly China, Japan, and Mexico, induced by prices of chicken cuts which remain 24-percent lower than the previous year. In addition, both imports and exports of Hong Kong SAR and Latvia/Estonia rose substantially as these markets were increasingly used as transshipment points for product moving into China and Russia.

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International Meat Prices

    FAO index of International meat prices   Average international meat prices
Chicken 1/ Pork 2/ Beef 3/ Mutton 4/ Lamb 5/
  (1990-92=100) (. . .. . . . .. . . . US$/tonne . . . ... . . . . .)
1994 103 921 2 659 2 384 . . . 2 975
1995 90 922 2 470 1 947 . . . 2 621
1996 88 978 2 733 1 741 1 119 3 296
1997 88 843 2 724 1 880 1 072 3 393
1998 79 760 2 121 1 754 901 2 750
1999 81 6/ 602 6/ 2 067 6/ 1 895 815 7/ 2 610 6/

Meat outlook for 2000

Despite expectations of strong economic growth in 2000, meat consumption is projected to increase only slightly as constrained red meat output prospects in major producing and exporting countries push up meat prices. While strong output gains are likely in the poultry sector, overall meat supplies will likely be limited by reduced hog inventories in the developed countries and a continuation of herd rebuilding which portends the first global output drop in the cattle sector since 1992. The meat production outlook is clouded by an on-going structural change particularly for the pigmeat sectors in the EC and the United States which, combined with expected low feed prices, might allow large operations, as they did in 1999, to mitigate the potential contraction in output.

Trade prospects in 2000 will likely be tempered by expectations of reduced meat supplies in the developed countries which accounted for nearly three-quarters of meat shipments in 1999, slightly higher red meat prices and limited prospects for new meat food aid to the Russian Federation.

Asian meat imports in 2000, while not expected to replicate the growth witnessed in 1999, are likely to remain robust. Similarly, shipments to North America, the second largest import market after Asia, are likely to be larger because of expected lower domestic meat output. However, growth in these markets is not expected to offset declining Russian imports. Exports by the United States in the context of lower supplies and higher domestic prices are set to register the first decline since the early 1980's. Likewise, EC exports will be compromised by a reduction in the WTO export ceiling for all meat exports and the prohibition on rolling over unused subsidies as of July 2000. By contrast, the lower relative prices in South America, generated by the devaluation of the Brazilian currency in 1999 and maintained by strong trading links between Mercosur countries, should facilitate exports from this region in 2000. Product movement from this region into the United States could be further bolstered by their improved animal health status, particularly the regions in Brazil likely to be declared Foot and Mouth Disease (FMD)-free in 2000.

E-Mail Information Exchange Service for the Meat Sector

The Commodities and Trade Division has established a new e-mail based network for the exchange of information on developments in the global meat market entitled the Meat and Livestock Market Network. To subscribe to this network (which is free-of-charge), leave the subject blank and send a message to:

mailserv@mailserv.fao.org : Subscribe Meat-L

The primary purpose of this services is to provide a forum for the discussion of issues relevant to the national and international markets for meat and livestock products. Registered users are invited to supply articles, publications and statistical reports on the meat sector in their own countries/regions while they are also encouraged to post questions and answers on topics of interest related to this commodity. Since global coverage is an essential feature of this service, users can send their messages in English, French or Spanish.

In summary, the objectives of this new FAO service are:

a. The exchange of information on meat and livestock markets between list members via the FAO mail server;
b. The circulation of FAO's reports dealing with current developments in the world meat market.

Begin your participation in this exchange system by forwarding some information on the meat and livestock sectors to which you have access and which you consider of interest to others. After subscribing, you can address your contributions to: Meat-L@mailserv.fao.org


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