FAO/GIEWS - Food Outlook No.4 - September 2000 p. 11

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Meat and Meat Products

Although world meat prices have been rising since the beginning of 1999, reflecting a tightening of supplies, the increase has been tempered somewhat in 2000. The upward momentum of the FAO meat price index has been maintained largely by escalating pigmeat prices, as producers in both the EC and the United States had already reduced inventories in response to relatively poor economic returns in 1999. International beef prices, on the other hand, have edged downward as slaughter and increased weights increased output. Low feed prices have also boosted supplies of poultry meat.

Global meat production in 2000 is currently forecast to increase by 2 percent to 231.4 million tonnes, mainly in developing countries as output is expected to contract in most developed countries. The strongest growth in output is expected to be in South America. In line with these changes, per caput consumption in developing regions is expected to increase by 1.5 percent to 27 kg, while in developed regions it is likely to decline by 1 percent to 79 kg.

The 8-percent jump in global meat trade witnessed in 1999, induced by strong economic recovery in Asia, the use of export programmes, such as meat food aid shipments to Russia, and high EC export subsidies, is unlikely to be replicated in 2000. Accordingly, world meat trade is currently estimated at 16.5 million tonnes, up by only 1 percent, with poultry meat accounting for most of that increase. Animal disease and food safety issues were minimal in the first half of 2000, with the exception of the outbreaks of foot and mouth disease (FMD) in Japan and the Republic of Korea, which are expected to reduce pigmeat exports in the latter. However, the August outbreaks of FMD in Argentina and swine fever in the United Kingdom add considerable uncertainly to the 2000 market outlook. Overall, however, developing countries are still set to capture all the growth in meat exports in 2000 because of reduced output in most developed countries.

World Meat Production

  1998 1999 2000 estim.
  ( . . . million tonnes . . . )
WORLD TOTAL 223.1 227.7 231.4
Poultry meat 61.5 63.7 65.4
Pig meat 88.0 89.2 90.3
Bovine meat 58.3 59.3 60.1
Sheep & goat meat 11.3 11.4 11.6
Other meat 4.0 4.0 4.0
DEVELOPING COUNTRIES 119.6 122.2 126.1
Poultry meat 30.9 32.1 33.3
Pig meat 50.4 50.9 52.6
Bovine meat 27.9 28.8 29.6
Sheep & goat meat 8.0 8.1 8.2
Other meat 2.4 2.4 2.4
DEVELOPED COUNTRIES 103.5 105.4 105.3
Poultry meat 30.5 31.6 32.1
Pig meat 37.6 38.3 37.6
Bovine meat 30.4 30.6 30.5
Sheep & goat meat 3.3 3.3 3.3
Other meat 1.7 1.6 1.6

The stabilization of WTO export subsidies by July 2000 and the elimination of the roll-over provision which had been applied to EC exports in previous years, have been the major policy developments of note in the current year. The implementation of the "double zero" option in the EC, which is expected to increase market access and eliminate the use of export subsidies between the EC and many of the accession countries in eastern and central Europe, will make its effects felt in 2001 rather than 2000.

World Meat Exports 1/

  1998 1999 2000
  (............... .. thousand tonnes ................ )
WORLD 15 108 16 338 16 498
Poultry meat 6 161 6 707 6 795
Pig meat 2 885 3 242 3 210
Bovine meat 5 136 5 447 5 512
Sheep meat and goat meat 676 689 715
Other meat 251 252 266

Bovine meat output up slightly, while trade gains slow down

Global bovine meat output is expected to rise by only 1 percent in 2000, sustained by a nearly 3-percent production increase in the developing countries, particularly China and Brazil, while a slight contraction is expected in the developed regions. In China, meat prices have recovered from the low levels of last year, prompting a sizeable increase in beef production. In Brazil, economic recovery along with strong export demand for competitively priced product are leading to increased slaughter and output. Meanwhile, beef production in some Near East Asian countries, e.g. the Islamic Republic of Iran and Iraq, is declining, affected by two years of drought compounded by outbreaks of FMD. Kenya and Ethiopia are also suffering one of the worse droughts in record, which has led to dramatic livestock losses in some regions.

Developed country bovine meat production is expected to decline marginally this year. European beef inventories and production should continue to slip in 2000, with EC output dropping slightly despite the phasing-out of most of BSE-imposed slaughter regimes. Low animal productivity in eastern European countries and the Russian Federation, combined with escalating feed prices, are maintaining a decade-long decline in animal inventories and output. Reduced slaughtering will constrain production in Australia this year, despite relatively high carcass weights, while output in New Zealand should expand slightly, reflecting in part increased steer slaughter as dairy herds increase. A modest rise is also anticipated in the United States due to unexpectedly strong placements of cattle in feedlots and low heifer retention for breeding, which defy expectations of significant herd rebuilding.

Trade in bovine meat is expected to increase by 1 percent this year, significantly below the 6 percent recorded in 1999, when product movement was supported by exporter credit programmes and food aid to Russia. The strong demand from Asian countries is the main factor underpinning the market in 2000. In particular, lower output in the Republic of Korea, partly due to the mid-year outbreak of foot-and-mouth disease that affected both cattle and pigs, is prompting a surge in imports. Lower tariffs in Japan have also stimulated imports. The United States, the largest bovine meat importer, is expected to step up its purchases of manufacturing grade beef in response to the relatively high domestic cow prices. A rebounding economy is also encouraging larger imports by Mexico. Beef shipments to the EC are expected to increase in response to lower duties and rising domestic prices. By contrast, imports by the Russian Federation could decline significantly, following the elimination of the EC and US export programmes. In Africa, the rise in international beef prices should also constrain imports of bovine meat this year.

The expansion of world imports in 2000 should be met mainly by suppliers in South America, despite concerns about the recent FMD outbreak in Argentina. Increased production in Brazil and Uruguay, changes in disease-free status in both Argentina and Brazil, and the continued weakness of the Brazilian currency is expected to increase exports from this region. Meanwhile, in the EC, higher domestic prices, a depletion of intervention stocks and a 25 percent decline in export restitutions since early 2000, portend a decline in shipments to 1998's level. Record supply availabilities in the United States will underpin export gains, while in New Zealand, depreciation of its currency is stimulating increased shipments.

Pigmeat supplies contact in developed regions, high prices restrict trade prospects

Responding to poor returns in 1999, pork producers in the developed exporting countries have reduced herd size and pigmeat production. As a result, the estimated 1 percent increase in global pigmeat output in 2000, is likely to take place in developing countries in Asia and South America. Improved margins in China (Mainland), following a recovery in pig prices and a sharp decline in feed costs, are stimulating a 3-percent jump in output. Similarly, in the Chinese Province of Taiwan, high prices and good profits in 1999 have encouraged producers to expand herd sizes, resulting in rising production this year. Steady growth is expected in the Philippines and Brazil, reflecting favourable returns and substantial investments in the industry in the two countries.

In the United States and the EC, producers have responded to last year's low returns by cutting their inventories, which should prompt a 1 and 2 percent decline in their respective outputs in 2000. Meanwhile, in eastern European countries, drought has induced a sharp rise in feed costs which should limit output gains. In Poland, the region's largest producer, pork output, after rising last year to its highest level since 1992, is forecast to drop in 2000, despite intervention buying by the government, in response to sluggish export demand and sharp price falls.

Global trade in pigmeat in 2000 is set to decline for the first time since the early 1990's, as escalating prices constrain import demand to 3.2 million tonnes. Asia continues to be a growing market, headed by China, Hong Kong SAR and Japan. Strong output gains in the Chinese Province of Taiwan, however, should discourage imports after last year's increase in market access. Meanwhile, in the Republic of Korea, the export ban stemming from this year's FMD outbreak, is leading to product, previously destined for export to Japan to be diverted onto domestic markets, depressing demand for imports. In the Russian Federation, the largest pigmeat market in 1997, imports are estimated to drop by a third from 1999's level, hampered by a cut in food aid shipments from the EC and the United States, the July elimination of EC export restitutions for all pork cuts and rising international prices.

Reduced supplies in the United States and the EC, who, along with Canada, furnish nearly three-quarters of global pigmeat exports, are expected to lead to lower shipments in 2000. In particular, EC exports are likely to drop by 10 percent from the 1999's record of 1.3 million tonnes, especially after the removal of all EC pigmeat refunds in an effort to adhere to the WTO subsidized export limit of 443 500 tonnes. The EC also agreed with 7 out of 9 eastern European accession candidates to eliminate all export subsidies and to expand market access. However, increased product movement between the regions is unlikely to change much in 2000 due to delays in implementation of those agreements. By contrast, Canada's exports are expected to increase as a result of expanded production and processing capacity.

Sheep and Goat meat output and trade expands

Global ovine output is expected to expand by 2 percent in 2000 to 11.6 million tonnes, with increases in China and Oceania more than compensating for declines in North America, Europe and the Russian Federation. Increased exportable supplies are expected in New Zealand, as favourable weather and lamb prices, together with improved management practices, have boosted lamb birth rates and slaughter numbers in 2000. In Australia, record lamb production is pushing up ovine output by 2 percent. This contrasts with a slight seasonal decline in EC sheep supplies and a steady fall in United States flocks and output. Asia, a region which accounts for more than half of global output, is likely to expand production by more than 2 percent, supported by steady growth in China, Pakistan and India. Output in Mongolia will fall this year as a result of the considerable animal losses incurred during the worst winter in 30 years. A second year of drought in the Islamic Republic of Iran and Iraq, combined with an outbreak of foot-and mouth disease, should depress outputs there also.

Global trade in ovine meat is expected to surge by 4 percent in 2000 as a supply-driven rise in export availability in Oceania combines with strong mutton and lamb demand from both the United States and the EC. Overall deliveries to the EC, particularly of fresh/chilled lamb cuts, could rise slightly as New Zealand moves to fill its EC quota of 283 000 tonnes. Meanwhile, imports by the United States are expected to reach 52 000 tonnes in 2000, or 6 percent more than in 1999, despite the imposition since July 1999 of a tariff-rate quota (TRQ) on lamb, with a duty of 9 percent charged on in-quota imports and 40 percent on over-quota imports. Falling production combined with the restrictive TRQ, have boosted lamb import prices in the United States by 7 percent since May of last year. Plentiful ovine meat supplies, particularly of lamb, in Australia and New Zealand, should help keep lamb carcass prices relatively stable in the short term. However, the overall value of shipments is likely to rise, as these two countries move to include more chilled product and meat cuts rather than carcasses in 2000. For instance, chilled product is expected to account for more than 10 percent of total New Zealand's shipments this year, considerably above their 2-percent share in the late 1980's, a shift that has boosted the export per unit value of ovine meat from New Zealand by more than 50 percent over the time period.

Poultry meat continues robust growth, trade prospects favourable

Remaining the strongest-growth meat sector, global poultry meat output is expected to reach 65.4 million tonnes in 2000, slightly less than the 4 percent gain registered in 1999. Developing countries are expected to account for nearly 70 percent of the expected increase, with the largest contributions being made by those in Asia and South America. Outputs in China and Thailand are estimated to increase by 3 and 2 percent respectively, while economic recovery in the Republic of Korea is prompting a sharp jump in output after 1999's decline of more than 20 percent. Output expansion is also expected in Indonesia, Viet Nam, and India. In Brazil, a surge in broiler breeder placements at the end of 1999 has set the stage for a nearly 4 percent increase in output, while neighbouring countries around the region, such as Chile and Peru, are witnessing robust output gains as their economies recover. In Europe, the sector is witnessing an unprecedented downturn, as it struggles to recover from 1999's low prices. Production in eastern European countries is estimated up 2 percent, despite drought-induced higher feed costs, which dampened the growth of output, which averaged 5-percent since the mid-1990's. Similarly, the higher input costs faced by Russian producers will likely limit any expansion in output, despite considerable foreign investment in the sector. Meanwhile, low feed costs in the United States and Canada are maintaining producer margins and inducing a 3 and 4 percent output expansion, respectively.

Abundant supplies in 2000 and lower international prices are expected to prompt a 2 percent growth in global poultry meat trade. Continued strong demand is expected in some countries in Asia, a region which accounts for more than 55 percent of global imports. Imports by the Russian Federation could expand slightly in 2000, supported by lower chicken meat import duties, as well as a reduction in the value-added tax to 10 percent as of July. Among the major poultry exporting countries of the United States, Brazil, the EC and Thailand, only the EC is expected to reduce exports in 2000. EC shipments continue to be constrained by WTO subsidy limitations and competition from other suppliers. In the United States, strong output growth in 2000 is supporting a 3-percent jump in shipments, after two years of decline. Similarly,

Brazilian exports are set to register another sharp increase boosted by the devaluation of the Real in January 1999. Thai shipments, while battling for market share with Brazilian products in the EC and Japan, are expected to increase.

Mixed outlook for meat prices over the next 12 months

Indications of intensive herd rebuilding in the major beef exporting regions in 2001 have raised expectations of strengthening international beef prices. However, as there has been little apparent retention of heifers for breeding in the United States, high slaughter rates could extend into early next year, dampening the prospects for price increases. Meanwhile, expectations of low feed prices throughout next year may lead to expansion in the pig sectors in the EC and North America, constraining upward price movements in prices of pig products in 2001.

In the sheep meat market, rising demand for imported lamb and possible declining availabilities from New Zealand may be the most important factors underpinning prices over the next 12 months. Mutton prices are likely to remain strong in response to continued demand from both the live trade and meat markets. Despite stronger red meat prices in 2000, poultry meat prices, as reflected by the US per unit export value for chicken cuts, have remained relatively stable over 2000. Both ample supplies in importing countries and the lower value of the currency in Brazil, the second largest poultry meat exporter, have prevented prices from rising, a tendency that is expected to persist into 2001.

International Meat Prices

    FAO index of international meat prices Average international meat prices
Chicken 1/ Pork 2/ Beef 3/ Lamb 4/
  (. 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 3 296
1997 88 843 2 724 1 880 3 393
1998 79 760 2 121 1 754 2 750
1999 85 602 2 073 1 894 2 610
2000 89 5/ 569 5/ 2 037 5/ 1 983 6/ 2 649 7/

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