Food Outlook No.4 - October 2002 p.11

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Meat and Meat Products


Pressured by rising meat supplies, global meat prices in 2002 have dropped and the FAO meat price index has declined two points since the beginning of the year. While in 2001 food safety concerns related to BSE were the main influence on markets, price movements in 2002 are primarily being influenced by abundant meats supplies, particularly in those meat producing countries previously restricted from exporting in 2001, as well as policy developments in major markets. Other factors underlying global meat markets in 2002 include: the waning impact of animal diseases, rising feed prices in major grain exporting markets and economic uncertainties in South America that led to sharp exchange rate movements over the course of the year.

Global meat production in 2002 is forecast to rise by 2.5 percent to 242 million tonnes. The bulk of the increase is the result of an estimated 3 percent growth among the developing countries, pushing up their share of world production to 56 percent. This would be 1 percent up from their share in the previous year and 5 percent up from 1995. Output in the developed countries is also expected to increase, recovering from two successive years of decline. Over two-thirds of the meat consumption gains forecast for 2002 are expected to take place in developing countries, pushing their per caput consumption up to 28 kg. A slight recovery in developed country levels to 80 kg/caput is also foreseen, while the world average stands at nearly 40 kg/caput.

Food safety concerns, which slowed annual growth in meat trade in 2001 to its lowest level for 13 years, are abating and recovering meat consumption, particularly of beef, is supporting a 3 percent rise in meat trade to 18 million tonnes. Many of the markets closed to meat products from those countries in South America and Europe afflicted with FMD in 2001 are opening, prompting strong gains for both beef and pigmeat shipments. Meanwhile, concerns about veterinary drug residues have led to market closures for poultry and differential exchange rate movements have caused shifts in exporter shares to traditional markets.

Waning impact of animal disease prompts increased beef output and trade

Drought-induced higher cattle slaughter in North America and Oceania is combining with increased throughput in previously FMD-afflicted countries in Europe and South America to push up global beef output by 2 percent to an estimated 60.1 million tonnes in 2002. After contracting for two successive years, output in the developed countries is expected to increase marginally. Among the developing countries, a 3 percent increase in output in South America is expected to augment their share of global output to nearly 52 percent, up 1 percent from 2001. In Asia, output is expected to be up 2 percent, despite drought conditions, mainly due to increasing export market opportunities. In China, official statistics report a slight year-on-year drop in the cattle inventory for the first time in over twenty years. Correspondingly, beef output is forecast to rise only 2 percent in 2002, compared to the average annual gain of about 8 percent reported since 1995. In Afghanistan, distress sale of livestock and high animal mortality have abated with improved rains and forage availabilities since mid-2002. In contrast, drought conditions in northern Ethiopia and southern Africa are leading to output declines.

World Meat Production

  2000 2001 2002
  (. . . . million tonnes . . . .)
WORLD TOTAL 232.7 235.8 241.6
Poultry meat 68.0 69.9 72.1
Pig meat 89.3 91.1 93.3
Bovine meat 59.5 59.0 60.1
Sheep & goat meat 11.4 11.3 11.5
Other meat 4.5 1.5 4.5
DEVELOPING COUNTRIES 128.4 131.7 135.3
Poultry meat 35.6 36.9 38.1
Pig meat 52.2 54.0 55.4
Bovine meat 26.6 29.9 30.7
Sheep & goat meat 8.1 8.0 8.4
Other meat 2.9 2.8 2.9
DEVELOPED COUNTRIES 104.3 104.0 106.3
Poultry meat 32.4 33.0 34.1
Pig meat 37.1 37.0 37.9
Bovine meat 29.9 29.1 29.5
Sheep & goat meat 3.3 3.2 3.1
Other meat 1.6 1.7 1.7

Source: FAO Note: Total computed from unrounded data.

Spurred by a recovery in consumer confidence in beef, beef trade in 2002 is projected to expand nearly 6 percent to an estimated 5.8 million tonnes. Asian import demand for beef is projected to recover from the estimated 7 percent decline in 2001, with strong growth reported in the Republic of Korea, Malaysia, the Philippines, and the Chinese Province of Taiwan. The noticeable exception to this is in Japan, where, despite a progressive recovery in consumer confidence in beef after the BSE crisis, imports are expected fall nearly 20 percent. Exports from the developed countries are expected to recover in 2002, after two successive annual declines, with increased availability from United States and the EU offsetting lower deliveries by Australia. Successful control of FMD in South America and currency devaluations in 2002, which ranged between 70 percent for Argentina and 30 percent for Brazil, are likely to prompt a more than 20 percent surge in South American shipments, competing with Australian exports even in non-traditional markets in South East Asia. Meanwhile, India’s export-oriented buffalo beef industry continues to be competitive, expanding low-priced product shipments to South East Asian markets, as well as to Near East markets, which previously imported from the EU. The strong export performance of developing countries is prompting an expansion of their share of global markets to 29 percent, up from 26 percent in 2001.

International Meat Prices

  FAO index of
meat prices
Indicative international meat prices
Chicken 1/ Pork 2/ Beef 3/ Lamb 4/
  (. . 1990-92=100 . .) (. . . . . . . . . . . . . . . . . . . US$/tonne . . . . . . . . . . . . . . . . . . .)
1994 102 921 2 659 2 384 2 975
1995 99 922 2 470 1 947 2 621
1996 96 978 2 733 1 741 3 295
1997 96 843 2 724 1 880 3 393
1998 83 760 2 121 1 754 2 750
1999 84 602 2 073 1 894 2 610
2000 85 592 2 083 1 957 2 619
2001 84 645 2 077 2 138 2 912
2002 83 6025/ 1 8835/ 2 2576/ 3 2086/
  2002 Jan. 84 646 1 879 2 291 3 118
           Feb. 85 581 1 953 2 326 3 110
           Mar. 86 656 2 083 2 375 3 104
           Apr. 82 604 1 903 2 323 3 148
           May 81 567 1 793 2 174 3 184
           Jun. 81 588 1 806 2 157 3 243
           July 82 570 1 763 2 223 3 390
           Aug. n.a. n.a. n.a. 2 184 3 360

Source: FAO

1/ Chicken parts, United States export unit value. 2/ Frozen pork, United States export unit value. 3/ Manufacture cow beef, Australia, cif prices to the United States. 4/ Lamb frozen whole carcass, New Zealand, wholesale prices London. 5/ January-August 2002 6/ January-July 2002.

Expanding pigmeat supplies in developed countries support increased trade prospects

High producer returns in 2001 led to a build-up in hog inventories in the major producing areas of western Europe and North America, resulting in increased slaughter in 2002 and a projected 2.5 percent increase in global production to 93.3 million tonnes. While output in the developed countries is recovering after a decline in the previous year, growth in the developing countries is expected to drop from 3.4 to 2.5 percent. Lower pigmeat prices in China, in the wake of meat safety issues related to pigmeat in early 2002, are constraining output growth to 2.5 percent, compared to the average annual growth rate of 5 percent since 1995. In South America, higher feed costs in the context of currency devaluations are expected to trim profit margins and slow output growth, especially in the latter part of the year. In contrast, low feed prices in eastern Europe and the Russian Federation, combined with government price support in some countries, is boosting slaughter and production.

Global trade in pigmeat is expected to remain strong in 2002, increasing by 6 percent to 3.6 million tonnes compared to 2001. This is despite an expected decline in shipments to Japan, the world’s largest importer, as emergency tariffs on pork imports were imposed in mid-2002, for the second consecutive year, in response to a BSE-induced surge in pork imports in 2001. Meanwhile, lower pigmeat prices and stronger economic growth are prompting strong imports by the Russian Federation, the Republic of Korea and Mexico. Canadian deliveries to the United States are being strengthened by the strong value of the US Dollar, while WTO accession, which resulted in lower tariffs for pigmeat, is encouraging stronger demand from both China and the Chinese Province of Taiwan. While quotas restrict imports by the EU and many eastern European countries, the recently negotiated “Double Zero” preferential agreement, which eliminates in-quota duties on meat trade between the two regions, is prompting increased exchange of product. Exports from the EU, recovering from last year’s sharp FMD-induced decline, are expected to increase 7 percent in 2002. Similarly, Canadian shipments are likely to rise by 8 percent in response to expanding hog slaughter capacity. Constrained demand in Japan, the United States’ major market, is expected to lead to a drop of 2 percent from that supplier. Meanwhile, product shipments from Brazil, where average export unit values are reported at US$1 172, down 20 percent from levels a year earlier, are escalating, making inroads into many markets for lower quality cuts, particularly in the Russian Federation.

World Meat Exports 1/

  2000 2001 2002
  ( . . . thousand tonnes . . . )
WORLD 17 441 17 455 17 955
Poultry meat 7 378 7 473 7 496
Pig meat 3 253 3 435 3 645
Bovine meat 5 795 5 523 5 841
Sheep meat and      
goat meat 770 777 725
Other meat 245 246 248

Source: FAO

Note: Total computed from unrounded data.

1/ Includes meat (fresh, chilled, frozen prepared and canned) in carcass weight equivalent; excludes live animals, offals and EC intra-trade.

Poultry production outlook favourable, market disruptions limit trade gains

Despite rising feed prices, poultry output is forecast to reach 72.1 million tonnes in 2002, 3 percent over the previous year. Despite lower profit margins as prices slide and input costs increase, output is expected to be higher in the major exporting countries of the United States, Brazil, the EU and China, countries which account for approximately two-thirds of global poultry meat output. Sanitary restrictions on Chinese poultry meat exports in 2002, however, are pushing domestic prices downward and restricting output growth to 2 percent, significantly below the 8 percent average annual gain witnessed since 1995. Production is also expected to be higher in India, Indonesia, Malaysia, the Philippines and many countries in the Near East. In South America production is slowing as domestic demand declines in a context of an economic downturn and diminishing profit margins due to rising feed prices. Sluggish economies and low prices are pressuring down output in Argentina, Colombia and Venezuela. Brazil is the only exception with annual growth expected to be up an estimated 7 percent in 2002. However, growth in the latter part of the year is slowing dramatically in response to reported increases in corn and soybean meal prices, up 54 percent and 25 percent respectively since January. This contrasts to an estimated 20 and 13 percent decline in Brazil’s respective domestic poultry price and export unit value during the same period.

Despite relatively robust increases in production and consumption, global poultry trade is projected at 7.5 million tonnes, up only marginally from the previous year’s level and significantly below the annual average 5 percent growth in trade witnessed since the mid-1990’s. Market disruptions persist in 2002 as food safety concerns related to hormones and antibiotics in feed lead to heightened border inspections. Imports by countries like the Russian Federation and Saudi Arabia are estimated to be down due to prolonged bans on imported products. Meanwhile, the increased incidence of residue detection and the reclassification of harmonized codes for EU poultry imports are expected to lead to a drop in imports to that market. Export competition, in the context of abundant meat supplies and lower poultry meat prices, is escalating in 2002, with Brazil, benefiting from an on-going currency devaluation, expanding its exports while shipments from the United States decline due to market disruptions in the Russian Federation. Exports from Thailand remain constrained by subdued domestic demand in the EU as well as heightened residue testing requirements on Thai products. In the EU, low domestic prices, combined with a 60 percent increase in export subsidies since the beginning of the year, are prompting sharps gains in shipments.

Constrained supplies in exporting countries limit trade opportunities for sheepmeat

After witnessing a decline in 2001, global ovine meat production is projected to rise 2 percent in 2002, as more favourable weather conditions prompt stock rebuilding and enhanced livestock productivity in many parts of the developing world. Expectations of a recovery in animal inventories in Afghanistan, northern China, the Islamic Republic of Iran and Mongolia are likely to lead to an increase of more than 3 percent in Asia, a region which accounts for approximately 50 percent of global output. Meanwhile, waning disease concerns in South America are resulting in increased slaughter and production. Output in the developed countries is set to decline for the second consecutive year. In Australia, tight lamb supplies due to increased demand for live animals from external markets, combined with weather-induced low slaughter weights, are reducing production prospects. This, in conjunction with structural contractions in North America sheep industries, is expected to offset output gains in the EU where slaughter is increasing despite lower inventories after the FMD outbreak in 2001.

Despite an expansion in global supplies and demand, trade prospects are expected down in 2002 as prices remain high and supply availabilities tighten in the major suppliers of Oceania. Imports by the United States continue to grow after the elimination of the TRQ restrictions in 2001, while imports by the EU, constrained by an import quota, are expected to be up only slightly in response to continued strong demand from continental Europe. Limited domestic availability is strengthening imports by Mexico, Canada, and China while, in South Africa, higher tariffs on lamb and mutton imports are limiting imports despite higher domestic prices. Export availabilities in both Australia and New Zealand are expected to decline due to lower output.

Price outlook mixed over the coming months

Abundant supplies of pigmeat and poultry are expected to persist over the next 12 months, maintaining downward pressure on international prices for these meats. High hog inventories, combined with rising feed prices, are pressuring producer margins and leading to increased slaughter in North America and the EU, suppliers of two-thirds of global pigmeat exports.

Increasing supplies, along with higher import tariffs in Japan through April of 2003, are likely to dampen any price increases for pigmeat. Upward price movement for poultry is also expected to be constrained by adequate supplies and increased use of export restitutions.

By contrast, the growth in beef supplies generated by wide-spread drought conditions in the major exporting countries in North America and Oceania is expected to slow in late 2002 as inventory rebuilding occurs, tightening supplies and pressuring up prices into 2003. Similarly, in the sheep meat market, lamb prices, which have risen 20 percent since mid-2001, are expected to remain strong in the context of robust demand and lower export availabilities from the major exporting countries in Oceania.

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