|No. 5||Rome, November 2003|
Meat and Meat Products
Global meat markets in 2003 are characterized by tightening exportable supplies, particularly from developed countries – traditionally the suppliers of nearly three-quarters of traded meat. Acute exporter competition is being heightened by differential price movements among the meats, shifting exchanging rates, sluggish demand growth and trade restrictions in major meat markets. In contrast to a 2-point decline in the FAO trade-weighted meat price index in 2002, international meat prices have been gaining upward momentum in 2003 with higher beef, pigmeat, and sheepmeat prices adding 5 points to the FAO index since the beginning of the year. Trade weighted prices for sheepmeat and beef have moved up 12 percent and 8 percent respectively, while pigmeat prices have moved up 2 percent. Weak demand for poultry has pressured the poultry price index down 12 percent from last year’s average, although prices have recently been rising from the low levels recorded in late 2002 and early 2003.
Low producer returns, poultry disease outbreaks, adverse weather conditions and higher feed prices in some regions have been slowing global meat output gains in 2003. Estimated at 249.1 million tonnes, meat output in 2003 is expected to expand by only 1 percent. This contrasts to the meat market situation in 2002, when a recovery in the animal disease status among the major meat exporters in South America and Europe prompted higher slaughter and output gains that neared 4 percent. Constrained by lower productivity as a result of adverse weather and low animal inventories, output in the major exporting regions of North America, the EU and Oceania is expected to decline by 1 percent. Meanwhile, output gains exceeding 2 percent in South America and Asia are pushing the output share of developing countries up 1 percentage point to 57 percent.
Rising international prices in 2003, the restrictive nature of trade policy developments in the Russian Federation and Japan, SARS in Asia and the BSE case in Canada have constrained meat trade growth to less than 1 percent at present, considerably lower than the 6 percent gains witnessed in 2002. Estimated at 19 million tonnes, the gains in global meat trade are expected to be supplied mainly by developing countries, pushing their export share of global trade up to 38 percent from 35 percent in 2002 and 29 percent in 2000. Exporter competition has so far been particularly keen in 2003 as limited meat supplies and rising prices combine with strengthening currencies in many developed countries to limit their competitiveness; this situation has led to a 3 percent decline in developed country meat exports.
International Meat Prices
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 2003 6/ January-September 2003.
Lower animal inventories in the developed countries as 2003 opened, along with a slow-down in beef slaughtering are both expected to limit global beef output to 61.9 million tonnes, an increase of less than 1 percent over 2002’s levels. The price-strengthening impact of tightening supplies in the major beef exporting countries in Europe, North America, and Oceania was aggravated by the discovery of a BSE-infected cow in Canada in May 2003. While effects on consumption were minimal, the temporary ban on beef and cattle shipments from Canada, a major exporter, has had ripple effects on supplies, prices and production in other markets, particularly the United States, the world’s largest beef market.
Globally, per capita beef consumption is anticipated to expand by 1 percent in 2003, as rising beef prices hamper a continuation of the record demand growth witnessed in 2002. While consumption in developed countries is set to decline by one percent to 22.7 kg/caput, stronger demand for higher quality beef in many countries in Asia is pushing up per capita consumption in developing countries by 2.6 percent. As developing country beef consumption grows, the shift in world beef production from developed to developing regions will continue to accelerate in 2003, with developing countries estimated to account for 52 percent of global production and consumption in 2003, up 3 percent from last year and up 12 percent since the early 1990s.
Global beef trade is estimated at 6 million tonnes, up 2 percent. Rising prices, the identification of a BSE-infected cow in Canada – a major exporter– and the imposition of trade barriers in the two largest beef markets – Japan and the Russian Federation are limiting trade gains to one-third of last year’s level. While growth in the beef trade is below 2002 levels, when beef consumption recovered in the aftermath of BSE concerns among consumers and trade resumed from previously FMD-afflicted exporters, it is nevertheless above the five-year average and exceeds the trade gains expected for other meats in 2003. A continued recovery in Asian import demand, particularly from China, the Philippines and the Republic of Korea, is expected to more than offset declining imports by North America, a region accounting for 20 percent of global imports. This recovery comes despite low Japanese import demand which, while partially recovering from the BSE crisis in 2001–02, is still being hampered by the beef prices that rose by 20 percent in the first half of the year and by the August 2003 imposition of higher tariffs on chilled beef products. Imports into the Russian Federation, expected to decline by 6 percent, have been less affected by the imposition of tariff rate quotas (TRQs) than pigmeat and poultry, because beef from other CIS countries is allowed free market access. Meanwhile, in the EU, declining domestic beef supplies combined with rising beef prices are prompting a shift in their net trade position; imports are likely to hit record levels, with nearly 62 000 tonnes, or 17 percent of total imports, being imported into the region at full duties of over 100 percent.
Competition between exporters has been particularly keen in 2003: South American exports, supported by devalued currencies and lower average export prices, have been recovering and pushing up the region’s share of global exports to 27 percent, up from 18 percent in 2001. While beef from the United States, despite higher export prices, has continued to expand in 2003, lower shipments from Canada, the EU and Australia are reducing developed country exports by 5 percent.
Constrained profitability in early 2003 in many major pig-producing countries has slowed growth in output in 2003 to less than 2 percent to a level of 95.8 million tonnes. Production in Europe and North America, accounting for one-third of global supplies and two-thirds of world exports, is down slightly from 2002 as the result of low prices in late 2002 and mid-year weather-induced productivity losses in Europe. This decline comes in spite of export-driven gains in Canada, the world’s largest single country exporter. Pigmeat supplies in developing countries, while expanding to 60 percent of world output, grew by only an estimated 2 percent in 2003, one-half the rate that has been witnessed over the past five years. Lagging consumer demand, low domestic pigmeat prices and export constraints, particularly for products moving into the Russia Federation, slowed output growth in both China and Brazil. Conversely, in Viet Nam and the Philippines, growing demand prompted strong output gains, despite higher feed costs.
World Meat Production
Source: FAO Note: Total computed from unrounded data.
Recovering beef demand in developing countries and the imposition of trade restricting policies in two major markets is limiting global pigmeat trade in 2003 to 4.1 million tonnes, less than one percent above 2002. Japan and the Russian Federation, which accounted for 40 percent of global imports in 2002, simultaneously imposed trade-restricting measures on pigmeat in mid-2003. For the third consecutive year Japan extended its safeguards and has raised minimum import prices by 25 percent. This factor, accompanied by stagnant demand in China and the Republic of Korea, is reducing Asian imports (40 percent of global pigmeat trade) by 2 percent. Meanwhile, the imposition of TRQs by the Russian Federation has raised domestic prices by 35 percent and is expected to reduce imports by 20 percent. Constrained market access is provoking a considerable scramble for market share among exporters. Rising pigmeat prices in Europe, limited use of export restitutions, and the high value of the Euro are leading to difficulties in competing with low-priced Brazilian product in the Russian Federation and elsewhere. Consequently, EU exports are expected to decline 15 percent, pushing down the EU’s share of global pigmeat trade in 2003 to 26 percent, compared with 31 percent in 2002 and 37 percent in 2000. Despite slowing supply availabilities in North America, exports are expanding with Canada benefiting from increased slaughter and processing capacity and strong import demand in the United States.
Poultry markets in 2003 are characterized by the slowest output growth in over 30 years because of low prices, disease and weather problems, increased non-tariff trade barriers among importing countries and heightened competition among exporting countries. Lower poultry meat prices going into 2003 have translated into world production of 75.2 million tonnes in 2003 with output gains of less than 2 percent, only one-half the level during the period from 1995 to 2002. While poultry output in the United States, the largest poultry exporter, is up marginally, adverse weather in the EU combined with disease-related losses in the Netherlands are estimated to have led to a decline in EU production of nearly 4 percent. Meanwhile, developing country output gains, at 3 percent, are expanding by less than one-half the level in 2002. Factors affecting this slower growth include reduced profitability in South America, where feed costs increased in the first half of the year, and the impact of SARS in Asia, which had a dampening effect on poultry consumption and prices. However, a recovery in Asian poultry consumption and prices has been prompting late-year output gains in Thailand and China, the region’s largest producers and exporters. In India, which is now exporting frozen whole birds to the Middle East, higher product prices and continued investment in industry capacity and productivity are expected to support output gains of 14 percent.
The imposition of country-specific quotas in the Russian Federation, the outbreak of SARS and subsequent economic impact in Asia, and market closures due to the outbreak of Avian Flu in numerous countries are leading to the second year of sluggish growth in the global poultry market. Poultry trade has been estimated at 7.9 million tonnes for 2003, which means that the level has remained unchanged since 2002, a considerable reversal from the past five years when 7 percent annual poultry gains considerably surpassed those of other meats. Sluggish consumer demand is lowering imports by China, Japan and the Republic of Korea; market access to China has further been complicated by administrative problems in obtaining import permits. The imposition of poultry quotas in the Russian Federation, the world’s largest poultry importer (nearly 60 percent of consumption is import-derived), is leading to an estimated 20 percent drop in imports and reports of domestic prices rising by 28–90 percent, depending on the cut, during the April–September period. In Europe, where prices are rising in the context of decreasing supplies, imports are expected to be up despite the closure of a tariff loophole in August which should slow the pace of year-end imports.
Limited export supply availability in developed countries, particularly in the United States and Europe, is eroding their already declining share of global exports, estimated at 47 percent in 2003, down from 64 percent in 1999. Meanwhile, relatively low production costs in Brazil and a favourable currency are prompting 8 percent trade gains there, while their Asian rival, Thailand, continues to expand exports of processed poultry products to Japan and the EU.
The impact of severe drought in Oceania, combined with a continuation of the long-term downsizing of sheep industries in developed and transition countries, has been limiting sheepmeat output gains in 2003 to 1.2 percent, below the five-year average of 2 percent. Developed countries are set to register their third consecutive year-over-year drop in production, with Australia’s output expected to plummet by 15 percent. However, output growth of 2 percent in developing countries, which account for nearly three-quarters of global production, will be supported by a recovery in animal inventories and higher productivity in previously drought-afflicted countries such as Afghanistan, Ethiopia and the Islamic Republic of Iran. In Iraq, livestock conditions are generally stable, particularly in the north; it is expected that favourable pasture conditions, a low incidence of diseases and the availability of cheap feed will result in an overall improvement in the sheepmeat sector. The ovine sector continues to be critical to the rural sectors in the above-mentioned countries, with per capita consumption of 5–8 kg/caput accounting for 25–40 percent of total meat consumption; this figure significantly exceeds the global per capita average of 1.9 kg/caput.
World Meat Exports 1/
Note: Total computed from unrounded data.
1/ Includes meat (fresh, chilled, frozen prepared and canned) in carcass weight equivalent; excludes live animals, offals and EU intra-trade.
Tight exportable supplies and strong import demand are pushing up international lamb prices to record highs. Global sheepmeat trade is estimated at 690 000 tonnes, virtually unchanged from last year with demand for imported lamb expected up to all the traditional markets in Canada, the EU, Mexico and the United States. The continuing devaluation of the South African Rand is strengthening imports despite high prices, and imports were up nearly 30 percent by mid-year. Conversely, in some other price-sensitive markets such as Papua New Guinea, the strengthening of exporter currencies has reduced demand. As regards exports, in Australia, the supplier of 40 percent of global exports, a combination of drought-induced declines in numbers of sheep, high domestic prices and the continued shortage of heavy export lambs is contributing to a 10 percent decline. However, favourable weather and higher lambing percentages in New Zealand are facilitating exports, with additional export supplies originating from some non-traditional exporters such as Argentina and Chile, which have benefited from increased EU sheepmeat quotas.
Continued short-term price recovery will likely prompt a slight rebound in production in 2004, with global meat output anticipated to increase 2 percent to 253.1 million tonnes. The low supply growth that characterized the poultry and pigmeat markets in 2003 is projected to abate as stronger economic prospects in both developed and developing countries strengthen demand for meat. However, the anticipated growth in pigmeat and poultry output will not be matched in the beef sector as herd rebuilding starts in the United States and Oceania. The tighter supplies typically associated with herd rebuilding are anticipated to limit their export potential; growth in beef supply availabilities is expected to come from developing countries.
The influence of trade-restricting measures in Japan and the Russian Federation, two of the major meat importing countries, will persist in 2004 because it is anticipated that both countries will maintain restrictive tariffs and TRQs. However, overall meat trade is expected to grow 3 percent, supported by strong import demand from the United States as its meat supplies decline and a rising Asian demand for pigmeat and poultry, particularly in China. Continued tightened supplies of beef, combined with a recovery in trade, are likely to maintain upward pressure on beef prices in 2004. Some stabilization is expected for pigmeat and poultry meat in the context of higher production.