June 2007  
 Food Outlook
  Global Market Analysis

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Special features

Statistical appendix

Market indicators and food import bills





Meat prices strengthen in 2007 as demand slowly recovers, but rising feed prices are putting pressure on livestock profitability

The global meat market is increasingly characterised by diverging paths between rising production and consumption trends of developing country against the more stable dynamics in the mature markets of developed countries.

FAO’s meat price index recovered from the low value of 112 it reached in March 2006 to 121 points in March 2007 (1998-2000=100). The increase comes in spite of a lower than expected recovery in global meat consumption and higher short-term beef supplies arriving on the international market from Oceania where drought is encouraging a culling of herds. The price increase affected the three major groups of meat, i.e. bovine, pig and poultry meat, to a similar extent.

Poultry prices, after declining by 18 percent in early 2006 mainly because of outbreaks of Avian Influenza (AI) in over 40 previously unaffected countries in Europe, Middle East and Africa , have recovered to pre-AI levels. By March 2007, export prices in the United States and Brazil, which together supply 70 percent of global trade, increased by 20 percent and 14 percent, respectively, from their 2006 annual averages. Demand continued to recover in previously AI affected countries, including Egypt, Turkey and Vietnam, despite a resurgence of the disease in parts of Asia. However, more expensive maize and soybean meal also are behind the strengthening of poultry product prices. These factors were reflected in the FAO poultry price index, which reached 120 in March 2007, a level close to the 2005 average index value, and 10 points above the index value in March 2006.

Growth in import demand, particularly from Hong Kong and Japan, in the context of reduced imports from North America, have lent support to pigmeat prices, as reflected in the FAO price index, which rose from 91 in March 2006 to 98 in March 2007. As for poultry meat, higher feeding costs are also contributing to making pigmeat more expensive.

Food Outlook


Tight bovine meat supplies have underpinned world beef prices since late 2006, as reflected in the FAO beef price index, which reached a value of 135 in March 2007, up from 125 in March 2006. World beef availability remains limited, as the framework surrounding trade between the Asian market and North America has slowed the recovery of beef trade flows from Canada and the United States, following the lifting of the BSE trade bans, which has coincided with a strengthening of import demand from most regions of the world.

Table 10. World meat markets at a glance

  2005 2006
Change: 2007 over
  million tonnes %
Production 269.7 276.6 283.0 2.3
Bovine meat64.666.266.60.5
Ovine meat13.113.613.92.1
Trade 20.9 21.0 22.0 4.8
Bovine meat6.
Ovine meat0.
Per caput food consumption:     
 World Kg/year 39.5 40.1 40.6 1.2
 Developed Kg/year65.466.166.81.1
Developing Kg/year30.931.532.11.9
FAO Price Index 1998-2000=100121115119 1 
1 Jan-Mar 2007.




Lower industry profitability slows meat output recovery in 2007

Global meat output in 2007 is set to rise by 2.3 percent to almost 283 million tonnes, an increase of over 6 million tonnes from the previous year, within the context of a recovery in consumer confidence in meat products. Around two-thirds of the output gain are expected to stem from expansions in Asia, particularly in China, which accounts for three-quarters of the Asian expansion. Continued high economic growth is supporting the rise in per capita consumption in Asia and stimulating the global expansion in meat production. South American potential for much greater output gains could be affected by the surge in feed costs, a low cow inventory in Brazil and recent policy developments in the Argentina’s beef sector. According to the current prospects, meat production by the developing countries may grow by 3 percent in 2007, more than three times faster than expected for the developed countries. This would leave developing countries’ share of global meat output unchanged at around 60 percent, after having risen from 43 percent in the early 1990s due to continuous investment in the sector.

Beef output is expected to increase fractionally in 2007 to 67 million tonnes. The price recovery is fostering a retention of animals for herd rebuilding and higher feed prices could negatively affect the slaughter weight of animals. Moreover, Brazil’s continuously declining stock of cows and Argentine’s policy measures1/, which have been implemented to keep domestic beef prices affordable and inflation in check, are leading to negative growth in beef output in these two countries. Most of the significant production gains, with the exception of New Zealand, are expected to be concentrated in a few developing countries, particularly in the dynamic economies of China and India.

Positive producer returns in pigmeat over the past few years have led to an expansion of the sector in many countries. However, the recent surges in feed prices are set to reduce the growth in global production to just over 3 percent in 2007, or 3.3 million tonnes, to 110.7 million tonnes. Although swine and pork production is becoming more concentrated in the feed grain producing areas of China, the strength of feed prices has not yet depressed the expansion of the sector and output is expected to continue expanding at 4 percent, largely sustained by an expanding domestic market. Combined with a favourable outlook in Brazil, Chile and Vietnam, the share of developing countries in global pigmeat production is expected to rise to almost 64 percent this year. By contrast, output gains in developed countries are likely to be rather limited, at slightly over 1 percent compared with 2006. Only the United States and European Union are expected to register more pronounced growth, as the industries responds to positive returns of previous years. For the third consecutive year, production may fall in Canada, which exports over 50 percent of its output, constrained by a strengthening of its currency and by the recent surge in feed grain prices, which is coinciding with a cyclical drop in pig prices.

As consumption and prices of poultry meat recover, global poultry output is set to increase by over 2 million tonnes to 86 million tonnes in 2007. Growth is mostly concentrated in developing countries, which will account for almost three quarters of the world-wide gain. Both Asian and South American markets are projected to expand their output by 2.5 and 5.3 percent, respectively, supported by higher prices and a resumption of demand in both domestic and traditional export markets. Poultry production in both Egypt and Turkey, greatly affected by AI in 2006, is rapidly recovering in 2007, as domestic consumption gathers momentum. Production, however, is still expected to fall short of pre-AI levels. The African continent as a whole shows a healthy 4 percent increase in poultry production, but this could be hindered by the persistence of AI in countries including Côte d'Ivoire, Ghana, Nigeria and Sudan.

Global Ovine meat output is expected to reach 13.9 million tonnes in 2007, an increase of 2.1 percent from last year. For the most part, this growth is expected to be concentrated in Asia, which accounts for more then 60 percent of global production, and in particular in China, the Islamic Republic of Iran and Pakistan. The production prospects for Australia and New Zealand are quite erratic, due to the unfavourable weather situation. This is making it difficult to assess whether the drought-induced slaughter in Australia will stop shortly or if producers may be forced to sell some of their core breeding stock in response to the lack of feed and water. Output in Argentina, and particularly Uruguay, is fast recovering, largely sustained by government programmes aimed at reviving a sector that has been severely constrained since the late 1990s by low wool prices.



Slower consumption recovery despite changing consumer attitude related to AI


As global economic growth for 2007 remains vigorous, increased consumer confidence along with reduced disease outbreaks could result in higher meat demand in developing Asian countries. On the other hand, the more mature meat markets in developed countries are expected to record only a modest increase in demand in 2007.

As human health concerns related to AI abate, per capita meat consumption looks set to rise by 1 percent to almost 41 kg per year, which is above pre-AI level. As consumers in developing countries diversify their diets away from staple cereals and adopt more western diets and consumption practices, about 80 percent of the growth in meat utilization is expected to occur in these regions. While per capita levels in developing countries are set to rise by a little more than 0.5 kg to 32 kg in 2007, this level still is less than half of that in developed regions.



Meat trade outlook sustained by a reduction in disease-related trade restrictions


Animal disease outbreaks in recent years have affected established trade patterns for meat products and created short-term imbalances in major net exporting countries, allowing disease-free exporting countries to gain an increased share of the market. Net meat imports of many of the larger net importing countries are set to increase in 2007, including those in Europe, China and Japan. After a decline in 2006, meat import dependency of LDCs is forecast to rise from 8 percent in 2006 to 8.7 percent in 2007.

The recovery in consumption could pave the way for almost 5 percent rise in meat trade in 2007, to 22 million tonnes. While trade prospects for most meats appear favourable, the poultry sector is set to account for 59 percent of the overall expansion, benefiting mostly from a lifting of AI-related trade restrictions. In 2004, Brazil has surpassed the United States as the largest meat exporter and has maintained around 25 percent of the world market share since then. Brazilian meat exports are set to expand by 9 percent in 2007, supported by increased demand in traditional Near East and African markets.

Following a 3 percent AI-induced drop in poultry trade during 2006, global shipments are estimated to expand by over 7 percent to a record of 8.7 million tonnes in 2007. For 2007, poultry exports by Brazil and United States are expected to increase to around 3 million tonnes, each. Together, both countries contribute almost 70 percent of world poultry exports, although supplying different products: mostly brown meat in the case of the United States and whole birds and white meat in the case of Brazil. With global poultry meat demand recovering to 86.2 million tonnes, many of the AI affected regions in Africa and the Middle East are resuming traditional importing patterns. In 2007, poultry import demand from developing countries has been even stronger than in the pre-AI era, with much of the strength originating in China, which is becoming the world’s largest importer, but also in Kuwait and Venezuela. Within the developed country grouping, imports by in the EU are expected to surge to 1 million tonnes, about 20 percent more than in 2006. The increase could be facilitated by a WTO panel decision that led the EU to open a new import quota of 264 245 tonnes of salted chicken, of which 170 807 tonnes with Brazil and 92 610 tonnes with Thailand. By contrast, purchases by the Russian Federation, the world’s second largest poultry importer, are set to increase by less than 1 percent, as domestic production stages a recovery. As for Japan, the world’s third largest importer, imports may decline by almost 2 percent, due to oversupply in its market. Nevertheless, imports of processed poultry products, which are expected to increase further, now account for almost 50 percent of the total in 2007, with the bulk of processed product shipments originating from China and Thailand.

Trade prospects for pigmeat in 2007 are bright, with world imports and exports forecast to rise to 5.1 million tonnes in 2007. Deliveries to Japan, the main importing country , are anticipated to rebound by almost 7 percent in 2007, to 1.2 million tonnes. In Asia, significantly larger purchases by Hong Kong, Singapore, the Republic of Korea and the Democratic People’s Republic of Korea are also anticipated. The Russian Federation, the second largest pigmeat importing country, is also foreseen to raise its imports by 7 percent, largely of high quality pig meat. By contrast, pigmeat purchases by Canada, the United States and the EU-27 may decline below last year’s levels. Much of the expansion in pigmeat trade is expected to be sourced from the newly enlarged EU, the United States but also from Brazil and China. By contrast, pigmeat shipments from Canada are likely to decline largely reflecting larger outflows of live pigs to the United States.

Bovine meat trade is expected to register a 3 percent growth to 7.1 million tonnes in 2007. Increased purchases by the United States, mainly consisting of low quality cuts, will help overcome domestic supply constraints, as the country is in a herd rebuilding phase. The anticipated trade growth also reflects expectations of larger imports by Chile, Egypt and Japan, where production is not keeping pace with consumption. On the export side, much of the expected expansion should originate in Brazil, New Zealand and the United States while exports from Argentina, Australia and Canada may decline, amid limiting factors, such as export policies, adverse weather, reduced cattle inventories or currency appreciation. Exports from Brazil are anticipated to increase by some 8 percent and surpass 2 million tonnes in 2007, with major markets in Egypt, the EU, the Islamic Republic of Iran and the Russian Federation. However, the rise in exports from the country may be dampened as the Russian Federation is looking to diversifying the origin of its beef imports and the European Union is becoming increasingly concerned about Brazil’s FMD policy. Brazil’s beef exports may displace product from Uruguay, the exports of which are anticipated to decline somewhat compared with last year. Although recovering, beef sales from the United States are forecast to remain below its pre-BSE level, given the slow recovery of demand from Japan. This is mainly due to the introduction of a monitoring period to assess the level of acceptance of the US beef by Japanese consumers and strict import conditions imposed on beef from the United States. The EU exports are forecast to slump to one of the lowest level ever recorded, confirming the trend witnessed after implementation of the CAP Reform.

Trade in sheepmeat is forecast at 0.9 million tonnes in 2007, about unchanged from last year. With reduced lamb supplies, partly owing to lower ewe numbers, sheep meat exports from Australia are expected to fall by almost 9 percent. This contraction is expected to be compensated by a 13 percent increase in exports from New Zealand. The country’s lamb industry is experiencing a difficult period domestically, as producers face competition from alternative meat, especially poultry and pork, which is fostering a liquidation of sheep herds. Consequently, available quantities for export are high. Shipments from Oceania, which comprise 85 percent of global exports, are being stimulated by higher import demand in China, Europe, Mexico and North America.

1.  Such as export taxes and restrictions on beef exports.

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