CCP: ME 98/2  |
| CCP: ME 98/2 |
COMMITTEE ON COMMODITY PROBLEMS |
INTERGOVERNMENTAL GROUP ON MEAT |
Seventeenth Session |
Cape Town, Republic of South Africa
|
REVIEW OF CURRENT WORLD MEAT MARKET SITUATION IN 1998 AND SHORT-TERM OUTLOOK IN 1999 |
1. This paper presents the latest assessment of the world meat situation and outlook in 1998 and 1999 and is based on 47 replies by Governments to the FAO statistical questionnaires and a variety of other sources. As it is customary for the Group to review the corresponding agenda item with the help of this document, it has been tabled rather than circulated in advance, in order to enable the secretariat to take into consideration the latest available information.
2. The international environment at the opening of 1998 was dominated by the economic weakness in several Asian countries, which had already been felt by the world meat economy in 1997. More recently, the financial crisis in the Russian Federation together with the recession in Japan and the financial turmoil in Latin America have given rise to concern regarding the future prospects for global economic growth and its consequences for world meat demand and trade in 1998 and 1999. Most important the new economic circumstances have added considerable uncertainty to the short-term outlook for meat.
3. Global meat production in 1998 has been estimated to be of the order of 219 million tonnes, up two percent on 1997, reflecting a favourable feed situation world-wide which has often compensated for falling producer prices. The expansion should mainly reflect growth in the pig and sheep meat sectors, while bovine and poultry meat production is forecast to stagnate. Region-wise, much of the increase in total meat production should originate from an expansion in North America, Oceania, and Asia and a recovery in Europe. However, there should be a noticeable slow down in the Asian production growth to three percent, or less than half the rate of last year, reflecting mainly the effects of sluggish domestic demand and rising internal feed costs in several countries affected by currency devaluation. An expansion in meat production is also forecast in Africa. Output in Latin America and the Caribbean should only rise slightly above the 1997 level, influenced by reduced export prospects. The steady slide of meat production in the CIS is forecast to continue.
4. Per caput meat consumption in 1998 is estimated to remain, on average, close to the 1997 level, at 36.5 kg, in contrast with the previous years' one to two percent growth. This slow-down reflects, to a large extent, a lower rate of expansion in the developing countries of less than half a percent, i.e. much below the annual four percent they recorded in recent years. In particular, the economic difficulties in the Far East are anticipated to cause 1998 meat consumption per inhabitant to fall or to expand at much lower rates in most of the region. Likewise, high domestic prices and/or poor economic performance could result in a decline in Africa, the Near East and South America. A sharp constraction is again expected in the CIS. By contrast, per caput meat consumption is forecast to rise in the developed countries, driven by dynamic growth in North America and Europe, where low meat prices compared with 1997 have stimulated demand.
5. International trade in meat in 1998 is put at around 14.4 million tonnes in carcass weight equivalent, about the same as last year. This would be in sharp contrast with the trends prevailing in recent years when meat shipments expanded by between 6 percent to 8 percent annually. The slow-down in 1998 was caused mainly by the economic crises in both the Asian economies and in the Russian Federation, which had emerged as the major growth import markets in the 1990s. Currency devaluation and sluggish or falling domestic demand in those countries have depressed overall meat imports, despite a number of incentive programmes introduced by major exporters to maintain their sales in those markets. Imports into Africa and countries in the Near East are also anticipated to fall, driven by poor economic prospects. By contrast, meat shipments to North America, Europe and Latin America and the Caribbean are expected to increase.
6. Despite the lack of growth in global trade, larger exports are expected to be made from North America, prompted by falling domestic prices and the granting of export credit guarantees. Shipments from Australia and New Zealand are also anticipated to expand somewhat, assisted by a weakening of their currencies relative to the US currency. Australia also used credit schemes to maintain its relative competitiveness. Exports of meat from most other regions, especially Europe are anticipated to fall. Sales from the EC are expected to fall by one percent, reflecting mainly its Uruguay Round commitment on subsidized bovine meat exports.
7. The combination of sluggish import demand and abundant export supplies dominated the meat markets in the first half of 1998, resulting in substantial declines in international meat prices. The general tendency for prices to fall is likely to persist for pig meat during the remaining of the year, but could stabilize or even reverse for bovine meat and poultry, mainly on account of shorter supplies expected during the coming months.
8. Global bovine meat production in 1998 is currently forecast at 57.9 million tonnes, only half a percent above last year, as a further contraction in the developed countries should be more than offset by moderate gains in the developing countries. Despite an on-going reduction in cattle inventories in the United States, output is anticipated to be boosted by heavier slaughter weights, brought about by low grain prices. Likewise, production is set to rise in Canada reflecting higher carcass weights and slaughter numbers driven by a fall in live animal exports. Output is also expected to be up in New Zealand, in the wake of El-Niño induced-droughts, which have boosted slaughtering. In the Republic of South Africa, a larger herd size following animal retention in 1997, should also provide the basis for increased production. By contrast, output might fall in Australia as favourable rainfall during the second half of the year is encouraging producers to delay the marketing of their cattle. Production in the EC is anticipated to decline for the third consecutive year under the effect of the various schemes launched in the aftermath of the 1996 BSE crisis to reduce surpluses. A further drop in output is likely to be recorded by the CIS and by most central and eastern European countries, reflecting a continued fall in breeding herds. Among the developing countries, production growth in China is expected to remain high while notable increases are expected in India, Indonesia and Pakistan. In the Republic of Korea, low prices and weak demand prospects have encouraged producers to proceed with the heavy cull initiated in 1997, boosting output further. In Africa, production is set to rise in Egypt, the Republic of South Africa and Nigeria, partly offset by some cattle losses reported in eastern Africa following flooding. In Latin America and the Caribbean, some increases are expected in Colombia and Paraguay, while a contraction could materialize in Argentina, Brazil and Uruguay which are currently expanding their herds.
9. International trade in bovine meat in 1998 is forecast to rise by two percent to 5.0 million tonnes. On the import side, the adverse economic climate should lead to smaller shipments to Malaysia and Indonesia. In the Republic of Korea the increase in domestic supply could dampen foreign purchases. Canada is also expected to reduce its imports in the light of large domestic supplies. Imports by the Russian Federation and Egypt could be negatively influenced by the substantial reduction in the 1998 export refunds by the EC, the main supplier to those markets. By contrast, beef purchases by Japan are anticipated to reach a new high, boosted by a surge in fast-food meat sales, as consumers confidence over beef recovers from the 1996 and 1997 BSE and E-coli health scares. Imports by the United States are also set to increase as Australia and New Zealand are diverting shipments from the Asian markets to that country. Purchases by Brazil and Mexico are also forecast to rise. Little change in imports by the EC, which enter mostly under preferential trading arrangements, is anticipated.
10. Export sales by Argentina and Uruguay are expected to be depressed by short supplies and high domestic prices, while a relatively strong currency could constrain those by the United States. Shipments by the EC, most of which are subsidized, are also expected to fall in line with the URA commitments. By contrast, increased output should boost exports from Canada and New Zealand. Despite the economic difficulties in Asia, Australia should succeed in maintaining the volume of its exports around last year's level, assisted by a weak currency relative to that of the United States which has allowed it to divert supplies to non-traditional markets, including North America, the Republic of South Africa, the CIS and Eastern Europe.
11. World prices for bovine meat have followed a declining pattern in 1998, reflecting a slackening of import demand in major growth markets and abundant supplies of other meats. During the first nine months of the year, FOB prices of Australian manufacturing beef fell by 6 percent compared with the same period in 1997, while CIF prices in Japan of fresh, boneless beef were 9 percent lower during the January-July period than in the same period of 1997. Although the tendency for international beef prices to fall could end in late 1998 or early 1999, as market supplies tighten, abundant supplies of the other meat categories are likely to limit the price surge.
12. World production of sheep and goat meat in 1998 is currently estimated at 11.4 million tonnes, three percent above last year. Increases have been reported in Nigeria, the Republic of South Africa and Sudan. In Asia, a sustained expansion is foreseen in China, the world's chief producer, and Pakistan, generally supported by good pasture conditions. Despite a continued reduction in the flock size since 1990, increased slaughter numbers are expected in Australia as wool prices have continued to slide, which should support an increase in production. Although the size of the flock in New Zealand is at a fifty-year low, production is forecast to remain stable in 1998. Large culls in the United Kingdom, fuelled by a decline in wool and skin prices, should sustain a rise in the EC. By contrast, a drop is expected in the United States, Argentina and Uruguay where flocks have been scaled down in recent years. Production is also anticipated to fall in the CIS and in the Islamic Republic of Iran.
13. Trade in sheep and goat meat is forecast to be of the order of 730 thousand tonnes in 1998, up two percent from last year. The increase should be sustained by larger imports by the Republic of South Africa, Mexico and Saudi Arabia, while purchases by the Islamic Republic of Iran and Papua New Guinea could fall. Imports by the United States are also forecast to expand despite an increase in the tariff on mutton in July following the triggering of a safeguard clause under the US Trade Act. Little change in imports by the EC is anticipated. Most of the increase in global exports should be accounted for by Australia, while sales by New Zealand could remain the same as last year. Uruguay's deliveries are expected to fall.
14. Similar to the other meats, international prices for sheep and lamb meat have shown a falling pattern during most of the year. New Zealand FOB prices for frozen lamb carcasses exported to the EC have declined by close to 19 percent between January and August 1998 compared with the same period last year, while Australia FOB mutton prices were down by 11 percent over the first seven months of 1998. The current tendency for prices to decline is not expected to reverse in the next few months, especially as unfavourable demand prospects for by-products, such as wool and skins, could bolster a reduction in the flock sizes world-wide with a concomitant increase in slaughtering and meat production.
15. Global pig meat production in 1998 is currently put at 85 million tonnes, four percent more than last year, with a large expansion anticipated in all major producing countries. Following favourable returns in the last two years, which triggered a strong expansion in inventories, pig meat production is expected to rise by 9 percent and 3 percent respectively in the United States and Canada. In the EC, a recovery from the swine fever outbreaks last year and a strong expansion in pig numbers following high producer prices in 1996 and 1997 should boost output by 5 percent. A substantial increase is also expected in Poland, underpinned by lower feed prices. For the second consecutive year, output is set to grow in Japan as reduced imports in 1997 encouraged a slight expansion in the breeding herd. Increases are also forecast in Brazil, Chile, Mexico and Paraguay, sustained by abundant feed supplies. Among the Asian countries, higher output is expected in China, where favourable pig to maize price ratio in 1997 encouraged an increase in the breeding herd, but also in the Republic of Korea and the Philippines. By contrast, a contraction is forecast in Thailand. Output should be down also in the Chinese Province of Taiwan wherea restructuring of the sector is being undertaken after the occurrence of several outbreaks of foot-and-mouth disease (FMD) in 1997 and the associated loss of the Japanese market. The long term downward adjustment of the pig sector in the CIS is set to proceed as state support continues to be curtailed.
16. After several years of sustained growth, trade in pig meat stagnated in 1997 at 2.6 million tonnes. The provisional forecast for 1998 points again to a similar volume of trade, despite a dynamic pattern in the first half of the year. However, much of the final out-turn will depend on the impact of the financial crisis on import demand by the Russian Federation, the second most important destination for pig meat after Japan. Current forecasts for the CIS indicate a 10 percent reduction from last year's import level, despite a strong demand during the first half of the year, reflecting the deterring impact on import demand of the currency devaluation since August. A positive production performance and low domestic prices could result in smaller purchases by the Republic of Korea. Imports by Japan, which during the first seven months of the year were almost 10 percent lower than those recorded during the same period in 1997, could recover somewhat during the last quarter, spurred by the Government expansive policies and by growing demand for stock building. However, the country's imports for the full year are anticipated to fall below the depressed 1997 level. By contrast, Hungary and Romania are forecast to step up their purchases to offset a production shortfall. Larger imports are also likely to be made by Argentina (which recently lifted an import ban on pig meat from the United States), SAR Hong Kong, Mexico, Poland and the United States.
17. Total EC shipments are set to rise slightly in 1998 despite the financial crisis in the Russian Federation, the main EC pig meat market. This assumes that EC sales to the Federation and to other markets, in particular in Eastern Europe, are sustained by the granting of substantial export refunds. Indeed, although EC subsidized pig meat sales are subject to a ceiling of 483 000 tonnes (carcass weight equivalent) for 1998, the Community can export a quantity in excess of this amount under WTO rules1 by rolling- over previous years'unutilized entitlements. Despite the poor economic situation in Asia and in the Russian Federation, sales by the United States, which were up 40 percent in January-May 1998, could rise by 20 percent on a calendar year basis, as very low domestic prices should boost its international competitiveness. Brazilian shipments are also expected to expand although this could entail a diversion of supplies to Mercosur partner countries to offset a weak import demand in South East Asia, where it had made large inroads in recent years. Sales by the Republic of Korea should also increase as the country filled part of the gap left by the Chinese Province of Taiwan in the Japanese market. By contrast, exports by China, which also relies extensively on the Russian market, are forecast to contract, as a result of keen competition from other major suppliers coupled with flooding problems during the summer, which disrupted trade flows. Practically no shipments from the Chinese Province of Taiwan are currently anticipated following FMD outbreaks last year. Insufficient domestic supplies should also result in a cut in exports by Hungary and Romania.
18. International prices for pig meat products have shown a distinct downward tendency since the last quarter in 1997. During the first seven months of 1998, the USA unit export value for frozen pork dropped by close to 7 percent, compared with the same period in 1997 and import prices in Japan recorded a 27 percent decline. International prices for pig meat are forecast to weaken further during the rest of the year, possibly reaching their lowest level in the 1990s under the impact of a combination of ample export supplies and shrinking import demand.
19. Global poultry meat production in 1998 is preliminarily put at 60.2 million tons, almost unchanged from last year. This would bring to a halt the sustained upward trend in world production that had characterized the sector in the last few decades. It would largely mirror an expected contraction in the Far East and a slow-down in growth of major producing and exporting countries. In particular, China is currently forecast to experience a one percent reduction in output on account of falling chicken meat prices combined with rising domestic grain prices after the launching of new government directives on cereal procurement. Production in Indonesia is anticipated to halve, squeezed between rising feedstuff prices and a crisis-induced tumbling domestic demand. A small contraction is anticipated in Brazil and Japan. In the rest of the world, a strong decline is envisaged in Bulgaria, where the state farm sector is undergoing a major restructuring, and in Romania. By contrast, growth in the United States is forecast at less than two percent, the lowest expansion rate since 1982, while that of the EC should also slide to two percent. For the first time since the overhaul of the centrally-planned system in the early 1990s, production in the CIS is forecast to stabilize around last year's level, reflecting a positive performance in the Russian Federation during the first half of the year, that was supported by large investments from local governments and foreign companies. However, falling demand and difficulties in procuring compound feeds following its financial crisis in August might wipe out these gains over the second half of the year, despite reduced competition from imports.
20. In contrast to the very strong expansion recorded in recent years, world trade in poultry meat is forecast to stagnate around 5.8 million tons. Much of the thrust in the 1990s came from dynamic growth in imports by China and the Russian Federation. This year, imports by China, much of which are channelled through the SAR Hong Kong, could be depressed by a slackening in domestic demand and exports. Similarly, foreign purchases by Poland, the Republic of South Africa and Saudi Arabia are expected to be smaller, generally reflecting increases in domestic production. By contrast, imports are forecast to increase by a modest two percent in the CIS, reflecting large purchases by the Russian Federation during the first half of the year. Increased imports are expected in Argentina and Mexico and in the Chinese Province of Taiwan, which recently opened up its chicken market to the United States. The removal of the import ban on poultry meat by Nigeria could also help purchases resume after many years, despite the imposition of a 150 percent tariff. Little change in imports is currently forecast for Japan.
21. Exports by the United States, the leading poultry meat exporter, are anticipated to remain around last year's level, constrained by poor demand prospects in foreign markets together with limited exportable supplies. Chinese exports are expected to suffer from keen competition from countries that have devalued their currencies, especially on the Japanese market to which China re-exports a sizeable part of the imported poultry after processing. Exports by Hungary should also fall as competition on the Russian market intensifies. By contrast, Thailand should step up sales abroad as the devaluation of its currency has boosted its international competitiveness. Exports from the EC and Brazil are also forecast to rise.
22. International prices for poultry meat, represented by the US export unit value for chicken cuts, have averaged 12 percent lower during January-June 1998 compared with the same period last year. Likewise, CIF import prices by Japan have recorded a 13 percent decline in the first seven months of 1998 compared with the same period last year. Despite the weakening of import demand in the course of the year, domestic prices in the United States have shown a tendency to recover reflecting a lower production growth than originally anticipated. This could signal a rebounding of world poultry meat prices, although a sustained recovery would depend on a number of factors.
23. The very preliminary outlook for meat production in 1999 points to a slightly faster growth in 1999 than in 1998 of 2.3 percent to 224 million tons, although this is still very tentative as much would depend on the economic situation world-wide and the evolution of feed prices. Production of all meat categories is expected to expand except bovine meat, whose output could stagnate for the third consecutive year as the sector in several important countries is entering a contraction phase. Region-wise, all developing regions are set to record faster growth next year, especially Latin America and the Caribbean and the Far East. Growth prospects for the developed countries are much more modest, at less than one percent in North America, Europe and Japan and in Oceania, and output in the CIS is expected to fall.
24. International trade in meat is again anticipated to stagnate in 1999 at around 14.3 million tons, with all meat categories on a constant or declining path with the exception of pig meat, whose trade might record a two to three percent increase. The impact of the financial crisis on imports by the Russian Federation could be much stronger than in 1998, with a 20 percent contraction currently forecast. However, the fall could be mitigated should the Russian Federation benefit from special assistance programmes from major exporters, including food aid or special credit schemes. By contrast, imports to Japan, North America and the Far East could increase somewhat. As for exports, smaller deliveries are anticipated to be made from South America and the EC, particularly of poultry meat. By contrast, exports from Far Eastern and Eastern European countries of this meat could rebound.
25. International prices of meat in 1999 may recover from the lows recorded this year, reflecting mainly downward adjustments in supplies particularly of bovine and poultry meat in major exporting countries which should result in a tighter supply/demand balance for them. Consequently, any upward pressure on prices is likely to be stronger for those meat categories than for sheep meat. Pig meat prices are likely to remain generally depressed as competition among exporters should remain rather keen.
1 Article 9 of the Agreement on Agriculture, on Export Subsidy Commitments, Paragraph 2. (b)