February 9, 2004

 

 

EU 2003 Beef Exports Fell By More Than 20%

 

European Union beef exports declined by more than 20% in 2003, mainly due to reduced exports from Germany and Ireland, according to information from the U.S. Department of Agriculture's Foreign Agricultural Service web site.

 

EU beef exports declined by more than 20% in 2003, mainly due to reduced exports from Germany and Ireland. Decline also resulted from import quotas in Russia and the high Euro/dollar exchange rate.

 

Pig meat consumption increased in 2003 in response to lower prices, however, not as much as previously expected. This is due to the consumer economic situation and the lack of a complete recovery in the beef sector, the press release said.

 

In January 2004 the Commission reintroduced export refunds for pig meat to third countries. These refunds are not eligible for all products. The reintroduction of pig meat export refunds is intended to rebalance the EU market.

 

In May of this year the EU will increase to 25 Member States. One of the impacts on the meat sector might be that many of these new Member States could temporarily ship live animals to slaughterhouses in the EU-15, as slaughter houses in some accession countries may not immediately meet the EU sanitary requirements. This will allow meat to have immediate access to the European market.

 

In 2004 the country could also begin to see posturing for EU Member States in anticipation of CAP reform, which could indirectly effect the pig meat sector through cereal and feed prices, the press release said.

 

Additionally the substitution of lower priced pig meat replacing high beef prices on the EU market will continue to be consumer driven.

 

Cattle

 

In 2003 EU cattle exports were lower than expected because of the high Euro exchange rate. The impact of the summer drought on total cattle slaughter was minimal.

 

The 2004 calf crop is anticipated to decline from previous years in line with decreasing beginning stocks, the press release said. The end of the slaughter premium as a result of the decoupling in the CAP reform is expected to increase slaughters in Italy, Denmark, Germany and the United Kingdom. For the UK this will be the case assuming UK maintains its OTMS (Over Thirty Month Scheme) through 2004.

 

In Italy the restructuring of the milk quota system may reinforce slaughters. Germany plans to implement decoupling through regional premia attached to arable land rather than through a single farm payment. This is projected to reduce profitability of beef production and is therefore expected to result in lower ending inventories.

 

As a result of increased milk production per cow, overall cattle ending inventories are expected to decrease further, resulting in less beef from milk cows entering the market. EU cattle imports in 2004 are expected to remain unchanged from the 2003 level. EU cattle exports in 2004 are expected to slightly recover as markets in the Middle East are expected to resume importing European cattle, combined with the anticipation that the Euro exchange rate may weaken.

 

Beef

 

In 2003 beef production declined in the EU as a consequence of lower slaughter numbers. Human consumption of beef continued its upward trend as consumers regained confidence in beef after the BSE crisis. The number of cows infected with BSE in Europe dropped by 41% in 2003. Except for a small volume in France, most of the intervention stock of beef was sold during the year.

 

Beef imports from third countries increased by 6%, which is higher than previously forecast. The most significant import increases were in Netherlands, UK and Italy. These imports mainly consist of beef produced in South America (primarily Brazil and Argentina) and imported under TRQs2. South American beef was so price competitive, that some of it was imported above quota with the full tariff rates applied.

 

Beef exports in 2003 declined by more than 20%. This decline was mainly due to reduced exports of beef from Germany and Ireland. Quotas hampered Irish beef exports to Russia, while Irish exports to Egypt did not resume in any significant quantity despite most of the restrictions related to BSE being relaxed. An important factor in the reduced exports is reportedly, the reduced supply and the high domestic price of beef in combination with the high Euro/US$ Dollar exchange rate.

 

In 2004 beef production is expected to increase marginally in line with increased slaughters. However, increasing domestic prices are expected to have a negative effect on beef consumption in 2004.

 

The 2004 beef forecast is expected to follow the same trend as in 2003 with a 2% increase in imports, the press release said.

 

In 2004 beef exports are forecast to decline due to an anticipated reduced availability of beef and the lack of competitiveness on the world market. It is believed that the EU will not benefit from restrictions laid upon U.S. beef exports since the EU and the U.S. compete primarily in different markets.

 

In 2003 total swine slaughter as well as ending inventories were lower than originally forecast. This could partly be attributed to last years drought and higher swine mortality due to PWMS3 in the UK.

 

In 2004, the pig crop continues to show a reduction trend in Europe. This is caused by the fact that increasing feeding costs are not counterbalanced by marginal price increases. Total supply is expected to go down in 2004 as a result of the lower beginning inventories and lower estimated production for the year.

 

The 2004 forecast for slaughter is down from the previous report due to reductions in France and Belgium. In the other countries slaughter is expected to be stable or slightly up from the previous forecast. Pig crop/sow ratio is expected to increase in 2004 due to technical increases in fertility and due to lower mortality rates, especially in the UK.

 

Large increases in EU pig production could result from the May 1, 2004 accession. This is forecast due to pig producing countries such as Poland, Hungary and the Czech Republic entering the EU common market.

 

Pig meat consumption increased in 2003 in response to lower prices, however, not as much as previously anticipated. This is due to the economic situation of the consumers, and the fact that the beef sector is recovering from the BSE crises.

 

In 2003 there was a reduction of pig meat exports from Germany and Denmark to Russia as a result of the Tariff Rate Quota. However exports to the U.S. were higher than originally estimated.

 

Private Storage Aid (PSA) was introduced in late December 2003 an estimated 77,000 tons of pig meat have been bought into private storage since the green light was given by the EU Commission. PSA has stopped the fall in prices and stabilized prices. Prices are at a very low level, and there is still no sign of them picking up. The Commission emphasizes that the reintroduction of export refunds is for a limited period only (through April 2004).

 

The Commission pronounces the causes of the current crisis as an excessively strong Euro, high feed prices produced by last summer's drought, and low consumer demand, in addition to normal cyclical fluctuations.

 

The Commission introduced refunds for pig meat exports in late January 2004. This action will be applied during the coming weeks. Export refunds are not eligible for all kinds of pig meat but for half carcasses and some cuts. The export refunds do not include Danish exports to Japan. The export refunds do not include the 10 acceding countries or the two applicant countries Bulgaria and Romania.

 

For EU pig meat exports the Euro/dollar situation is resulting in low prices for exports. In addition Brazil continues to be a major competitor on the EU market, offering cheaper pig meat.

 

In 2004 a slight reduction in the number of swine slaughters is anticipated. This is expected to be compensated by higher slaughter weights, the press release said. Imports are expected to remain stable, while exports are anticipated to decrease slightly compared to 2003 levels.

 

Looking further the EU Commission saw a more positive outlook for pig meat. With the EU's enlargement to 25 countries in May, consumption is expected to rise by about 28%, but production should only increase by 20-25%. In the ten new member states, demand might rise by a further 12% by 2009 because of the expected growth in disposable incomes.

 

While existing EU Member States with large pig sectors are set to profit from enlargement, the new member states stand to gain less if they cannot overhaul their agricultural production as a whole.