February 17, 2006

 

EU increases meat supply to bring prices down

 

 

More supplies of beef and pork are expected to come on the market as the EU's reform to the Common Agricultural Policy (CAP) takes effect, according to a USDA forecast.

 

EU cattle prices reached record prices towards the end of 2005 as a result of tight supplies, lead to a decrease in beef consumption. USDA forecasts domestic beef consumption will increase again in 2006, while exports are expected to fall.

 

Cattle slaughter numbers and beef production in the EU are forecast to increase in 2006, mainly because the end of the over-thirty-month scheme in the UK will release beef from older cattle into the market.

 

The European Commission is expected to lift the ban on UK cattle from the bloc's wider market early this year. The easing of this restriction is expected to add half-a-million extra cattle to the market, the USDA stated in its analysis of the European market.

 

The extra beef will make up for the shortage resulting from reduced Brazilian beef imports due to food-and-mouth disease there.

 

EU beef exports will decline further this year due to tight supplies despite increased production, the USDA reported.

 

Major changes to the market are expected due to the full implementation of the CAP reform package by EU member states. CAP is a system of agricultural subsidies available throughout the EU.

 

Specialised beef production is congregating in the southern part of Europe, where member states have made extensive use of CAP, while the northern part of Europe is cutting down on its beef production and concentrating more on dairy production.

 

Increased beef supplies will also come from Portugal, which is utilising the 90,000 slaughter premium rights obtained in the CAP reform agreement.

 

Herds in the UK, Poland, the Czech Republic and Hungary are also expanding. . However, calf production was reduced in Portugal and Spain due to extreme drought.

 

Meanwhile, pork production in other parts of Europe is rising and would satisfy increasing demand from domestic consumers and expanding markets in eastern and central Europe. 

 

EU pork production is forecast to increase about one percent in 2006. Pork imports are expected to fall further as a result of higher EU production while exports will increase approximately 3 percent, according to the European Commission.  Russia is expected to import more pork from the EU to make up for decreased imports from Brazil. EU pork consumption is also forecast to continue its increase through 2006.

 

One uncertainty in the forecast is whether the avian influenza will lead to higher pork consumption as consumers avoid poultry. Pork exports could soar if the current bird flu situation in Russia, central Europe and Asia worsens.

 

Pork exports to Japan and the rest of Asia will fall as Asian consumers are expected to turn to beef again when US and Canadian beef imports resumes, the USDA stated.