February 29, 2012

 

EU meat demand, output to drop slightly

 

 

According to the European Commission, the EU's overall 2012 meat output is likely to lower by 1.1% and remain stable with a further small decrease of 0.1% in 2013, while the total EU meat consumption is seen to drop by 0.7% in 2012 and 0.4% in 2013.

 

The EU meat sector in 2011 was supported by a relatively strong level of demand on the world market, characterised by the fairly favourable global economic situation. Global import demand increased, partly as a consequence of animal disease related supply constraints in the Far-East.

 

Overall supply of meat was further constrained by high feed costs despite the reasonably good harvest in the EU, US, Canada and Russia. As a consequence, world prices increased which contributed to the continued good performance of EU exports.

 

The outlook is characterised by a further contraction in total EU meat consumption, which is expected to decrease by 0.7% in 2012 and 0.4% in 2013. Only poultry meat has proven to be resilient, with consumption estimated to have grown slightly in 2011 and expected to increase further over the outlook period given its healthy image and relative cheapness.

 

Overall meat production in the EU should decrease slightly by 1.1% in 2012, and remain stable in 2013.

 

The overall beef/veal consumption in the EU should fall in the next two years, driven mainly by tighter supply and high prices. For the last four years, the beef/veal herd has continuously decreased and this should persist in the short-run.

 

In fact, the supplies of beef feeder male cattle are compromised by fewer male and heifer slaughtering and also due to sustained live animal export demand. Therefore, domestic production is expected to decrease noticeably in 2012 leading to a reduced export capability for 2012.

 

Prices for carcasses of all categories and live animals are expected to remain high throughout 2012 due to limited supply and competition for earlier marketed finished cattle to offset high feeding costs.

 

On the world market, USA and Australia are the largest suppliers of fresh and frozen beef whereas Mercosur countries have limited production during 2011. At present, the Russian, Japanese, South Korean and the Turkish markets remain dynamic importers.

 

Mainly due to the firm beef and live export demand from Russia and Turkey, the EU has consolidated a net exporter position in volume, although a global descending trend is foreseen for 2012. In contrast, beef/veal imports should increase in 2012 as a consequence of tight domestic availability and gradual recovery of imports from main Mercosur suppliers.

 

In the pork sector, the sharp rise in grain prices from 2010 led to increased feed costs, which persisted throughout 2011, reducing the scope of higher pork prices to improve producer margins. Margins improved only in the last quarter of 2011, softening the pressure from feeding costs. The world consumption of pork declined but external demand remained strong with tight supply from competitors.

 

The outlook for 2012 is characterised by firm producer margins, driven by continuously high pork prices and stable feed prices. However, EU production is expected to decline due to poor profitability in past years and the need for investments. 2011 was exceptionally good for pork exports, and the outlook for 2012 remains favourable despite a slight decrease of 2%.