August 23, 2004

Taiwan's 2004 Beef Consumption Seen Down To 63,200 MT

Taiwan beef consumption in 2004 is expected to fall by 17% to 63,200 metric tons, according to information from the U.S. Department of Agriculture's Foreign Agricultural Service web site, dated Aug. 16 and released Friday.
 
Executive Summary
 
The discovery of Bovine Spongiform Encephalopathy in the U.S. in December 2003 continues to dramatically affect the Taiwan beef market. Beef consumption in 2004 is expected to fall by 17% to 63,200 MT (86,000 MT CWE), reversing steady increases since 2001. Assuming the market remains closed to U.S. beef, 2005 consumption is expected to increase slightly to 64,700 MT (88,000 MT CWE) as the trade compensates for the absence of U.S. beef, the report said.
 
Consumption is not expected to recover strongly because of high prices, in addition to increased concerns about food safety and constrained beef supplies. Prices of beef remain high because Australia and New Zealand are unable to fully make up for lost U.S. supplies. The burdens of high prices and short supplies will continue to cause heavy losses, especially in high-end restaurants. Total Taiwan economic losses from the beef ban are estimated at $10 million and climbing.
 
The ongoing outbreak of Porcine Circovirus (PCV) continues to depress local swine production, keeping local pork prices high. This will likely stimulate pork meat imports although more than 95% of consumption is supplied locally. In the long term, Taiwan's relatively efficient swine industry will only contract slowly, continuing to produce pork for the local market while imports enter for processing or during period of high prices.
 
The demand for imported pork variety meats, which adds to the reduced local supply since the 1997 foot-and-mouth disease outbreak, is expected to remain strong for the foreseeable future. As Taiwan's current leading supplier of pork and pork offal, U.S. suppliers should benefit most from WTO market opening measures. Sanitary concerns are likely to keep key competitors, such as South Korea and Mainland China, off the market for several years.
 
Note: This report assumes that there will be no changes in Taiwan's ban on imports of U.S. beef and livestock products.
 
Exchange rate: approximately NT$34.5=US$1 in 2001, 2002 and 2003, roughly NT$33.5=US$1 in 1-6/2004.
 
Beef
 
Production
 
Domestic beef, mostly from culled dairy cattle, meets only 5% to 6% of Taiwan's total beef demand. Total local beef production is expected to continue slowly contracting in 2004 and beyond.
 
Trade
 
In line with lower consumption, the BSE-related closure of the Taiwan market is expected to cut Taiwan's 2004 beef imports by 17% to 60,000 MT (81,000 MT CWE). Total 2005 imports are forecast slightly higher at 61,000 MT (83,000 MT, CWE), the report said. U.S. market share remained above zero in early 2004 because of "pipeline" beef imports of 634 MT. Since these shipments, virtually all other U.S. beef exports to Taiwan have been replaced by New Zealand products.
 
As a result of the market closure to U.S. products, New Zealand became the largest beef supplier to Taiwan in 2004. Its market share rose from 30% in 2003 to 53% during the first half of 2004, the report said. Australia's market share remained at 44% because of short supplies caused by a serious drought and sharply higher domestic prices. Taiwan reportedly continues to have difficulties sourcing beef because local importers do not pay as much as the Japanese or South Koreans.
 
Supplies available from other sources remain very limited. Imports of beef and products from Canada were banned entry on May 21, 2003 in response to the Canadian BSE detection. Taiwan still bans imports from most EU countries.
 
Imports of beef and products from the United States and Canada were suspended on Dec. 24 and May 21, 2003 respectively, in response to single BSE detections in each country. New Zealand and Australia are expected to take North America's entire market share as long as the bans stay in place.
 
Pork
 
Production
 
In 2004, swine production (fat pigs slaughtered) is estimated to grow less than 1% to 9.5 million head, the report said. This is down 6% from the post-FMD outbreak peak of 10.1 million head in 2001 but above Council of Agriculture (COA) "target" production of 9.3 million. The most recent pig inventory survey conducted in May 2004 was not available because of a typhoon that disrupted data collection. Despite ongoing attempts to increase herd size in response to high prices, production continues to be limited by a persistent outbreak of Porcine Circovirus Infection (PCV), which has high mortality in pigs weighing between 15 to 30 kg. When and if Taiwan gets PCV under control, high prices are expected to result in a larger number of breeding and standing pigs.
 
Post forecasts a total 2005 slaughter of 9.5 million. Production will not rise from 2004 despite high local pork prices because of disease, high feed prices, the imminent liberalization of competing imports as well as the continuing closure of the once-lucrative Japan export market. Farmers may also be reluctant to expand production too quickly in order to keep prices high. To prevent an oversupply of pork, Council of Agriculture has been continuously urging farmers not to expand production too quickly.
 
Consumption
 
The substitution of pork for beef and poultry is expected to push Taiwan's 2004 pork consumption to 973,000 tons, the highest level since 2001. Consumption in 2005 is expected to fall only slightly to 965,000 tons as beef consumption increases slightly. In most years, demand tends to be stable, moving between 940,000 to 970,000 tons. The very limited (less than 3%) substitution of pork for other meats indicates that they are not close substitutes in the Taiwan market. Taiwan's pork consumption is around 10 times as large as its beef consumption. Changes in relative prices or availabilities only slightly affect beef demand relative to pork - or vice versa.
 
Trade
 
Spurred by continued high Taiwan prices, pork meat imports are expected to reach 78,000 tons (CWE) in 2004 and 70,000 tons (CWE) in 2005. The PCV outbreak kept prices high and stimulated imports totaling 54,000 tons (CWE) in 2003. U.S. market share is expected to increase slightly to 42% in 2004 and remain around 40% in 2005. Unlike beef, the vast majority (96% from 2002-3) of pork meat consumed in Taiwan is produced domestically. Although post-WTO liberalization and high Taiwan pork prices have sharply increased pork meat imports in 2002-4, total volumes relative to consumption remain low. Given the competitiveness of Taiwan pork production, trading volumes and market shares are very sensitive to price and imports and mostly exist on the margin.
 
According to industry sources, imports can rise above 3,000 tons per month if Taiwan pig auction prices rise above NT$5,000/100 kg, a situation expected to last into 2005. On the other hand, high export prices can sharply cut trade - even if Taiwan has high prices. For example, if prices of imported products exceed 38 cents/pound, imports will fall by more than half, to around 1,400 tons per month.
 
As another indicator of this market's extreme price sensitivity, U.S. market share suffered major losses in 2003 because of high U.S. prices and lower prices in Canada. During that time, Canada more than doubled its market share over two years at the expense of the U.S. However, in first half 2004, high Taiwan pig prices and low U.S. prices made U.S. pork very competitive. In the latter half of 2004, Taiwan prices are expected to remain high but U.S. prices have also risen sharply, making it less competitive. For example, U.S. pork prices have risen to US$70/100 lb from US$40 in early 2004.
 
Since pork meat demand in Taiwan depends strongly on the prices of locally produced pork, export prospects for pork meat can vary greatly from year to year. When Taiwan does import, buyers prefer carcasses because U.S. cuts are different from what is used in Taiwan. 

USDA