October 3, 2012

 

 

EU beef production may drop to its lowest since the 1960s, as high grain prices cause long-term decline in output due to changes to subsidies and decreased dairy herd.

 

The bloc, the world's third-largest beef producer after the US and Brazil, will see output fall to 7.76 million tonnes in 2013, the European Commission said.

 

While representing a lower rate of decline than that seen this year, the drop will be enough to leave production at its lowest for 46 years, according to data kept by the USDA.

 

The USDA's own offices in Europe have pegged EU production at 7.70 million tonnes next year.

 

The European Commission flagged a "long-lasting reduction in the EU cattle herd, and thus reduced slaughtering" behind the decline in output, adding that this meant "beef prices are expected to stay firm".

 

The decline reflects in part the diminishing dairy herd, due to an increasing improvement in productivity which is allowing farms to produce more milk with fewer cows.

 

Indeed, EU milk output will rise by 1.1% to 154.8 million tonnes next year despite a drop of some 200,000 cows to 22.5 million head.

 

However, increased costs and reduced subsidies have also cut numbers of beef cattle too.

 

"The herd contracts as a result of increasing input costs such as feed, energy and credits, and phasing out of government support," the USDA bureau said.

 

Reforms to farm subsidies have phased out supports such as per-head subsidies and slaughter premiums.

 

"In Germany and Italy, competition for acreage with corn for biogas production is also negatively impacting the herd," a factor which, in the face of increasing criticism over energy crops at times of high food prices, is prompting groups such as KTG Energie to promote use of follow-on crops such as millet.

 

The high prices encouraged by the EU's dwindling production are only encouraging consumers to swap beef for cheaper meats, notably poultry, which the commission said "is expected to remain the only species in which production is expected to keep growing.

 

"Poultry meat becomes more attractive under periods of economic slowdown because of its price competitiveness," the commission said.

 

EU pork production will tumble 3.2% in 2013, with the costs of upgraded animal welfare rules from January expected to encourage some farmers to sell-up, and higher grain prices curtailing output among remaining producers.