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AHDB European Market Survey

16 March 2012

AHDB European Market Survey - 16 March 2012AHDB European Market Survey - 16 March 2012

Wholesale prices for lamb carcases in France followed the usual seasonal pattern in 2011 with the price premium for domestic lamb over imported lamb on the Rungis market being 20 per cent on average.


Further rise in German pork exports

German exports of fresh and frozen pork totalled 1.69 million tonnes in 2011, seven per cent higher than the previous year. In the last six years exports have more than doubled as processors increasingly focus on export markets. The increase in 2011 occurred despite the German dioxin crisis that dampened trade at the beginning of the year; the weakness of the euro and good demand has boosted export prospects. Exports were valued at €3.5 billion in total, a year on year increase of 12 per cent, with the average export price up by five per cent.

Over 80 per cent of fresh and frozen pork exports from Germany were destined for other EU Member States. Italy remained the largest market, with a 20 per cent market share, and increased shipments by almost 11 per cent between 2010 and 2011. Exports to Poland, the Netherlands, Czech Republic and Hungary also increased over the year. Austria and the UK were amongst the exceptions, with German exports down by eight per cent and seven per cent respectively. The largest share of third country shipments was destined for Russia, with trade remaining relatively stable year on year. However, exports to Russia were 63 per cent higher than in 2009. During 2011, there was significant growth in shipments to other increasingly important markets, notably China and South Korea.

Imports of fresh and frozen pork to Germany were two per cent lower in 2011 than in 2010 and were almost entirely supplied by other Member States. Although Denmark and the UK increased shipments by five per cent, imports from the Netherlands fell 25 per cent year on year. In addition, shipments from Spain and Belgium were down compared to year earlier levels. Imports have suffered on the back of subdued consumer demand, competition from third country markets, higher German production and the release of stocks from the Private Storage Aid scheme. However, the total value of imports to Germany rose by three per cent year on year to over €1.6 billion.

Imports and exports of live pigs were lower in 2011, compared with 2010. Imports to Germany totalled 12.5 million head, ten per cent lower year on year, with both weaner and slaughter pig numbers down by similar amounts. Denmark and the Netherlands remained the dominant suppliers. Weaner imports were reduced by lower demand from German finishers while German slaughtering companies reduced their requirement for imported slaughter pigs.

Total live pig exports from Germany were down by one per cent over the year to over 2.5 million head. Shipments decreased to Austria, Poland, Hungary and Croatia but exports of live pigs to Spain and the Netherlands were up by 42 per cent and six per cent respectively. Exports of piglets, which accounted for almost two thirds of the total, were up 7 per cent year on year, with strong growth in numbers sent to the Netherlands and Spain. Meanwhile, finished pig exports were down 13 per cent, despite increases in trade to Poland, Italy and the Czech Republic.

French wholesale lamb price premium maintained

Wholesale prices for lamb carcases in France followed the usual seasonal pattern in 2011 with the price premium for domestic lamb over imported lamb on the Rungis market being 20 per cent on average. However, by the autumn, when supplies in the British Isles are at a seasonal high, the price premium was as much as 38 per cent. Imports from the UK and Ireland in the second half of the year increased seasonally and were down only slightly year on year, contributing to the seasonal fall in the imported lamb price from June through to the autumn.

In the first two months of 2012 the price premium for domestic lamb has been largely maintained given slightly lower domestic supplies and ongoing tight supplies of imported product, especially from New Zealand. In week ended 4 March 2012 the premium was 17 per cent compared with 23 per cent in the same week last year.

Both imported and domestic lamb prices have shown only a small seasonal decline since the turn of the year whereas normally the reduction is more marked. In week ended 4 March the domestic price was up seven per cent on the year, while the imported price was up 13 per cent. Some seasonal upturn can be expected in the period leading up to Easter when demand reaches its seasonal peak. However, the problems of the French economy may affect the demand for lamb in 2012.

Lower production reduces New Zealand beef exports in 2011

The decline in production in 2011 was largely down to much higher slaughter levels in previous years as the drought conditions forced herd numbers down and culling rates up. As a result, in 2011 slaughterings declined seven per cent to 2.17 million head. The increased prominence of the dairy herd, at the expense of the beef herd, also contributed to the decline in beef production. Overall male cattle throughputs were considerably lower, reflecting the declining beef herd with steers down 10 per cent and bulls five per cent. Further increases to the dairy herd and some rebuilding of the beef herd restricted the number of cows culled, with throughputs down seven per cent while heifer throughput fell five per cent.

The majority of New Zealand export markets recorded lower shipments either as a result of the lower production or the economic situation in importing countries. The US remained the main market, accounting for 43 per cent of New Zealand trade, although volumes were down five per cent year on year as product lost competitiveness because of the strong New Zealand dollar. In addition, shipments were restricted by lower cow beef production as the US market is mainly for manufacturing beef.

The strong NZ dollar also limited the competiveness of New Zealand beef on other markets, particularly Japan, with exports to this market 10 per cent lower on the year. Consumer demand in Japan was lower while the weaker US dollar meant that New Zealand lost out to US beef.

In contrast, shipments to South Korea increased four per cent given the economic situation there and a decline in domestic production. In addition, shipments to the EU increased 18 per cent because of shortages of South American beef. The high valued EU market is a highly desirable destination for New Zealand exporters and so a concerted effort has been made to service it. At NZ$12,700 per tonne, the export price to the EU was more than double that on other key markets for New Zealand.

Tight global supplies have influenced the returns from New Zealand beef exports with the average unit price in the year up 13 per cent on 2010 at NZ$5,900 per tonne which meant that the total value of NZ beef exports increased six per cent to NZ$2,058 million.

Beef +Lamb New Zealand released their mid-season outlook in February which forecasts that the beef and dairy herds are both expected to increase year on year in June 2012 with a rise of almost two per cent in beef cattle to 3.94 million head and of one per cent for the dairy herd to 6.25 million head. This growth comes as a result of better seasonal conditions and improved returns for producers. For the 2011/12 season (October to September) beef production is expected to be five per cent higher than in the previous 12 months at 598,000 tonnes with a similar growth in exports. Cattle slaughterings are expected to increase two per cent, driven by a three per cent increase in cows, while carcase weights are expected to be three per cent higher overall.

EU High Quality Beef quota usage

As a result of an increase in the import quota for Argentina, the EU’s High Quality Beef (HQB) quota for 2011/12 increased by 1,375 tonnes on last year. Nevertheless, certificates of authenticity issued in the year to date (July to January) were more than 10 per cent lower than during the same months a year earlier.

Certificates issued to Argentinean exporters were down by almost half compared with the same period last year, largely due to delays in issuing certificates by the Argentinean authorities in the first half of the year. By the end of December, less than a quarter of the annual quota had been allocated to exporters, leaving more than 75 per cent to be shipped in the January to June period.

Australia and Uruguay appear to be on track to maintain high uptakes of their annual allocations, with almost 70 per cent of certificates issued in both countries in the first seven months of the quota year. Compared with the corresponding period of 2010/11, certificates issued were up 13 per cent year on year in Australia and by almost 40 per cent in Uruguay. Although total fresh and frozen beef exports from Uruguay have fallen in the last year due to tighter domestic supplies of cattle, the higher price for HQB beef has maintained good opportunities for Uruguayan beef exports. In the year to September 2011, total fresh and frozen beef exports from Uruguay were down 13 per cent year on year, to 163,000 tonnes.

Uptake of the HQB quota from Brazil has remained low for the third consecutive year, as the industry still struggles with lower availability of cattle for slaughter. Certificates issued to US and Canadian exporters have also been low over the last two years, with only 17 per cent of their annual quota issued so far in 2011/12. This has largely been due to competition with the autonomous beef quota, permitting a total of 20,000 tonnes of high quality beef to be shipped to the EU with no import duties. In comparison, the HQB quota carries a 20 per cent ad valorem customs duty.

For the first three quarters of the year (July 2011 to March 2012), the autonomous beef quota has again been fully exhausted. The 20,000 tonnes available to the US, Canada, Australia, New Zealand, and, as of August 2011, Uruguay, is spread equally over the year.

The autonomous beef quota is due to be increased to 48,200 tonnes as of July 2012, helping to put an end to the 20-year hormone beef trade war with the US and Canada. In exchange, the US and Canada have suspended import duties, amounting to almost $130 million, imposed on “blacklisted” EU farm produce, including pork.

Increase in German red meat production

German red meat production totalled 6.7 million tonnes in 2011, an increase of one per cent compared with the previous year. This increase was driven by a two per cent increase in pig meat production, along with increases in the much smaller scale veal and sheep and goat meat sectors. In contrast, production of beef fell by three per cent. With domestic consumption of red meat in long term decline, most of the rise in production was destined to satisfy the strong export demand for German meat.

German beef production in 2011 decreased three per cent compared with 2010, while veal production increased by nine per cent. Slaughterings of adult cattle during 2011 decreased by four per cent to 3.3 million head. The fall in slaughterings was partly offset by a marked increase in average carcase weights which were up by nearly 3kg to 337.7kg per head. There was a four percent fall in bull slaughterings, although they were stable in the first half of 2011 but seven per cent lower in the second half of the year when compared with the same periods in 2010.

There was a decrease of two per cent in the number of cows slaughtered but a marginal increase in the number of heifers slaughtered. The decline in cow slaughterings was due to fewer dairy cows being culled, as since June 2010 there has been a recovery in the German milk market following a fall in prices in the previous year. Therefore milk producers increased their milk production.

Pig meat production in Germany in 2011 was up two per cent on 2010 to 5.6 million tonnes. Pig slaughterings in Germany increased by two per cent year on year with only a marginal increase (0.4kg) in carcase weights.

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