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AHDB European Market Survey

23 March 2012

AHDB European Market Survey - 23 March 2012AHDB European Market Survey - 23 March 2012

In 2011 sheep meat production in Argentina totalled 56,000 tonnes, down by over a quarter on the year as throughputs recorded a noticeable decline and carcase weights were lower.


EU a net exporter of beef in 2011

For the second consecutive year, the EU was a net exporter of fresh and frozen beef in 2011. The previous year was the first time this had been the case for many years. This was largely a result of increased demand from Russia and Turkey, combined with a reduction in imports from South America. The trend in 2010 continued last year as a result of a decline in world production and the increase in global beef prices which made EU beef more competitive. Since early 2010, rising prices in the key South American exporting countries have closed a large proportion of the gap with EU prices. In addition cattle supplies in the US are at record low levels and prices at a historic high.

Exports of beef from EU Member States to external trading partners increased by more than a third compared with 2010. A large part of the increase was the result of shipments to Turkey almost doubling, following the reduction in tariffs since October 2010. However, as the year progressed shipments to Turkey reduced and in the final quarter of the year exports of fresh and frozen beef were 80 per cent lower than they were in the corresponding period of 2010. While increased shipments to Turkey was the main driver, many other destinations also recorded significantly higher imports from the EU, including Switzerland, Bosnia and Herzegovina and Macedonia.

For the year as a whole, shipments to Russia declined. However this is largely as a result of reduced exports in the second half of the year. Demand from Russia was firm in the first half of the year as global supplies remained tight and they took lower shipments from a number of other markets including Brazil, Uruguay and Argentina. The strength of the rouble against the euro also helped to make EU beef more attractive to Russian importers, especially as prices for South American beef continued to increase. However, reacting to the Schmallenberg virus, Russia recently announced that it may extend its ban on the import of live cattle to include beef.

In 2011, unit prices were nine per cent higher as there was increased competition to secure sufficient product to feed the export market. This, combined with the surge in volumes, helped the value of EU beef exports to exceed €930 million.

As well as higher exports of beef, shipments of live cattle from the EU were also considerably higher than in 2010. Overall numbers were up by nearly a third at just over 800,000 head. Turkey took over 250,000 head of cattle compared with 54,000 head in 2010.

In contrast, EU Member States imported nine per cent less beef in 2011 as supplies from some South American and African countries declined. The largest exporter of beef to the EU, Brazil, recorded a modest increase in shipments compared to the year before. However the other two largest importers, Argentina and Uruguay recorded declines of 11 and 18 per cent respectively. These were partly offset by increased volumes sourced from the US, Australia and New Zealand as they sought to gain wider access to the high value European market. The recent announcement by the EU Parliament approving an increase in the volume of hormone-free beef exempt from tax may result in increased shipments from the US later in 2012.

With increased competition for limited global beef supplies, unit values for beef imported into the EU were up 23 per cent year on year. As a result, the total value of imports increased by 11 per cent to €1.45 billion, despite the decline in volumes.

Chinese pig prices fall back from record highs

China accounts for nearly half of global production and consumption of pig meat. It is largely self-sufficient but, given the scale of the industry, small changes in production can have a significant impact on price. During the summer of 2011, pig prices in China rose to record highs. Since then prices have fallen steadily, except for a small rise in the run up to the Spring Festival in January, and are now less than five per cent higher than their level a year ago. At their peak, in early September, the average pig price in China was just over 20 yuan per kg liveweight, equivalent to 196p per kg. By early March, the price had fallen to a little over 15 yuan (155p) per kg.

Pig meat is a staple food in China and its price makes an important contribution to the country’s Consumer Price Index (CPI). Food makes up around 30 per cent of the CPI basket and pig meat accounts for around a third of the food portion or 10 per cent of the total. Therefore, the rising prices during 2011 contributed to high levels of inflation, leading to government intervention to open up the import market (see EMS 12/06) and subsidise herd expansion. As a result, annual inflation fell below four per cent in February 2012, although meat prices were still 16 per cent higher than a year earlier, including a similar rise for pork.

The key reason for falling prices is the expansion of the Chinese pig herd as a result of improved profitability, government subsidies and warmer weather, which led to a lower incidence of disease outbreaks this winter. Breeding sow numbers have risen through most of the year and USDA estimates that they totalled 49.3 million head at the end of 2011, four per cent higher than a year earlier. As a result, pig meat production during 2012 is forecast to be four per cent higher than in 2011 at 51.6 million tonnes. The impact on imports is less clear but they are likely to be lower than in 2011. Increased production will probably mean that average prices during 2012 will be lower than in 2011, with one major processor predicting a fall of between 15 and 20 per cent.

The Chinese government has recently released its 12th five-year development plan for agriculture. The plan aims to increase Chinese pig meat production by six per cent by 2015. It also sets out goals to modernise the industry and improve productivity. The intention is to move away from China’s dependence on small ‘backyard’ producers, which cannot meet efficiency and sustainability requirements.

Argentine sheep meat industry update

In 2011 sheep meat production in Argentina totalled 56,000 tonnes, down by over a quarter on the year as throughputs recorded a noticeable decline and carcase weights were lower. Throughputs at abattoirs totalled 906,000 head, a decline of 16 per cent on 2010 levels. This translated into an estimated total kill (including abattoir and on farm slaughterings) of 3.48 million head, also a 16 per cent decline on the year. Carcase weights were also significantly lower falling from an average of 18kg in 2010 to 16kg in 2011.

Historically, approximately a third of the kill is adult sheep and wethers with the remainder being lambs. The Argentine sheep flock is estimated to have fallen to 14.7 million head in 2011, down from just over 15.0 million in 2010 and 16.2 million in 2009. Numbers continue to decline as more producers convert their pasture to cropping, pushing sheep production to more marginal areas. However, some of the decline in slaughterings 2011 may be a result of producers rebuilding numbers as a result of increased returns for both wool and sheep meat.

GTIS figures indicate that exports of sheep meat from Argentina declined 26 per cent on the year to total 5,400 tonnes. The main market remained the EU; despite recording a 24 per cent fall it still accounted for two thirds of all Argentine sheep meat exports. Other markets included Jordan, Saudi Arabia and Israel. Increased procurement costs and strong competition globally during 2011 resulted in the unit value of exports increasing 40 per cent on the year to US$5,740 per tonne. The increased cost offset the decline in volumes so the total value of sheep meat exports rose three per cent to US$31 million.

Despite lower exports, the decline in production resulted in the supplies available for domestic consumption falling. Per capita sheep meat consumption in Argentina fell from 1.7kg in 2010 to 1.3kg in 2011.

Lamb prices have eased in recent months with light lamb prices in January 2012 seven per cent lower than they were at their peak in June 2011 at 19.1 pesos (US$4.40). This was still seven per cent higher than in January 2011. Heavy lamb prices averaged 15.8 pesos (US$3.60) per kg, a decline of three per cent since their peak in September 2011, but still considerably above year earlier levels. Light lamb prices improved in February to reaching 19.9 pesos (US$4.57) per kg while the price of heavy lambs continued to fall, down to 15.0 pesos (US$3.44) per kg.

Contrast in Dutch and Danish pork exports

Danish exports of fresh and frozen pork were five per cent higher in 2011 than the previous year at over 1.2 million tonnes. This growth in exports mainly reflects a four per cent increase in Danish pork production over the same period and some increase in export demand, with the average export price up four per cent. Trade with other EU Member States increased by three per cent year on year; pork exports to Germany and Italy were up seven per cent and three per cent respectively. In contrast, shipments to the UK were five per cent lower. Danish exports to non-EU markets grew by ten per cent over the year but they still only accounted for 29 per cent of trade. Strong demand meant that shipments to China and South Korea grew tremendously year on year, counteracting falls in trade with Japan, Australia and the US.

In contrast, Dutch exports of fresh and frozen pork fell marginally in 2011, compared with 2010, despite a rise of two per cent in production. Trade with other EU Member States fell by four per cent year on year, whereas exports to non-EU markets increased by 20 per cent to make up 17 per cent of the total. Shipments to Germany and Italy fell significantly over the year, down by 25 per cent and 10 per cent respectively, as the Netherlands lost market share to Denmark. However, there was strong growth in trade with Poland, because of domestic shortages, and Spain. South Korea, Hong Kong and Russia were the main contributors to the rise in non-EU exports. The average export price increased six per cent year on year. By value, Dutch exports to non-EU markets increased by 30 per cent.

Danish exports of bacon were up by two per cent in 2011 compared with year earlier levels at 101,100 tonnes, with shipments to the UK, the main market, also up two per cent. Dutch bacon exports on the other hand fell by thirteen per cent to 114,000 tonnes, as exports to the UK decreased by 18 per cent over the year.

Danish live pig exports rose by two per cent between 2010 and 2011 to 8.9 million head. Weaner exports, which accounted for almost 95 per cent of all trade, increased by eight per cent over the year. There was strong demand for Danish weaners from Poland with exports increasing by 86 per cent year on year. This came as a result of a shortage of locally-bred pigs as many Polish breeders left the industry or switched to finishing. Weaner shipments to the main German market were little changed. However, slaughter pig exports to Germany, the dominant market, fell by 60 per cent.

Live exports (excluding breeding pigs due to an error with the data) from the Netherlands fell to 9.0 million head, down by over 17 per cent compared with 2010. Slaughter pigs saw the biggest fall in trade, with exports down 28 per cent year on year, on the back of considerable decreases in shipments to Germany and Hungary. Exports of weaners were down by six per cent, with falls in trade to Germany and Poland.

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