AHDB European Market Survey

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18 April 2012

AHDB European Market Survey - 13 April 2012

Irish sheep meat exports in 2011 totalled 39,000 tonnes, up 11 per cent on the year.

Declining EU cattle numbers

The EU Commission has published data from censuses taken in November and December. The results show that overall cattle numbers declined in most of the major beef producing countries. In France, the top EU beef producer, the census reported a three per cent fall in the overall number of cattle on farm. Dairy cow numbers were down one per cent while beef cow numbers declined almost two per cent compared to a year earlier. Heifer replacements were seven per cent lower, suggesting a further decline in cow numbers can be expected in 2013. The drought conditions during 2011 and subsequent lack of fodder resulted in an increase in liquidations in cow herds. During 2011, cow slaughterings in France were up eight per cent while heifer slaughterings were up two per cent.

The trend since 2008 towards fewer cattle in Germany continued in 2011, with total numbers down one per cent on the year. However, dairy cow numbers were little changed, a reflection of the improved milk prices since June 2010, resulting in a sharp expansion in milk production and hence greater retention of dairy cows. Beef cow numbers were back three per cent. The number of heifers aged over one year was down three per cent, which suggests a continued easing back in heifer replacement demand for breeding purposes.

In the UK, the total number of cattle fell two per cent. There was a near three per cent decline in the dairy breeding herd and a one per cent decline in the beef breeding herd. This decline was driven by much higher culling rates in 2011 as a result of the record prices on offer for cull cows, due to the shortage of manufacturing beef globally. The short term outlook remains bleak for any rebuilding of the herds, with the number of females between one and two years old down two per cent for beef and up only one per cent for dairy.

Following the trend, cattle numbers in Spain were three per cent lower on the year. Both beef and dairy cow numbers were well down as producers culled their herds; cow slaughterings in 2011 were up nine per cent compared with 2010. Mirroring the situation in many Member States, profitability was under pressure given high feed costs. The number of heifers for breeding was down by as much as 22 per cent, suggesting a further decline in cow numbers can be expected.

In contrast to the other major beef producing countries the numbers of cattle in Italy and Ireland both increased on the year. In Ireland the number of dairy cows recorded a three per cent increase, reflecting the profitability of the dairy sector. However, in the face of the expanding dairy sector, the beef herd contracted by one per cent. In Italy, there was a notable increase in beef cow numbers.

The results of the recent European forecast working group for beef suggest that production in the EU-15 region is likely to decline by two per cent in 2012, largely attributable to lower output in France, the UK and Ireland. Production in France is forecast to decline three per cent. Assuming better grazing conditions this year, female beef production is forecast to decline by five per cent in 2012 according to the Institut de l’Elevage, after an estimated increase of six per cent in 2011. In the UK, as cow slaughtering return to a more normal level, production is expected to fall four per cent. A six per cent fall is anticipated in Irish beef production in 2012.

Strong demand drives up Irish sheep meat exports

Irish sheep meat exports in 2011 totalled 39,000 tonnes, up 11 per cent on the year. Although sheep meat production increased one per cent during the year, the increased trade was principally driven by the tight global supply situation which led to increased demand for Irish product.

France remained the primary destination for Irish sheep meat exports, with volumes up one per cent on the year. The overall growth was driven by strong performance in a number of markets. Irish customs reported an 18 per cent growth in volumes to the UK, with this market taking more than a quarter of all shipments. In addition, there was significant growth in exports to Sweden, Germany and Belgium. These increased exports to Northern Europe were somewhat offset by the tougher trading environment of the Southern European market. Volumes to both Portugal and Spain fell as the economic woes of these countries resulted in consumers turning to cheaper proteins.

While exports to other EU Member States accounted for most of Irish shipments, trade with third country partners increased. Exports to these markets were up 58 per cent, although volumes were a relatively modest 1,100 tonnes. The largest non-EU market remained Vietnam, followed by Switzerland and Hong Kong.

The tight global supply situation resulted in remarkably strong competition for available supplies. With Ireland being an important supplier of lamb this resulted in farmgate prices increasing by nine per cent on average. This increased cost of procuring product resulted in the unit value of exports increasing seven per cent to €4,920 per tonne. When combined with the increased volume being shipped the total value of Irish sheep meat exports was almost 19 per cent higher than in 2010 at €190 million.

Bord Bia also report that live sheep exports fell by more than half in 2011 to total only 17,000 head. This decline came as the live export market failed to compete with the domestic processing sector and the sheep flock underwent some rebuilding, which limited the availability of animals.

Following this strong performance, Irish exports of sheep meat are expected to experience further growth in 2012. Bord Bia currently indicate that Irish lamb supplies in the first quarter of 2012 have been almost eight per cent ahead of 2010 levels, despite fewer lambs being imported from Northern Ireland. While adult sheep throughputs are lower, overall supplies are five per cent higher. Further to this Bord Bia expect that lower European production will result in ongoing firm demand for Irish sheep meat. While it is anticipated that shipments from New Zealand will be higher in 2012, lower production in some markets, especially France, is expected to result in the requirements for Irish product increasing.

EU weaner prices reach record high

The average price of weaners in the EU has risen steadily since October. By week ended 25 March, the average price had reached €51.65 per head, its highest level since the expansion of the EU to 25 Member States in 2004. The figure was more than 50 per cent higher than it was six months earlier and 24 per cent higher than in the equivalent week a year ago.

The rapid rise in weaner prices is partly seasonal but has been driven by relatively strong demand coupled with a shortage of supply. The supply shortage is largely due to the three per cent reduction in the size of the EU breeding herd during the year to December 2011 (see EMS 12/08). As a result, the number of piglets and weaners recorded in the December Census was little changed, despite continuing productivity gains. Robust demand comes partly because some producers have switched from breeding to finishing, notably in Poland and elsewhere in Eastern Europe. In addition, expectations of higher finished pig prices later in the year are encouraging demand, despite rising feed prices since the New Year impacting on margins.

In percentage terms, the sharpest price increases were in Poland and Hungary, where prices were around 75 per cent higher than a year earlier. Prices in Poland are still lower than in most other major producing Member States but the gap has narrowed significantly due to steadily increasing values since January 2011.

Germany is the largest market in the EU, with 8 million head of imported weaners to add to the output of the EU’s second largest breeding herd. At the end of March 2012, prices here were 21 per cent higher than a year earlier and over 60 per cent above their level in September 2011. Given the close links with the German market, the Dutch weaner price followed a somewhat similar trend. Prices in Southern Europe have also risen rapidly in recent months, with prices in Spain more than doubling since September 2011.

There were a few exceptions to the general pattern of price rises. Most significant was Denmark, the EU’s largest exporter of weaners. Prices here were slightly lower than at the start of the year, although still seven per cent higher than a year earlier. Other Scandinavian countries and the UK also experienced more modest rises in prices in recent months. UK prices were 16 per cent higher than a year earlier, in euro terms, but only 18 per cent above their October low-point.

Contrasting trends in Italian beef and pork imports

Italian beef and veal imports were down six per cent in 2011 as consumer demand for beef remained weak, with cutbacks in consumer spending. Despite the overall fall, imports from the largest supplying nation, France, were up three per cent. This was largely due to France exporting surplus young bull beef at competitive prices given higher production in 2011. Italian young bull beef production was down eight per cent on the year in 2011, which contributed to higher cattle and beef prices and falling consumption. Beef imports from non-EU countries were also down three per cent on the year, despite a four per cent rise in shipments from Brazil. The unit prices of imports in euro terms was up eight per cent on the year.

Exports of Italian beef and veal were up one per cent on 2010 levels to 135,000 tonnes, largely the result of a near doubling of trade with the Netherlands, as trade with the largest markets of France and Germany declined.

Total live cattle imports were down two per cent to 1.3 million head in 2011, despite a two per cent increase in imports from France, which accounted for 73 per cent of the total. High feed costs have affected demand for imported store cattle from feedlots, after having grown strongly in 2010.

Imports of fresh and frozen pork were one per cent higher in 2011 than in 2010. Shipments from Germany and Spain were up eight per cent and four per cent, respectively. In contrast, imports from the Netherlands and France were down seven per cent and 10 per cent respectively. The average unit price of all pork imports was up four per cent to €1,893 per tonne. Imports of fresh and chilled legs for curing into hams were up three per cent on the year to 613,000 tonnes.

Live pig imports in 2011 were up 17 per cent to 1.1 million head. The increase was mainly due to a 44 per cent rise in shipments from Denmark. Weaners represented more than two-thirds of the total , with numbers up 22 per cent. Slaughter pig imports were up four per cent on the year.

Total Italian pig meat production was down four per cent in 2011 on the previous year and this contributed to a one per cent fall in household purchases of pig meat. In January to November 2011 household fresh pork purchases were down one per cent year on year but purchases of more expensive processed products, including salami, increased two per cent.