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AHDB European Market Survey


22 June 2012

AHDB European Market Survey - 22 June 2012AHDB European Market Survey - 22 June 2012

In the first quarter of 2012, the EU imported 17 per cent less sheep meat from third countries than a year previously.

AHDB

EU sheep meat imports well down in first quarter

In the first quarter of 2012, the EU imported 17 per cent less sheep meat from third countries than a year previously. Even March shipments were down 10 per cent year on year despite the earlier Easter. This year’s drop follows the 21 per cent fall in first quarter imports in 2011. Compared with 2010 levels, imports in the January to March period of 2012 were over a third less.

Given the nature of the EU quota system, much of the decline has been falling shipments from New Zealand, down 15 per cent compared with 2011 and down 35 per cent when compared with 2010. The main driving factor behind falling imports last year was the lower production in NZ. This remains a contributing factor, but this year’s drop is much more due to the deteriorating economic situation in the Eurozone, resulting in reduced demand for NZ lamb. There has been considerably higher levels of intra-EU trading, particularly of product originating from the UK and Ireland. There has also been a three per cent increase in EU lamb production.

The table below shows that in addition to the lower volumes from New Zealand, there has been a decline in volumes from Australia, Uruguay, Argentina, Iceland and the Falklands islands. In contrast there were increased volumes from Macedonia and Chile.

While overall volumes have fallen, imports of chilled sheep meat were up six per cent to 18,000 tonnes. Shipments were up from most suppliers, of which New Zealand accounted for nearly 90 per cent of total supplies. However, this was still almost a third below 2010 levels. Frozen shipments fell 29 per cent on the year to 24,000 tonnes (down 37 per cent compared with 2010), with shipments from most regions significantly down.

Overall unit import values for the first quarter were 19 per cent higher than in 2011 and 51 per cent more than in 2010, with product from New Zealand showing similar movements. This was helped marginally by the increased volumes of higher valued chilled product, but frozen unit values were also up 16 per cent on the year. With chilled values up 18 per cent, all imports were considerably more expensive.

The higher unit cost did much to offset the lower volumes with the total import value falling only two per cent to €305 million. This followed no change between 2010 and 2011. As a result of the dramatic rise in global lamb prices in recent years, EU Member States continue to spend broadly the same amount on imported lamb, despite the difficult economic climate.

Chilean sheep production on the rise, beef falls

As with pork and poultry production (see EMS 12/23), production in Chile’s sheep sector has also increased in recent years, although it remains similar to the levels recorded in 2000. In 2011 sheep meat production totalled 11,200 tonnes, an increase of six per cent on 2010 levels. This production was off the back of a three per cent rise in slaughterings, up to 791,000 head, and a near three per cent increase in carcase weights. This represents an almost stand on position when compared with 2000 levels, although production fell substantially in the mid-2000’s. The latest figures show a 21 per cent increase on 2005 levels.

In the first quarter of 2012 production has dropped. At 6,000 tonnes, sheep meat production was down eight per cent compared with the corresponding period last year. This was fuelled by an 11 per cent fall in slaughterings and lower carcase weights.

A large proportion of Chile’s sheep meat production is exported, with over 6,400 tonnes shipped in 2011. Despite increased production, this represents a decline of six per cent on 2010 levels. The EU remains the largest destination for this product, although its importance has declined in recent years. In 2011 almost three quarters of shipments were destined for the EU, down from almost 90 per cent in 2009. The EU market is likely to remain important given its high value nature. Chile also has the fourth largest quota allocation, although this is currently at a relatively modest 6,800 tonnes. The main destinations for the remainder of exports were Hong Kong, Mexico, Israel and Brazil. Shipments in the first quarter of 2012 were up 17 per cent year on year but with no change in trade with the EU.

Chilean sheep prices have followed global trends with the average price in 2011 recording a considerable rise on 2010 levels. In US dollar terms, the average liveweight price for the year was $2.12 per kg, up 14 per cent on year earlier levels. Prices have continued to follow global trends in 2012 with prices dropping as the year has progressed and tracking below 2011 levels from March onwards.

Beef production

In contrast to other meats, beef production has fallen in recent years. From a high point of 242,000 tonnes in 2007, Chi lean beef production in 2011 was 191,000 tonnes. This represents a fall of 21 per cent over the five years and a nine per cent reduction on 2010 levels. This has mainly been the result of a considerable decline in cattle slaughterings. At 725,000 head for 2011, the cattle kill has fallen by over a quarter from the recent peak of 1.0 million head in 2008 and was 12 per cent lower than 2010 levels.

This decline appears to have been arrested in 2012, with figures for the first quarter showing a six per cent increase in the number of cattle slaughtered. This has translated into beef production being five per cent higher than year earlier levels as carcase weights were evidently lower.

Unlike in other meats, Chile is a net importer of beef with export volumes comparatively small. At 4,000 tonnes, beef exports for 2011 were down almost a fifth on 2010 levels. Trade with the EU accounted for 44 per cent of the total in 2011 with shipments of 1,800 tonnes. Chile has an autonomous tariff quota with the EU under which product is free of customs duty. This quota totalled 1,850 tonnes in 2011/12 and increases by 100 tonnes each year.

Beef imports in 2011 totalled 126,600 tonnes, a decline of five per cent on 2010 levels. This decline was largely the result of the ban on imports from Paraguay in the final quarter of the year due to the FMD outbreak. Despite this Paraguay remained the largest supplier accounting for 35 per cent of volumes, though this was down from the 60 per cent market share in 2010. Shipments from Paraguay so far this year have continued to fall, down almost six per cent in the first quarter. Total imports for the first quarter of 2012 were up seven per cent, with other suppliers all increasing shipments to offset the lack of product from Paraguay. Brazil has been the main beneficiary with volumes more than trebling and accounting for almost half of imports, compared with 14 per cent in the same period of 2011.

The increased farmgate prices for cattle globally have also been evident in Chile. The average liveweight price for finished steers in 2011 was US$2.19 per kg, a 23 per cent increase on 2010 levels. Latest prices show that this trend has continued into 2012 with the average price for April four per cent above the level recorded in the same month of 2011.

Further growth in German net pork exports

German net pork exports increased further in the first quarter of 2012 to 190,000 tonnes, compared with 130,000 tonnes a year earlier. Despite a three per cent fall in production, exports increased while imports fell as a result of sluggish domestic demand. The increase in exports came despite the dioxin scare, which led to temporary bans of German exports to some countries (see EMS 11/13).

German exports of fresh and frozen pork were up 12 per cent in the first quarter of 2012. Fresh/chilled exports were up two per cent on the year to 277,000 tonnes with frozen exports up 38 per cent to 144,000 tonnes. Total pork exports to the EU in the first quarter of 2012 were up two per cent with shipments to Italy and Poland, the two largest markets, both up three per cent. Exports to the UK and Denmark, two smaller markets for Germany, were up by 34 per cent and 90 per cent respectively.

Pork shipments to third countries in January to March 2012 recorded growth of over 80 per cent year on year, largely the result of a weak euro and especially strong demand from Asian countries. Shipments to China and South Korea, in particular, were up 16-fold and four-fold respectively. Trade with Russia was up by around 19 per cent on 2011 and there was also substantial growth in trade with Belarus, up 12-fold to 5,000 tonnes.

German pork imports were down six per cent in the first quarter 2012 compared with a year earlier. There was a decline in shipments from all leading markets with imports from Denmark, Belgium and the Netherlands all down by around nine per cent. However, there were sharp increases from Spain and France, up 34 per cent and 81 per cent respectively.

Live pig imports in January to March 2012 were down six per cent to three million head on the year. Shipments from the Netherlands were up 18 per cent to 1.7 million head but volumes from Denmark fell by 28 per cent to 1.2 million head. Total slaughter pig imports were up 12 per cent to 1.2 million head. However, weaner shipments fell 15 per cent to 1.8 million head on the back of lower demand from German finishers.

Live pig exports were unchanged in the first quarter of 2012 at 610,000 head. Shipments to Poland, Germany’s largest destination for live pig exports, were up 62 per cent to 153,000 head. This was largely due to falling reported pig numbers on Polish farms, creating demand for imported slaughter pigs. There was also five-fold growth in exports to Ukraine to 62,000 head. However, this growth was largely compensated for by falling trade with Austria and the Netherlands.

The importance of the meat sector within the EU

In an address to the World Meat Congress on the importance of the meat sector, the EU Commissioner to Agriculture and Rural Development, Dacian Ciolo?, identified the livestock-farming sector as being high on the Commission’s agenda, and not just in the context of discussions on the future of the CAP. The address spoke of the significance of the sector to farming in vulnerable areas, and the challenge of food security while respecting the strong cultural identities linked to meat production and the environment.

According to the Commissioner, Europe is a ‘trailblazer’ on the issues of animal welfare and environmental standards, reflecting the expectations of society as a whole but coming at a cost to the producer. Although these issues are not sufficiently taken into account in international negotiations, they have been raised at the World Organisation for Animal Health. The reform of the CAP has an important role in overcoming the challenges of the sector and to assist in its further development. A full copy of the address is available at: http://ec.europa.eu/agriculture/newsroom/index_en.htm.

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