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AHDB European Market Survey

01 February 2012

AHDB  European Market Survey - 27 January 2012AHDB European Market Survey - 27 January 2012

After several years of intense cow culling, the Brazilian beef industry is still facing lower availability of cattle for slaughter.


Steady upward trend in EU sow prices

Following the end of the dioxin crisis in Germany at the end of January 2011, the EU cull sow market gradually recovered and prices increased steadily through most of the year. Prices were in general slightly higher than year earlier levels, particularly in Germany, Denmark and the Netherlands.

After reaching a peak in early December, prices have started to fall back. To some extent this is a seasonal development, with lower demand from manufacturers during the holiday period. However, it is also influenced by developments in the clean pig market and by a reduction in demand for exports of lard and other fat products to third countries, particularly Russia. By mid January sow prices in Germany, the key driver of the sow market, had fallen almost six per cent since the December peak. In spite of this, prices in all major Member States started the year significantly higher than the previous year.

Cull sow prices in selected Member States, 2011

Since falling to just €0.86 per kg in week ended 23 January, the average German M1 sow price has steadily improved over the year. Although prices flattened out between June and August, further growth in the last quarter pushed prices up to reach €1.34 per kg as of week ended 4 December, up 56 per cent from the January low. Sow prices had eased back to €1.26 per kg as of week ended 15 January, but still remained almost 25 per cent higher than in the corresponding week in 2011.

Sow prices in the Netherlands have followed a similar trend to Germany throughout the year, although they are typically around 15 cents lower. However, Dutch prices dropped more sharply during the May lull, down by 14 per cent, and took some time to recover. Prices increased by 63 per cent from the low point in January to peak at the beginning of December at €1.22 per kg. They have since fallen to €1.07 as of week ended 15 January 2012, up 43 per cent on the same week last year.

Danish sow prices remain among of the lowest of the major Member States, and in 2011 were about three quarters of the German prices. Despite this, from the end of January sow prices in Denmark steadily increased throughout 2011, rising by 76 per cent to peak at €1.06 per kg in November. By the week ended 15 January 2012, the Danish sow price had weakened to €0.95 per kg, but stood 28 per cent higher than in the same period in 2011.

In euro terms, the average GB sow price rose significantly throughout 2011, to peak at €1.37 per kg in the week ended 10 December, 57 per cent higher than the January low. For the first seven months of 2011, GB sow prices were generally lower than German prices. However, since August, prices have matched German prices, and in December and into January, the GB price overtook the German one. Prices dipped to €1.31 per kg in the week ended 24 December but have since recovered to level off at €1.35, nearly 34 per cent higher than a year earlier.

Higher EU sheep slaughterings

EU25 sheep slaughterings during the first nine month months of 2011 totalled 34.1 million head, an increase of two per cent on the previous year. A combination of increased slaughtering and higher carcase weights resulted in total sheep meat production in the first nine months of 2011 being up three per cent on the year at 530,000 tonnes. This recovery comes after the fall in throughputs experienced in 2009 and 2010 and has been led by developments in the UK and France. Increased numbers in the UK were attributed to a better lamb crop in 2011 and strong prices encouraging the marketing of sheep.

Total lamb slaughterings were up two per cent on the year to 29.9 million head. However, there were considerable variations in throughputs amongst Member States. Of the main producers, lamb slaughterings were up five per cent in the UK and three per cent in both Ireland and France. In contrast, there were two per cent and three per cent falls in Greek and Italian lamb slaughterings respectively. EU25 lamb production was two per cent higher at 433,000 tonnes as carcase weights were largely unchanged on the year.

Annual change in EU sheep slaughterings, Jan-Sep 2011

Adult sheep slaughterings were up five per cent on the year at 4.3 million head. Growth was most apparent in Spain, with throughputs up over 50 per cent on the year. Adult sheep slaughterings in France and the UK were up six and seven cent respectively. In contrast, throughputs fell by 10 per cent in Ireland and 13 per cent in Italy on the year. EU25 mutton production was up nine per cent on the year due to the increased throughputs and higher average carcase weights. These higher weights further indicate that producers culled their flocks harder and sent better animals to slaughter as they attempted to take advantage of higher ewe prices.

Forecasts indicate that total EU sheep meat production for the whole of 2011 will be up around two per cent compared with 2010, although this figure will still be well below the levels recorded in earlier years. Production in 2012 is forecast to be lower, as some stabilisation in numbers is expected, given the better farmgate prices being achieved. The fall will be driven by a lower culling rate and increased ewe lamb retentions, limiting the number of animals available for slaughter. A more detailed analysis of EU sheep meat production is available in the December 2011 issue of the International Meat Market Review, available from Dorian Harris (024 7647 8850 or [email protected]), priced at £60.

German pig numbers stable

Provisional figures from the German Pig Census undertaken in November 2011 show a two per cent rise in the overall pig population compared with a year earlier. However, this increase is largely due to changes in the number of producers covered by the survey. The German Federal Statistical Office estimates that this has added around 650,000 pigs to the total, which more than accounts for the rise. Therefore, the true situation is that the total German pig herd is little changed from November 2010.

Even with the addition of the extra producers, the size of the breeding herd was two per cent lower than a year earlier; in reality the fall was probably closer to three per cent. This is the continuation of a long-term decline in sow numbers recorded over the last decade. An even sharper fall in numbers of in-pig gilts suggests that there will be no reversal of the downward trend in the near future.

Germany is the first Member State to report the results of their November/December Census. There are expectations that, following the four per cent fall recorded in the June survey, the overall EU pig breeding herd will have declined further. This comes as producers have experienced a year of poor profitability, due mainly to high feed costs, with many facing the need to invest in order to comply with the forthcoming partial ban on the use of sow stalls.

Despite the fall in breeding sow numbers, the number of pigs reported as weighing less than 50kg was one per cent higher, as productivity continued to improve. Within this group, there was a big rise in the number of piglets recorded but a significant fall in the number of weaned pigs. It is not clear whether this is a real shift or whether it is just down to how animals are recorded. Numbers of slaughter pigs were also reported to be higher than a year earlier, with a particular increase in numbers at heavier weights.

Whilst the number of pigs in Germany is little changed, the number of holdings with significant numbers of pigs declined by six per cent to just under 31,000. Of these, around 14,000 had at least 10 breeding pigs, a decline of over 10 per cent. This marks a continuation of the long-term trend of consolidation into fewer, larger producers.

Brazilian beef exports decline

According to the Brazilian Institute of Geography and Statistics (IBGE), cattle slaughterings in the year to September were almost three per cent down on 2010 at 21.5 million head. Production fell by five per cent year on year to five million tonnes indicating a marked fall in carcase weights.

Increased domestic demand and hence firm beef prices, plus a strong real, put pressure on export levels in 2011. Exports of fresh and frozen beef declined 14 per cent year on year. Russia remained the most important destination for Brazilian beef, accounting for almost 30 per cent of exports. However, shipments to Russia declined 19 per cent as Russia’s Federal Veterinary and Phytosanitary Surveillance Survey (VPSS) announced a temporary ban on imports of animal products from three Brazilian states in early June, citing sanitary concerns. Consequently, shipments to Russia in the second half of the year were 42 per cent lower than in the corresponding period in 2010.

Of the other major markets, shipments to Iran were down 30 per cent and to Egypt 14 per cent. In contrast, whilst still low in a historical context, shipments to the EU increased by nine per cent, largely as a result of increased trade with Italy, the Netherlands and Germany. Together these three Member States accounted for 80 per cent of Brazilian imports into the EU.

Exports of processed product also declined, with volumes down 17 per cent on the year to 103,000 tonnes. The most significant fall in trade was with the UK which received shipments 21 per cent lower than last year at 33,200 tonnes. Shipments to the US were down nine per cent to 12,300 tonnes.

The increasing size of the Brazilian middle class in recent years has resulted in a rise in protein consumption, resulting in higher beef prices on the domestic market. As a result, there has been an growing demand for higher quality imported beef, mainly among steakhouse chains in the Sao Paulo region. In 2011, imports increased 17 per cent on the year to 28,200 tonnes. Shipments from Uruguay and Paraguay increased 30 and 13 per cent respectively and, while only a small volume, imports from Australia increased five- fold. As expected, shipments from Argentina declined; the share of Brazilian imports sourced from Argentina fell from one third in 2010 to a quarter this year.

EU Commission seeks to improve animal welfare

The EU Commission last week adopted a new four year strategy that aims to improve the welfare of animals in the European Union. In a Communication, the Commission indicated the need to address the issue because of difficulties in agreeing on unitary rules and in ensuring their correct implementation. These difficulties have arisen partly because of the diversity of farming systems, climatic conditions and land types in different Member States. The net result is that animal welfare standards have varied significantly across Member States.

The Communication identifies several main drivers affecting the welfare of animals in the Union, including the lack of enforcement of current EU legislation by Member States and a lack of appropriate information on aspects of animal welfare to consumers.

Taking these issues and concerns into account, the Commission’s strategy is based on two complementary approaches. The first aims to tackle problems with existing legislation and its enforcement. In the past, the EU has adopted legislation to address specific issues. However, the establishment of general principles in a consolidated EU legislative framework might simplify the regulations governing animal welfare and facilitate its enforcement.

Subject to an impact assessment, the Commission will consider the need to revise the existing EU legislative framework based on a holistic approach. In particular, the Commission will consider introducing sciencebased animal welfare indicators as a way of simplifying the legal framework while allowing the flexibility to improve competitiveness of livestock producers. The simplified legislative framework is also likely to include common requirements on issues such as the handling of animals.

The second approach is to reinforce or better use actions that the Commission already performs. The Commission has therefore proposed measures such as: developing tools to strengthen compliance with legal requirements; improving international cooperation on animal welfare issues; providing consumers with better information; and performing studies where animal welfare appears to encounter the most problems.

The strategy will gradually come into effect from 2012 to 2015. Over the next year, key actions will include developing an implementation plan and enforcement actions on the grouping of sows and work on rules or guidelines on the protection of animals during transport.

A copy of the Communication is available by clicking here.

January 2012

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