FAO/GIEWS - Food Outlook No.1 - February 2001 p. 10

Meat and Meat Products

• Bovine Meat
• Pigmeat
• Poultry Meat
• Sheep/Lamb
• Meat Outlook in 2001

After posting solid gains in 1999, international meat prices showed no decisive direction in 2000. Escalating pig prices during the first part of 2000, caused by supply reductions in major exporting countries, provided some upward price momentum; however, unexpectedly high cattle slaughter, especially in the United States, dampened the upward price movements in both beef and poultry meat during the latter part of the year. Sluggish price movements were also influenced by limited expansion in world import demand, with growth in international meat trade sharply below the strong gains recorded in 1999. Global meat trade in 2000 is estimated at 17 million tonnes, up less than 2 percent from 1999.

The global meat economy in 2000 was characterized by a slow-down in output growth, increased market disruptions and trade diversion in the second half of 2000 due to animal disease outbreaks in major exporting countries. Exporter competitiveness was also influenced by wide fluctuations of currency exchange rates and the reduced food aid and export subsidies. Animal disease outbreaks included incidence of foot-and-mouth disease (FMD) in Asia as well as the major export markets in South America and southern Africa, Rift Valley Fever in Eastern Africa and the Near East, swine fever in the United Kingdom and the Nipah swine virus in Malaysia. Food safety concerns re-emerged in Europe during late-2000 with increased evidence of bovine spongiform encephalopathy (BSE) in EC member countries previously considered free from the disease.

Consequently, global meat production rose less than 2 percent to 232.8 million tonnes, with developing countries further expanding their share of the total to 55 percent. The strongest gains were in Asia and South America, prompted in part by continued low feed prices and stronger economic growth which stimulated demand for livestock products. Per caput meat consumption in the two regions is estimated to have risen to 2 percent to 26.7 kg and 66.8 kg respectively. In aggregate, per caput meat consumption in developing countries moved up 2 percent to nearly 28 kg, while that in developed regions dropped by nearly 2 percent to 78 kg.

Bovine Meat

Expectations of herd rebuilding and lower output in the cattle sector in major producing and exporting countries did not materialize in 2000 and global output rose to 59.6 million tonnes, up 1 percent from 1999. Most of the output gains were registered in developing countries, particularly those in Asia and South America. Growth in developed regions dropped by 1 percent, as EC slaughter was cut back in response to uncertainty caused by the BSE crisis and the decade-long industry decline in CIS countries continued. Despite the mid-year FMD outbreaks in South America, more than half of the global production gains in 2000 were realized in this region, with Brazil, Argentina, Uruguay, and Chile all registering increased output. High meat prices in China encouraged slaughter, while in Indonesia increased live animal imports from Australia for feeding contributed to an almost 7 percent increase in production. Cattle producers in the Republic of Korea reduced cattle numbers and output in response to an FMD outbreak and prospects of market liberalization in 2001. Mexican output grew slowly due to prolonged drought, low profitability, overdue loans and tight credit. In Africa, beef output increased in the major producing countries of Egypt and South Africa, while erratic rainfall in the Horn of Africa and the some regions of the Near East induced high livestock losses due to drought and infectious diseases. In the developed regions, near record levels of heifer slaughtering in the United States prompted higher output, while production in both Australia and Canada was supported by higher carcass weights which more than compensated for lower slaughter numbers.

International Meat Prices

Source: FAO
1/ Chicken parts, United States export unit value.
2/ Frozen pork, United States export unit value.
3/ Manufacture cow beef, Australia, cif prices to the United States.
4/ Lamb frozen whole carcass, New Zealand, wholesale prices London.
5/ Estimated.
6/ January-November.

Disease-related market disruptions in the latter part of the year played an important role in keeping the volume of bovine meat trade unchanged at 5.5 million tonnes in 2000. Also contributing to dampened trade growth were the absence of food aid programmes and constrained use of export subsidies by the EC. In particular, deliveries to the Russian Federation, in the absence of these measures, dropped a precipitous 60 percent in 2000. Imports by other countries, however, grew sharply, especially in Japan, Mexico, and the United States - markets which account for more than 50 percent of global imports. The mid-year FMD outbreak in Japan had no noticeable effect on import demand. In the United States, the world's largest import market, higher prices for manufacturing grade meat prompted an 8 percent increase in imports. Meanwhile, shipments to Mexico, despite the application of compensatory duties for US beef, witnessed a double-digit increase. South American exports, while up year-on-year, slowed in late 2000 as a consequence of FMD outbreaks in the region's major exporting countries, e.g. Brazil, Argentina, and Uruguay. Further disruptions to the region's exports stemmed from a sharp drop in demand for bovine meat in Europe emanating from the BSE-related concerns. Trade disruptions were also evident in parts of Africa where trade flows of both live animals and meat were impeded by regional disease outbreaks. With EC shipments dropping an estimated 40 percent due to early year prices increases, low subsidy levels, and the late-year BSE concerns, Australian, Canada, and New Zealand exports, stimulated by weakening currencies, reached record levels.

World Meat Production

Source: FAO
Note: Total computed from unrounded data.

Pigmeat

Price-induced production declines in the major exporting regions of Europe and North America constrained global output gains to 1.5 percent in 2000. However, gains of nearly 4 percent in developing countries pushed pigmeat output to an estimated 91.2 million tonnes in 2000, with China, the world's largest producer, accounting for much of the increase. Low feed prices in China and a 10 percent rise in pork prices compared to 1999, maintained favourable producer margins and pushed up output by 4 percent to 41.6 million tonnes. Similarly, industries in Taiwan Province of China and the Philippines responded favourably to higher prices by increasing slaughter, while government support to the FMD-afflicted pork industry maintained output in the Republic of Korea. Developed regions witnessed a 2 percent slide in both output and per capita consumption in 2000, with producers in eastern European and CIS countries reducing output in response to high feed costs which encouraged slaughter of low-weight animals. In addition, the increasingly concentrated industries in the United States and the EC - together contributing 30 percent of global production and over half of world exports - finally responded to the low prices in late 1998 and 1999 by reducing farrowing, decreasing output by an estimated 2 and 1 percent, respectively. Expanded hog slaughter capacity, however, propelled Canadian output up by 7 percent.

The decade-long solid growth in pigmeat exports was disrupted in 2000, with shipments dropping by 2 percent to 3.2 million tonnes. The elimination of most EC export subsidies for pigmeat, combined with recovering domestic prices, resulted in the Russian Federation buyers scaling down purchases by an estimated 43 percent. Meanwhile, growth in Asian import demand slowed appreciably from 32 percent gains in 1999 to 3 percent in 2000. The mid-year FMD outbreak in the Republic of Korea, previously both a major exporter and importer of pigmeat, led to excess domestic supplies and an 18-percent drop in imports. Support to the sector, however, was generated by Japan and Malaysia. A recovery of South American demand led to strong import gains while, in Mexico, anti-dumping duties on United States live hogs stimulated a 16 percent jump in pigmeat imports. Declining output in the United States led to a nearly 23 percent import surge in 2000, mainly supplied by a rapidly expanding industry in Canada. In fact, Canada became the world's largest pigmeat exporter in 2000, due to soaring output and encouraged by the depreciating value of the Canadian dollar against the US dollar. Shipments from the United States, while up over the course of the year due to increased demand from Japan and Mexico, are not expected to recover to last year's level because of sluggish demand in the Russian Federation.

Poultry Meat

Strong output growth in developing countries, particularly Brazil, China and other Asian countries, is prompting an estimated 3 percent increase in global poultry meat production to 66.6 million tonnes in 2000. Although more than three-quarters of the production and consumption gains were realized by developing countries, average annual per caput consumption of 7.6 kg per person there still lags considerably behind that of developed regions at 23.3 kg per person. The strongest regional output gains (5 percent) are expected in South America where robust gains in Brazil, Chile and Peru have compensated for recession-induced output declines in Argentina and Venezuela. Industry profitability in Brazil in late 2000 was squeezed, however, by higher feed prices, aggravated by concerns regarding the use of genetically modified imported maize. In Asia, economic recovery and favourable margins are fuelling strong output gains, particularly in Indonesia, Vietnam, Thailand and Malaysia. In China, the world's second largest producer, annual output gains are expected to slow from the decade average of 15 percent to only 3 percent, with output standing at 11.6 million tonnes. In contrast to robust growth in developing regions, that in developed countries languished at 1 percent in 2000. Record meat production has pressured poultry prices lower in the United States, slowing chick placements with output estimated up only by 2.2 percent. Meanwhile, in the EC sluggish export growth and weak prices early in the year resulted in a 1 percent output decline in 2000. Output in the Russian Federation and the eastern European countries is estimated to have increased slightly; however, drought induced higher feed costs hamper industry profitability.

Economic recovery in Asia and the Russian Federation, combined with low poultry prices, induced an estimated 7 percent increase in trade to 6.1 million tonnes (excluding transshipments). The stabilization of the Russian Federation economy and lower tariffs for broiler meat in 2000 prompted an estimated 10 percent jump in imports to that market, which, in 1997, was the world's largest meat importer. Strong Asian buying stemmed from China, the Republic of Korea, and Singapore. Drought in some countries of the Near East, such as the Islamic Republic of Iran and Yemen, resulted in lower meat supplies and higher imports. Shipments to Angola continue to witness strong growth, as did deliveries to Mexico which saw a significant jump as growth in domestic output was constrained by an outbreak of Newcastle disease in the spring. In contrast, Argentina's introduction of a minimum price system for Brazilian imports resulted in a slide in 2000 import volumes. Strong competition among exporters characterize the international poultry market in 2000 with a 16 percent increase in Brazilian shipments constraining European shipments, particularly to the Middle East. The recent lifting of China's restriction on Brazilian imports, due to concerns about Newcastle disease, supported late-year exports, as did Brazil's competitive prices resulting from its weakening currency. United States exports are estimated up 8 percent, supported by robust demand from the Russian Federation, Mexico and Canada, while shipments from Thailand were up 10 percent due to strong demand from their traditional markets-Japan and the EC.

Sheep/Lamb

Global production and consumption of ovine meat rose 1.4 percent in 2000 to 11.4 million tonnes. Output in developed regions grew marginally in 2000 with gains in Australia and New Zealand, the two largest exporters, offset by declines in the Russian Federation, eastern European countries and the United States. Most of the output gains in 2000 were generated in developing countries, resulting in higher per caput consumption at 1.8 kg. Average per caput consumption in developed countries, by contrast, declined by 2 percent to 2.3 kg in 2000. Recovering from last year's drought, output in Argentina and Uruguay surged by 5-6 percent, while high prices in Mexico prompted an increase in production. Output growth in Asia slowed, with India, the Islamic Republic of Iran and Turkey registering gains of less than 1 percent. The growth in Chinese output slowed as well, as national average prices for sheep and goat meat weakened; however, a firm wool market is prompting increases in sheep inventories in the north of the country. Erratic rainfall and high feed prices in Africa's largest producer, the Sudan, is combining with a disease-induced ban by countries in the Arabian peninsula on imports of live animals to prompt Sudanese herd liquidation, inducing a three-fold drop in prices and incomes.

The world ovine meat market witnessed robust trade gains in 2000 with shipments estimated at 775 000 tonnes, an increase of nearly 12 percent compared to the previous year. Major import gains were registered in the EC, South Africa and the United States, despite the imposition of tariff-rate quotas (TRQ) in the latter. Uruguay has taken advantage of high United States lamb prices to increase exports four-fold to that market. Meanwhile, mutton demand from the Near East strengthened, causing higher imports of both meat and live animals, mainly from Australia and New Zealand where competitive prices stemmed from higher offtake and weakening currencies. Animal shipments from a number of African countries remain constrained due to bans related to the outbreak of Rift Valley Fever.

Meat Outlook in 2001

Continued slow growth in meat supplies is likely to characterize the world meat market in 2001, with global meat production expected to expand to 237.4 million tonnes, up by 2 percent. The output gains are likely to be concentrated in pigmeat and poultry meat sectors in North America as well as in middle-income developing countries in Asia and South America. A recovery in the beef sector will be hampered by progressive herd rebuilding and consumer concerns regarding BSE. Considerable uncertainty clouds the outlook for the EC meat sector as beef consumption drops, intervention stocks increase and prospects for cattle slaughter in 2001 hinge on testing results of the cattle aged over 30 months. Late-year price shifts in favour of pigmeat and poultry should serve to boost output in these sectors.

World Meat Exports ^1/

Source: FAO
Note: Total computed from unrounded data.
1/ Includes meat (fresh, chilled, frozen prepared and canned) in carcass weight equivalent; excludes live animals, offals and EC intra-trade.
2/ Includes transshipments from China, Hong Kong SAR and the Baltics.

Gains in international meat trade are expected to be around 2 percent, similar to last year but considerably less than the 5 percent annual average gains observed over the past five years. In Asia, slower growth is likely to stem from declining import demand for pork in the Republic of Korea and high stocks of frozen beef in both this market and Japan. Constrained by only slight gains in supply availabilities, meat shipments from developed regions will decline slightly with gains in North American shipments of pigmeat and poultry not offsetting sliding EC beef exports. The containment of the FMD outbreak in parts of South America should signal a resumption in beef sales in 2001, however, the trade outlook for the various meats and relative meat price movements, both in the EC and globally, hinge in part on consumer responses to BSE concerns.

Trade policy developments which could potentially influence trade prospects over the next few years include two recent WTO rulings: one on the beef marketing structure in the Republic of Korea and the other regarding US lamb TRQs. The Republic of Korea, in response to a ruling that their domestic regulations governing the import, distribution and retail sale of imported beef are inconsistent with the WTO regulations, is expected to introduce major reforms in its beef import and distribution regimes, which will coincide with the liberalization of the Korean beef market in 2001. Meanwhile, United States TRQ restrictions on lamb imports from New Zealand and Australia, implemented in July 1999, were found to violate WTO safeguard rules. The United States, however, may opt to appeal this decision. In Europe the "double-zero" option between the EC and most eastern European countries went into effect on 1 July, 2000. This provision allows for increased bilateral trade flows, especially for pork products, through higher quotas and zero in-quota tariffs and eliminates the use of export subsidies between participating countries.