FAO/GIEWS - Food Outlook No.4 - October 2001 p. 13

Gains in meat production and consumption concentrated in developing countries

Meat trade prospects sluggish as consumption falters

Mixed outlook in 2002

Meat and Meat Products

While the international meat market is witnessing a gradual recovery in beef demand, animal disease concerns continue to cast uncertainty about meat trade and price prospects in 2001. Global meat trade is expected to rise by less than 1 percent above the previous year's estimated volume. However, even this marginal increase, along with the meat price gains thus far in 2001, could be put in jeopardy by the first reported Asian case of bovine spongiform encephalopathy (BSE) announced in early September by Japan, the world's largest meat import market. This announcement might prompt consumer reaction away from beef in the region, with negative implications for global import demand and world prices.

Since the start of 2001, the FAO meat price index has moved up by more than 5 percent, rising from 79 to 85 points, mostly driven by an impressive 11 percent jump in the poultry prices. This is a pattern that should persist in the near term, as animal disease concerns contribute to a global move away from beef consumption towards other meats, particularly poultry. In addition, any deterioration in global economic conditions could also trigger a further slowdown in meat consumption and result in a shift in consumer preferences to lower-priced meat cuts and poultry, a phenomenon already evident in some importing countries.

Gains in meat production and consumption concentrated in developing countries

Meat production in 2001, estimated at 237 million tonnes, is up less than 2 percent from 2000 with an estimated 1 percent drop in beef production offset by expected growth of 3 percent and 2.2 percent, respectively, in the poultry and pigmeat sectors. Developing countries are expected to continue to expand their share of the global meat sector to 56 percent in 2001, as their production grows by 3.5 percent to 134 million tonnes. This is in stark contrast to developed countries where herd rebuilding and disease-induced animal culls are expected to lead to a 1 percent drop in overall meat production, mainly as a result of a substantial decline in beef output of 4 percent.

The strongest gains are anticipated in South America and Asia with annual regional meat output growth estimated to surpass 3 percent in 2001. In South America, FMD outbreaks in Argentina and Uruguay have limited output gains. In Brazil, however, the region's largest meat exporter and the world's 4th largest meat producer, output is set to expand nearly 5 percent in 2001, with exports as a share of production expected to surge from 10 percent to nearly 13 percent. In Asia, strong output gains, particularly of pig and poultry, are expected in China, Indonesia, the

Philippines, Thailand, and Viet Nam. Regional consumption gains, on the other hand, are slower than those of production, driven mainly by lucrative export opportunities for some countries, particularly for poultrymeat from China and Thailand.

Food safety concerns regarding meat, combined with economic slowdown in some countries, are limiting growth in global meat consumption in 2001 to 1.3 percent. The expected stagnation of global per capita meat consumption in 2001 at 38.4 kg per caput, however, masks extreme regional variability.

World Meat Production

Source: FAO Note: Total computed from unrounded data.

Relatively robust growth in developing countries is pushing up per caput averages from 27.7 kg to 28.2 kg; however, a nearly 2 percent growth in Asian meat consumption to 27.5 kg per caput contrasts with an estimated 2 percent decline in Africa to 14.1 kg. Meanwhile, consumers in developed countries, for the second year in a row, are set to reduce their meat utilization by over 1 percent, to an estimated 76.3 kg per caput in 2001. This results from lower beef consumption, as slow growth in meat availabilities, rising prices and BSE concerns lead to per caput declines from 23.2 kg in 1999 to 22.4 kg in 2000 and to an estimated 21.7 kg in 2001.

Meat trade prospects sluggish as consumption falters

Meat importers, bound by animal disease restrictions limiting product sourcing, are scrambling to identify alternative meat product suppliers in 2001, thus bidding up product prices from disease-free regions. These factors, in the context of only slow growth of supply availabilities in 2001, are expected to limit meat trade to 17 million tonnes, only about half a percent from the previous year. Thus 2001 will mark the slowest meat trade gains in 15 years, in stark contrast to the 6 percent average annual gain over the past five years. Meanwhile, the composition of meat trade has continued to change, with poultry's share of global trade surging to an estimated 44 percent in 2001, up from 41 percent in 1999. Furthermore, meat suppliers are changing as developing countries move to expand meat exports by nearly 8 percent in 2001 in response to the more than 2 percent decline expected in developed countries.

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.

In contrast to favourable trade prospects for poultry meat, import demand for both bovine and pigmeat is expected to decline. A 1 percent decline in global consumption of bovine meat in 2001 is contributing to an estimated 4 percent drop in bovine meat exports to 5.2 million tonnes. Beef import demand is estimated down in all regions, except North America where lower domestic beef supply is stimulating demand for imports. Despite expectations of fairly robust pigmeat consumption in 2001, imports by Asia, the recipient of more than half of world pigmeat imports, are expected to fall by an estimated 5 percent. Consequently, despite higher imports by some countries such as Mexico and Canada, global pigmeat trade is likely to stumble marginally in 2001. Japan's imposition of an import safeguard which raises the average import price for pigmeat - authorized when import levels exceed certain levels - should lead to declining deliveries in the last half of the year. Excess pigmeat supplies in the Republic of Korea, as a result of an FMD outbreak in early 2000, are reducing import demand, while deliveries to Russia, the second largest pigmeat market, remain constrained by high domestic prices in the EC, their traditional supplier of preferred meat cuts for processing. Lower red meat supplies in this market has induced strong demand for lower-priced poultry products, pushing up global poultry trade to 7.5 million tonnes, up 4 percent over 2000. Meanwhile, volume of trade in ovine meat is expected to increase only by 1 percent due to tightening supplies in Oceania. This is despite strong demand from Europe and the immanent lifting by the United States of its restrictions on Australian and New Zealand lamb in response to a lost WTO appeal.

Constrained supply availabilities in developed countries are leading to a estimated 1 percent drop in meat shipments in 2001, allowing developing countries to increase their share of international meat exports to 30 percent, up from 28 percent in 2000. The inability of

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/ January-July. 6/ January-September. 7/ January-August

the EC, the world's second largest meat exporter, to move meat to many markets in 2001 due to animal disease concerns and escalating domestic prices for poultry and pigmeat, has led to an estimated 13 percent drop in shipments. While supply constraints and rising export demand for disease free meat products have pushed up domestic prices in the traditional meat exporting countries such as the United States, Australia, and Canada, these markets have moved to only partially fill the market gaps left by the EC. Favourable export prospects for Brazil, which is expected to increase meat shipments by nearly 30 percent in 2001, is in part due to a nearly 40 percent currency devaluation since early 2001. Meanwhile, in Asia, India and Thailand have increased their respective shipments of bovine and poultry meat. China, despite the short-lived ban on chicken shipments to both the Republic of Korea and Japan, its largest market, is also expected to register export gains in 2001.

Mixed outlook in 2002

Supply shortages in the beef market, as major beef exporters finally show tentative signs of herd rebuilding, raise expectations of continued strength in international beef prices in 2002. However, as market disruptions due to animal diseases stabilize in 2002,

particularly in Europe, some of the price pressure induced by strong demand by consumers around the world for alternatives to EC beef may abate. Certainly, stabilizing consumption and prices in the EC, as well as prospects for higher EC meat exports in 2002, may limit gains in international meat prices. However, other traditional meat exporters, such as Argentina and Uruguay will still face difficulties in exporting as long as they lack the certification of FMD-free vaccination status from the World Animal Health Organization.

Meanwhile, favourable producer returns for the pig and poultry meat sectors in 2001, particularly in North America and Europe, combined with expectations of continued weak feed prices, could lead to an expansion in output in 2002, thus curbing the upward pressure on meat prices in 2002. By contrast, in the sheep meat market, limits on supply availabilities in Australia and New Zealand and robust import demand from Europe and the United States are the key factors supporting strong prices for both lamb and mutton. Critical to the outlook for international meat markets in 2002 will be the global response to the recent discovery of the first reported BSE case in Asia. In addition, prospects for stronger demand and prices could be potentially compromised by deteriorating economic conditions around the globe.