Food Outlook Global Market Analysis

By the Food and Agricultural Organisation (of the United Nations). Rebounding demand together with tight supplies and rising production costs sustain meat prices in 2007.
calendar icon 17 December 2007
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Prices

FAO's meat price index recovered from the low value of 112 in March 2006 to 123 in August 2007 (1998-2000=100), reflecting higher prices for all the three major groups of meat, i.e. bovine, pig and poultry meat. With increased costs of production in major producing countries, the rise in prices can be expected to continue. In August, beef prices were almost 6 percent above year earlier levels, sustained by a strong import demand and limited export supplies, especially in Australia. Despite a slight tendency for pigmeat prices to firm over the year, by August 2007 the FAO's pigmeat price index stood at only 99 points; up from 96 in August 2006. Much of the growth reflected developments in China where low domestic supplies have converted the country from a net exporter to a net importer. Currently, the main source of the increase in FAO's global pigmeat index is a gain of around 12 percent in the wholesale price of pork loins from the United States between January and August of 2007. On the supply side, the price pattern was also influenced by rising feed and energy costs. From January to August 2007, average poultry export prices in Brazil and the United States had increased by 21 and 30 percent, respectively, compared with the same period in 2006. The export price strength largely reflects the continued recovery of global poultry import demand in 2007, despite a recurrence of avian influenza in different parts of the world and sharply higher feed and energy costs. These specific market developments were captured in the FAO poultry price index, which strengthened considerably since January, reaching 136 points in August 2007, the highest level observed in the last ten years.



Table 8. World meat markets at a glance
  2005 2006 estim. 2007 f'cast Change: 2007 over 2006
  million tonnes %
WORLD BALANCE        
Production 269.3 275.7 278.3 1.0
Bovine meat 64.5 66.2 67.1 1.3
Poultry 82.9 83.7 86.2 3.0
Pigmeat 103.7 106.9 105.8 -1.0
Ovine meat 12.9 13.6 13.8 2.1
Trade 20.6 21.1 21.4 1.5
Bovine meat 6.6 6.8 7.0 2.5
Poultry 8.2 8.1 8.2 1.3
Pigmeat 4.8 5.0 5.0 0.7
Ovine meat 0.8 0.8 0.8 -0.3
   
SUPPLY AND DEMAND INDICATORS  
Per caput food consumption:        
World kg/year 39.5 40.0 40.0 0.0
Developed kg/year 58.6 59.0 59.3 0.6
Developing kg/year 31.0 31.6 31.6 -0.1
           
FAO Price Index (1998-2000=100) 121 115 1201  
1 Jan-Aug 2007

BOVINE MEAT

Strong expansions in Asia and South America sustain global bovine meat production despite higher feed costs, poor weather conditions and herd rebuilding in North America

Global bovine meat output in 2007 is currently projected at 67 million tonnes, 1.3 percent above last year. All of the increase will arise from larger production in developing countries now set to expand by 3.2 percent to 37.5 million tonnes. This will more than offset an anticipated contraction of 1 percent in bovine meat production in developed countries. In North America, bovine meat production is forecast to decline by 0.7 percent. In the United States, the expected fall would result from a retention of heifers for herd rebuilding and lower slaughter weights, due to a combination of poor pasture conditions and reduced grain feeding. Likewise, lower domestic slaughter numbers are projected for Canada, where the herd is contracting due to unprofitable conditions associated with higher feed costs and an appreciated exchange rate. In South America, Argentina's production is forecast to increase by 7 percent, triggered by poor pasture conditions and policy measures2/ that have stimulated slaughtering. Production in Brazil, one of the most competitive world suppliers, is growing more slowly than in the recent past because of a reduced animal inventory. An amplified but similar trend in inventories applies to Uruguay, which also faces shortages of replacement cattle. Bovine meat production in the European Union remains on a downward trend, reflecting the structural reduction of the dual dairy herd, which is constrained by milk production quotas and rising yields. The decline also reflects the impact of the ongoing decoupling of government support from production. Recent outbreaks of Foot-and-Mouth and Bluetongue diseases will also negatively affect the output in the European Union. The continuing drought in Australia has influenced the profitability in the sector and lowered meat production. However, should a herd liquidation process be initiated before the end of the year, production may rebound in 2007. With New Zealand's sustained expansion of the dairy herd, which continues to represent a large share of beef production, a decrease in output is anticipated this year. China's production is forecast to increase by nearly 5 percent, reflecting a steady herd expansion, improved genetics and feeding practices, as well as continued strong government support. Bovine meat output is likely to increase also in India and Pakistan, in response to growing domestic demand and expanding dairy industries.

International trade in bovine meat for 2007 is forecast at 7.0 million tonnes, up 2.5 percent over 2006, as the market continues to recover from the shock caused by the Bovine Spongiform Encephalopathy (BSE) incidents in North America and the resulting import bans, which are being progressively lifted. Among the major import markets, shipments to Japan are set to rise by 4 percent, largely reflecting larger purchases from Australia and the United States, fostered by a disease-induced shift of domestic demand from poultry to other meats. Improved access following the implementation of free trade agreements is expected to boost imports to the Republic of Korea. Purchases by the United States, the world largest importer, are also set to rise by 5 percent, due to revised import regulations of products from animals over 30 months old. By contrast, imports of beef into the EU-27 have declined, reflecting a partial ban on beef import from Brazil together with a stagnating domestic demand. Imports to the Russian Federation are likely to continue rising, to meet a growing demand in the wake of falling production.

Turning to bovine meat export, shipments from Brazil have soared recently, replacing Argentina's and Uruguay's limited export volumes. Exports of buffalo meat by India continues to increase rapidly in 2007, supported by growing investment in the sector and strong import demand from Malaysia, the Philippines and countries in the Near East. On the other hand, the strong Euro and a high internal price continue to depress exports from the European Union. Canada's beef shipments are also expected to fall, negatively affected by the introduction in the United States, its major market, of Country of Origin Labelling legislation.

November 2007

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