FAO/GIEWS - Food Outlook No.1, February 1999

MEAT

• Bovine Meat
• Sheep and Goat Meat
• Pig Meat
• Poultry Meat
• Outlook for 1999

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Subdued import demand for meat combined with ample supplies resulted in steep declines of international prices in 1998. The fall accelerated in the last quarter, after the financial crash in the Russian Federation seriously compromised sales to that market. The price slide was particularly pronounced in the case of pig meat, which reached historical lows, reflecting excess supplies world-wide. While poultry meat was also traded at depressed price levels during most of the year, they fell especially sharply from September onwards when purchases by the Russian Federation virtually ceased. Prices of sheep and bovine meat also trended downward, influenced by keen competition from the other meats.

Global meat production and consumption rose by 2.5 percent in 1998 to 218 million tonnes. After several years of steady declines, production in the developed countries increased, albeit by only 1 percent, sustained by a large expansion in North America and, to a smaller extent, in Europe. However, production in the CIS continued to fall. Growth in the developing countries, at 3 percent, was half the level of the previous year, reflecting mainly a slow-down in China.

International trade in meat^1/ fell marginally in 1998 to 14.2 million tonnes, after a decade of steady expansion. The key factor underlying this development was the fall in imports by the Russian Federation, which had emerged as the second most important destination for meat after Japan. Trade in all meat categories, except sheep meat, was adversely affected by the contraction in import demand, although a strong increase in EC export subsidies helped to sustain flows in pig meat.

Bovine Meat

Global bovine meat output rose by less than 1 percent in 1998 to 57.7 million tonnes, supported by a moderate expansion in the developing countries. China’s production continued to increase in 1998, although, at 8 percent the growth was about half of that registered in the previous year. Notable expansions were also recorded in Egypt, India and Pakistan. By contrast, production fell in the Republic of Korea, Thailand and Indonesia with the ending of the cattle liquidation which had boosted output in 1997. In Argentina, Brazil and Uruguay, the sector's performance was constrained by a retention of animals for herd rebuilding. Among the developed countries, production rose to a new high in the United States, largely triggered by record carcass

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1/ In carcass weight equivalent, excluding trade in live animals and trade among EC and CIS countries.

weights. An expansion was also recorded by Canada and Australia while drought led to increased slaughter and output in New Zealand. Production was down in the EC where a cyclical fall was accentuated by the launching, since 1996, of several schemes to limit surpluses. Production in most eastern European countries and in the CIS continued to decline.

WORLD MEAT PRODUCTION 1/

SOURCE: FAO
Note: Total computed from unrounded data.
1/ In 1998, following the disclosure of the risults of a recent national agricultural census, China’s official estimates of meat production in 1996 and 1997 have been revised downward. FAO statistics have been adjusted accordingly.

International trade in bovine meat contracted slightly to 5.2 million tonnes in 1998, remaining close to the record level reached in 1997. Larger imports were made by the United States, to which beef supplies were increasingly diverted in reaction to weak demand from Asia. Purchases by Brazil, Mexico and Japan were also up, although in the latter country there was a noticeable shift towards lower priced cuts and qualities. By contrast, imports by Canada and the Republic of Korea dropped. As for exports, the United States increased its deliveries slightly in 1998, while Australia, Brazil, Canada and New Zealand recorded more substantial gains, in some cases assisted by a weakening of their currencies that enhanced their competitiveness. However, deliveries from Argentina and, to a smaller extent, Uruguay suffered from high domestic prices, while those from the EC declined in line with its URA commitments limiting subsidized exports.

WORLD MEAT EXPORTS 1/

SOURCE: FAO
| Note: Total computed from unrounded data.
1/ Includes meat (fresh, chilled, frozen prepared and canned) in carcass weight euivalent; excludes live animals, offals and EC intra-trade.

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Sheep and Goat Meat

Global production of sheep and goat meat rose by 3 percent to 11.1 million tonnes in 1998. The largest increases occurred in Asia, especially China, India and Pakistan where the sector benefited from rising demand, and in Africa, in particular Algeria and Nigeria. In the EC, sheep meat prices have been depressed during most of the year which has accelerated the cull of the breeding herd, resulting in a sizeable increase in production. The collapse in sheep skin prices, a by-product of sheep meat, put additional pressure on producers' returns. Australia and New Zealand registered some increases in production, reflecting high drought-induced slaughter at the beginning of the season. By contrast, the sheep meat sector in the United States continued to shrink. Output also fell in Argentina and Uruguay as resources were diverted towards cattle production.

Global trade in mutton and lamb in 1998 is estimated at 675 000 tonnes, some 10 000 tonnes above the previous year. Most of the increase was accounted for by larger imports by Mexico, Saudi Arabia and the United States. In the latter country, the rise in shipments triggered the safeguard under the US Trade Act, resulting in slightly higher tariffs since July 1998. Australia was the exporter that benefited the most from the expansion in trade, with sales by New Zealand remaining about the same as last year. Shipments from India were smaller.

Pig Meat

Reflecting large and widespread increases in the breeding herds in the last two years, world pig meat output grew 4 percent in 1998 to 84 million tonnes. Although this expansion coincided with record low producer prices, relatively cheap feed grains in 1998 relieved some of the downward pressure on the sector’s returns. Large increases in output were recorded especially by Brazil, Canada, China, Indonesia, the Republic of Korea, the United States and the EC. By contrast, production fell in the CIS and in Thailand.

Despite ample supplies available for export, international trade in pig meat stagnated at about 2.7 million tonnes in 1998. Purchases by the Russian Federation dropped, although the concession by the EC of a special refund of 700 ECU per tonne on sales to that market in November encouraged trade flows to rebound late in the year, thus limiting the extent of the contraction overall. The increased availability of domestic supplies resulted in smaller shipments to the Republic of Korea while a draw-down of stocks led to a 1 percent decline in imports by Japan. By contrast, shipments to Hong Kong SAR, the Chinese Province of Taiwan and Mexico rose. Exports from most eastern and central European countries, which depend critically on up-take by the Russian Federation, were depressed by the contraction of that market and by competition from EC’s exports. Canada also reduced shipments somewhat. By contrast, both the United States and the EC managed to raise exports by sharply reducing selling prices. The Republic of Korea also stepped up its deliveries, filling part of the gap left on the Japanese market by the withdrawal of the Chinese Province of Taiwan, prompted by the trade ban introduced in 1997 after the occurrence of foot-and-mouth disease.

Poultry Meat

Global poultry meat production is estimated to have risen by 2 percent in 1998 to 61 million tonnes. The sector generally benefited from low feed prices which helped sustain returns despite depressed poultry producer prices. The expansion was relatively small in the United States, the leading producer, dampened by the occurrence of Leukosis, a disease which raised bird mortality. Similarly, production increased much slower in China following several years of price declines. In the EC, the sector growth, at two percent, was rather modest, but there were notable increases in South Africa, Chile, Peru, Poland and Mexico. For the first time since the launching of the market reforms, the poultry sector showed signs of stabilization in the Russian Federation. However, output fell in Indonesia, hindered by high domestic feed prices caused by the currency devaluation and in Japan, where consumption continued to be depressed.

Global trade in poultry meat contracted in 1998 for the first time in the decade, falling by 1 percent to 5.4 million tonnes. The reduction was mainly brought about by the retreat of the Russian Federation from the international market during the last quarter of the year, which led to a sizeable drop in its imports. Weak domestic demand in China caused their purchases to be reduced and also led to a reduction in imports by Hong Kong SAR, part of which are normally re-exported to China. Imports by Japan stagnated. By contrast, those by Canada, Mexico and Argentina were driven by dynamic domestic consumption. Much of the brunt of the decline in world trade was born by the United States although Brazil and China also exported less, the latter under pressure of increased competition from Thailand. By contrast, the EC recorded a modest increase reflecting the good export performance during the first three quarters. Thailand’s exports also increased.

Outlook for 1999

Global meat production is forecast to expand by about 2 percent in 1999. Much of the increase is likely to be concentrated in the poultry and pig meat sectors, especially if they should continue to benefit from low feed prices. Indeed, despite poor returns in 1998, producers have given few signs of downsizing their operations. An increase in sheep and goat meat production is also anticipated. However, bovine meat production could stagnate with some important producing countries entering the negative phase of the production cycle.

There is considerable uncertainty regarding the prospects for international trade in meat in 1999. Preliminary estimates point to a relatively stable volume of aggregate meat flows, with some decline expected for beef, as exportable supplies could tighten in North America and Oceania and more than offset increased availabilities in South America. The expectation of reduced sheep meat output in New Zealand could also limit the volume of trade in mutton and lamb. Trade in poultry meat is expected to fall somewhat in the light of poor demand prospects in the Russian Federation. By contrast, trade in pig meat could reach a new high, sustained by abundant supplies in Brazil, Canada, the EC and the United States combined with more buoyant import demand by Japan. The increase is likely to be associated with very low prices at least for the first half of the year. This could give rise to a resumption of trade with the Russian Federation whose meat processing industry relies critically on pig meat imports. However, the configuration of meat trade this year will also hinge, to a large extent, on the launching of special measures by exporters. The EC has already approved the granting of food aid to the Russian Federation which envisages the delivery of 150 000 tonnes of beef and 100 000 tonnes of pig meat. Likewise, the United States recently announced concessional sales to the Russian Federation of poultry meat under the "Food for Peace" programme, in addition to a food aid package agreed in December which included 120 000 tonnes of beef and 100 000 tons of pork.

International prices for meat are expected to follow a mixed pattern in 1999. Prices for bovine meat might strengthen under a combination of smaller supplies and an expected recovery in import demand in Asian markets. Sheep meat prices could also come under upward pressure as export availabilities dwindle in New Zealand and production falls in major importing countries. By contrast, poultry and especially pig meat prices are likely to remain depressed as supplies in both importing and exporting countries are expected to remain ample, although this will depend to a large extent on the evolution of feed prices. With the current expectation of low grain quotations at least during the first six months of 1999, it might take some time before a reduction in poultry and pig meat production materializes and prices for these two meat categories recovers.

INTERNATIONAL MEAT PRICES

SOURCE: FAO 1/ U.S. export unit value.
2/ Australia, cif prices to the United States.
3/ Australia, fob prices.
4/ New Zealand, wholesale prices London.
5/ January-October 1998.
6/ January-November 1998.