March 18 – The current financial crisis will trigger a decline in EU meat consumption until the end of 2009, with falling demand set to put downward pressure on producer prices, said a report published by the European Commission.
However, meat consumption in the region is forecast to rebound by 2015 with the poultry sector seen as the major beneficiary. This will occur at the direct expense of the beef industry and by a slowing in the growth of the pig meat sector, argued the EC in its study on prospects for agricultural markets.
EU Meat Overview 2008 - 2015
Total meat consumption in the European Union is forecast to fall by 2.4% in 2008 and 2009 compared to 2007. However, this downward trend will reverse from 2010 onwards, leading to a 2.1% increase by 2015 compared to 2007.
Total meat consumption fell “considerably” to 85.1 kg/capita in 2008 a drop of 2.2% compared to 2007. EU experts said it was likely this was because of “high prices and low availabilities”.
A further fall could take place in the short term on the back of the economic downturn but the report said medium term prospects remained good with EU per capita consumption forecast to rise by 0.7% compared to 2007 to 87.6 kg.
Pig meat will remain the most popular meat among EU consumers – and is estimated to hold its current 50% share of per capita consumption. Poultry consumption is predicted to increase its share to 28% - a rise of 1.5%. This growth will come at the expense of beef and sheep meat whose share in total per capita consumption is likely to decline by 1.2% and 0.3% respectively.
EU meat exports to third countries in 2009 are predicted to decline due to the financial crisis and the resulting fall in world demand. This follows a 24% increase in 2008 which was, in part, fuelled by EU export refunds.
The declining value of the currency of a number of exporting countries will be a major reason for the export slump, as will the fall in value of the Russian Rouble, said the report. Uncertainty over exports to Russia could be compounded depending on future decision taken by authorities there on the status of veterinary approvals of EU meat plants.
In the medium term, the study estimated that the status of the EU as a net importer will strengthen with respect to poultry and beef, while exports in the pig meat sector are expected to fall, although at a slower rate.
The EU report suggests that weakening meat consumption and increasing difficulties surrounding exports because of the financial crisis “could put downward pressure on meat prices”.
However, it concludes: “Whereas the short-term outlook for meat markets appear relatively difficult due to the aforementioned lower domestic demand and weakening export prospects for EU meat products, the medium-term projections are more favourable driven by the recovery and continuous increase in domestic consumption for poultry and pig meat.”
Pig Meat Sector
The second half of 2008 saw EU’s pig sector enter into a period of recovery following the near crisis in 2007 and the first six months of 2008 when production costs outstripped pig producer prices.
Production of pig meat is forecast to rise by 1.7% by 2015 – compared to 2007. The EU report said this represents slower growth than over the past decade and is “due to competition from poultry” and firmer feed prices. However, compared to the 2005-2007 average, this translates into a production growth of 5%, said the report.
Pig meat exports in 2009 are likely to fall. This comes in stark contrast to last year when, buoyed by export refunds, shipments to third countries soared by 29% with markets in Russia, Ukraine and Asian particularly successful.
However, the current calendar year will see a marked reversal of fortune due to “lower production, unfavourable currency movements and the impact of global recession”, said the report.
In the medium term extra-EU exports are projected to decline gradually due to increasing competition from low-cost producing countries and a rise in consumption of 3.8% that will outstrip production growth.
Its competitive price tag compared to other meats plus a steady increase in consumer demand mean the medium term outlook for poultry is “positive”, with production set to increase by almost 9% by 2015.
The report said: “Competitive prices vis-à-vis other meats and strong consumer preference are projected to drive poultry production to 12.5 million tonnes by 2015 (+8.8%).”
Poultry consumption is predicted to leap by 9.4% within the same period.
Imports are projected to grow steadily in the medium term with the reverse trend set to hit exports, with the EU is set to return to being a net importer of poultry.
(All sources: European Commission)
Producer prices reached record highs last year thanks to tight supply both inside and outside the EU. Exports climbed noticeably in H1 2008 on the back of export refunds and a jump in shipments to Switzerland.
However, the report said Brazilian will gradually regain market share in the EU due to the worsening economic conditions and a fall in demand. This will lead to downward pressure on beef prices and a “significant decline in EU beef production over the short term”, said the EC study.
In the medium term, there will be a “modest but continuous decline in beef production” that is predicted to see output at 7.9 million tonnes by 2015 – a 4.3% fall compared to 2007. Consumption is also estimated to decline – but by a smaller margin of 2.7% over the same period. Consequently, imports should increase to fill the supply gap – reaching 608,000 tonnes by 2015.