Meat and Meat Products: Market Summary

Struggling with high feed prices and stagnating consumption, global meat production in 2012 is forecast to grow by less than two per cent to 302 million tonnes. As falling industry profitability has translated into modest output gains in the developed countries, most of the world expansion is likely to take place in the developing countries, which now account for 60 per cent of world output. Virtually all of the sector growth in 2012 is forecast to stem from the feed-dependent poultry and pig meat sectors, as gains in both bovine and sheep meat outputs are anticipated to be modest.

Concerns about the profitability of the meat sector have been compounded by a weakening of the growth of export markets, with trade expansion anticipated to slow down to two per cent from eight per cent in 2011. Global meat exports are expected to edge up by about 600 000 tonnes to 29.4 million tonnes in 2012, mainly sustained by increased poultry and pig meat flows and with much of the market expansion likely to be captured by developing countries, in particular Brazil and India.

Escalating feed prices and slowing meat production growth have pushed up international meat prices in late 2012, to levels approaching the highs attained in 2011. Accordingly, the FAO meat price index, which has jumped by five per cent since July 2012, averaged 174 points between January and October, which compares with 176 for the same period last year. Most of the recent increase in the meat price index reflect price gains for poultry and pig meat, which have soared by nine per cent and 12 per cent, respectively, since July.

Poultry Meat

Poultry production growth weakens in the face of high feed prices and falling profitability

High feed prices and stalling consumption growth are anticipated to weaken world poultry meat production growth to two per cent in 2012, from 3.4 per cent last year, reflecting a loss of momentum in both developing and developed countries. Global production is now forecast to rise by 2.2 million tonnes to 104.5 million metric tonnes, with two-thirds of the increase originating in Asia.

While chicken prices remains competitive and preferred by price-sensitive customers, difficulties in passing off higher feed costs have resulted in negative profit margins for the sector and lower year-to-year chick placements in the United States and Brazil, a situation expected to result in falling production in the two countries this year.

Prospects are more positive in the EU and the Russian Federation with output expanding to meet firm domestic demands. Increased investment and a consumer shift from pork to poultry is underpinning an expansion of output in China.

Production gains are also foreseen this year in India, Indonesia, Japan, Malaysia and Thailand, with oversupplies reported to be pressuring down prices and profitability in several of them. While 12 countries have registered outbreaks of avian influenza in 2012, persistent occurrences have curbed output in Viet Nam for the third successive year. This contrasts with Mexico where a mid-year outbreak of H7N1 affected production of eggs rather than broilers. Unlike in Brazil, the sector is expected to grow vigorously in Argentina, which has moved into position as the world's fifth largest poultry producer, reflecting past years government supported investment and competitive feed prices. In Saudi Arabia, subsidies on imported animal feed are supporting the expansion of poultry output, which would lift the country's rate of self-sufficiency since last year from 38 per cent to 46 per cent.

Poultry trade growth slows as global import demand stalls

With adequate supplies in many Asian markets translating into lower regional import demand, global poultry trade is anticipated to rise by only 2.4 per cent to 13 million tonnes in 2012. This would imply a severe loss of momentum compared with 2010 and 2011, when trade in poultry products rose by 6.7 per cent and 8.8 per cent, respectively.

Early year production expansion in Japan, the Republic of Korea and the Philippines are limiting imports into the region, despite larger shipments to Singapore and Viet Nam. Deliveries to the Russian Federation in 2012 are expected to rebound after four years of contraction, more as a result of a custom agreement with Ukraine and Belarus than by the recent accession of the country to the WTO.

Contrasting with the other regions, import growth for Africa as a whole is expected to remain sustained at around 12 per cent in 2012. This tendency reflects the positive effects of income growth in several African countries, such as Angola, Benin, Ghana and the Republic of the Congo, which are translating into strong domestic demand and double digit import gains. Even deliveries to South Africa are moving up despite this year's imposition of anti-dumping duties on Brazilian shipments - a decision which Brazil is disputing at the WTO. Imports by Egypt are also anticipated to surge to record levels, following outbreaks of avian influenza, combined with FMD-induced high beef prices. By contrast, meat imports by the Islamic Republic of Iran, including poultry, which is increasingly supplied by neighbouring Turkey, have been stricken by the impact of sanctions.

Low margins and declining output are expected to result in only a modest expansion of poultry exports by the United States and Brazil, which together supply two thirds of global trade. Meanwhile, shipments from Thailand to the EU are forecast to rise vigorously, due to competitive pricing and the EU lifting of an eight-year AI-induced ban on fresh/chilled product. Likewise, exports from Turkey, which have benefited for the last several years from a rising regional demand, especially from Iraq, are forecast to grow by over 20 per cent. Government investments are supporting record Argentine exports, particularly to regional markets, including Venezuela and Chile.

Further Reading You can view the full report by clicking here.

November 2012