Weekly Overview: UK Supermarket Pledges to Buy Local in Wake of Horsemeat Scandal

ANALYSIS - The UK's chicken companies look likely to benefit from the latest Europe-wide scandal over the substitution of horsemeat for beef as a leading supermarket has pledged to buy all its fresh chicken from the UK from July. It looks as if a rise in German organic egg production reported last week might not be real as widespread mislabelling of eggs as organic has been revealed this week. Forecasts for US agriculture at the USDA Outlook Forum have again been positive - but always with the caveat that the weather is 'normal' in the coming months.
calendar icon 28 February 2013
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In the wake of the on-going 'Horsemeat Scandal' across Europe, British supermarket chain, Tesco has pledged to source produce more UK products and to shorten the supply chain, reports Editor-in-Chief, Chris Harris, from the National Farmers Union conference in Birmingham this week.

Tesco CEO, Philip Clarke, told the conference: "As a first step, I am announcing that from July, all of our fresh chicken must come from UK farms. No exceptions. We will also move over time to ensure that all the chicken in all of our products - fresh or frozen - is from the British Isles.

"These commitments represent a genuine shift in how Tesco sources the products we sell. But we cannot do this without you," he told farmers.

For the year 2012, meat output in Germany was lower than the previous year - for the first time since 1997.

Poultry meat output was up by just 0.3 per cent from 2011 at 1.4 million tonnes. Broiler meat output was up 1.1 per cent at 863,000 tonnes. Turkey meat production, at 464,000 tonnes, was 0.7 per cent lower that the previous year. The production of meat from spent hens was down 4.5 per cent to 40,000 tonnes.

Also in Germany, new food-related scandal has been reported: it has been revealed that millions of eggs have been incorrectly labelled as organic. The scandal is centred in the state of Lower Saxony but other regions appear to be involved. Prosecutors are investigating around 200 German egg farmers.

Despite the historic drought, USDA chief economist, Dr Joseph Glauber, said at the 2013 USDA Outlook Conference that US agricultural exports will have another record-breaking year and the financial outlook for the agricultural sector remains solid. However, he acknowledged there are differences between sectors.

Livestock, dairy and poultry producers faced high feed costs for most of 2012 and high prices are likely to persist through much of 2013 until new crops become available in the fall, Dr Glauber noted.

"Feed ratios, which have generally been tight since 2007, tightened further in 2012 as feed costs rose relative to meat and dairy prices," he said. "While productivity gains have offset some of the decline in feed ratios, margins have been tight throughout the second half of 2012 and into 2013."

Strong pork and broiler exports helped keep margins higher than they would have been otherwise, but high feed costs have limited hog, poultry and dairy expansion. Prices for livestock, dairy and poultry products are all forecast up in 2013 but they face continued tight margins in 2013, at least until new crop feed grains and soybeans reach the market in the late summer and fall. Another year of below trend yields and high prices would likely result in further liquidation, according to Dr Glauber.

Finally, turning to bird flu news, Cambodia has reported another human death from the disease. As a result, neighbouring China and Viet Nam are on high alert, as are those authorities and poultry companies in the regions of Mexico, India and Nepal where the latest outbreaks have occurred.

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