Meating the Market: Outlook and Issues

Nancy MorganCommodities and Trade

Division, FAO

Issues of Concern to Meat Market Participants

Disease Outbreaks

Food Safety

Protectionism

Liberalization

Exchange Rate Movements

Policy Developments Input Costs

Market Access

Long Term Market Prospects

Structural Change and Competitiveness

Technical and Sanitary Standards

An Overview of the Presentation

Trends in the global livestock sector

Factors influencing the global meat market in 2006

Impact of animal disease

Medium term outlook, issues/analysis

Challenges for the industry

World Meat Production and Trade, a historical perspective, 1990-2006

0

50

100

150

200

250

1990 1995 2000 2001 2002 2003 2004 2005 2006

Beef Pigmeat Poultry Ovine

Driven by Gains in Poultry/Pork Sectors

0

5

10

15

20

90 92 94 96 98 99 2000 2001 2002 2003 2004 2005 2006

Mill

ion

tonn

es

Beef Pork Poultry Meat Ovine

Trade Grows Faster than Production: Composition of Trade Changes

Accompanied byAnimals Disease Outbreaks

The 2006 Meat OutlookLimited meat consumption gains, with poultry down 1 percent

Disease induced price diverenges between the various meats

Import bans on poultry/South American beef/pigmeat leads to trade diversion

Meat trade is taking a hit, growing less than one percent

The context:The context:

Strong economic growthStrong economic growth

Rising feed pricesRising feed prices

Less exchange rate Less exchange rate volatilityvolatility

Animal disease concerns cloud market and price outlook in 2006

•Poultry consumption down 1 million tonnes from 2005•Prices drop by half in some markets-even in some exporting countries•Market bans, changing market structures….

potentally long term implications for investment in sector

AI moves westwardinto Europe-ME-Africa

Policies shaping the 2006 outlook

Import bans on poultry/South American beef/pigmeat—what are the Russians doing?

EU moves to set up TRQs on certain types of poultry cuts

Food safety issues: China’s zero tolerance for pathogens; impact on trade?

Increased imports by disease-affected developing countries

The key issue in 2006?

Impact of animal disease on consumption patterns and relative meat price movements

Animal disease/exchange rates movement influence trading patterns.....

BRAZIL’S MARKET SHARE: 24%US: 20 %EU: 12%

South America Meat Exports

010002000300040005000600070008000

2000 2001 2002 2003 2004 2005 2006

1000

tonn

es

Beef Pork Poultry

Share of World Trade:

Poultry: 14==>40%Pigmeat: 5==>18%Beef: 17==>44%

Total Meat: 13==>35%

Brazil’s meat exports to drop4 percent in 2006

75

80

85

90

95

100

105

110

115

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Months/years

Bas

e Pe

riod

1990

/92

Asian/Russiafinancial crisis

Animal disease

Animal disease increases price volatility

FMD/BSE crisis

Animal disease outbreaks result in unusual price movements…

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

2000

2001

2002

2003

2004

2005

2006

Inde

x:19

98-2

000

=1

Poultry Pigmeat Bovine

Cost of recent animal disease outbreaks

0

2

4

6

8

10

U.K. Netherlands Taiwan Uruguay U.K. Korea 1/ Japan 1/

US$

billi

on

IndirectDirect

$3.8

$2.3

$6.6

$.08

$9.2

$.433 $.015

1/ Indirect costs not available.

BSEBSE CFSCFSFMDFMD

COSIMO: COSIMO: FAOFAO’’ssCOMMODITY COMMODITY SIMULATION SIMULATION

MODELMODEL

plusplus

OECD AGLINK OECD AGLINK MODELMODEL

2.4

3.5

1.4

2.12.4

1.3

2.0 1.9 1.72.3

-1

1

3

5

Total Meat Bovine Pork Poultry Ovine

% c

hang

e pe

r ann

um 1996-2005 2006-2015

Meat Consumption Growth Slows

Per capita meat consumption gaps between OECD and Non OECD countries

0

10

20

30

40

50

60

70

80

1995 2005 2015 1995 2005 2015

Kg

per p

erso

n r.t

.w.

BEEF PORK POULTRY SHEEP

OECD Non OECD

3.5

8.6

5.1

3.73.7 3.73.6 3.42.6

1.70.4

3.2

0

2

4

6

8

10

World Developed NorthAmerica

Europe Developing Asia

% c

hang

e pe

r an

num 1996-2005 2006-2015

World Trade increases from 21 mmt to28 mmt

Developing country imports increases 10 mmt to 14mmt

Meat Trade: Where will the growth be?

Import Gains for Meats:Where will they originate?

-2000

0

2000

4000

6000

8000

1990-1995

1995-2000

2000-2005

2005-2015

1000

mm

t

LDC Other DevelopingTransitional Developed

4.2 mmt (66% imports):

Mexico: 500,000China: 650,000Korea: 360,000

Africa-700,000

6.3mmt

This Outlook Assumes NO Changes in:

Domestic policies

International Rules and Standards

No Doha Agreement.

What about protectionism and market liberalisation?

Animal disease outbreaks?

Issues of Concern to Meat Market Participants

Total Value of Production (at farm gate)=822 billionTotal Support Estimates: 378 billion (PSE 279)

Estimated Support to Livestock Sector: 102 billion

Beef/Veal: 34 billion Sheepmeat: 4.9 billion Pigmeat: 13 billion Poultry: 9.4 billion

Milk: 39 billion

Protectionism

Liberalization

Trade Liberalization: Meat MarketsIndicators Change

in World Price

Change in Exports

Major Beneficiaries

Beef 12%

Poultry 11%

Pigmeat 8%

Sheepmeat 16%

Trade Liberalization: Meat MarketsIndicators Change

in World Price

Change in Exports

Major Beneficiaries

Beef 12% 23%

Poultry 11% 40%

Pigmeat 8% 17%

Sheepmeat

16% 38%

Trade Liberalization: Meat MarketsIndicators Change

in World Price

Change in Exports

Major Beneficiaries

Beef 12% 23% Dvped: 2%Dvping: 74%

Poultry 11% 40% Dvped: 35%Dvping: 52%

Pigmeat 8% 17% Dvped: 2%Dvping: 53%

Sheepmeat

16% 38% Dvped: 2%Dvping: 74%

Impact of Further Outbreaks of AITable 1: Scenario 1 - Worldwide 10% Preference Shift Away From Poultry Consumption

World Developed Least

Developed Other

developing Production -5.8 -4.7 -5.5 -6.7 Consumption -5.8 -5.5 -6.2 -6.0 Imports -16.2 -8.0 -12.3 Exports -13.3 -7.7 na -18.9 International Prices: Poultry -6.7

Atlantic Pigmeat 14.9 Pacific Pigmeat 18.8

Atlantic Beef 15.8 Pacific Beef 10.7

Maize -3.2 Oilmeal -3.3

Notes: In this scenario the consumption preference shift away from poultry is re-allocated to other meats on a proportion basis using world consumption shares of 2004-05. An na value for LDCs results from the fact that exports from these countries are miminal.

Impact of Further Outbreaks of AIScenario 2b: AI outbreaks in the EU: 10% preference shift away from poultry

World EU Brazil US Developed Least

Developed Other

developing % change Production -1.0 -11.9 1.5 0.6 -3.4 0.9 1.0 Consumption -1.0 -6.6 -0.3 0.2 -1.7 -0.9 -0.4 Imports -0.4 0.0 0.0 3.0 -4.5 -8.5 Exports -3.2 -50 5.8 3.0 -12.3 na 5.8 Price: Poultry 1.2 -6.2 1.5 0.5 Pigmeat 1.5 11.8 -0.1 1.5 Beef 3.6 4.7 3.6 0.6 Notes: Applied to 2006 base projection. Assumes trade bans last 6 months. Results for annual data. Consumption preference shift is allocated to other meat products in proportion to 2006 consumption share. For the EU, the world reference prices used are the Pacific pigmeat prices and Atlantic beef prices.

Challenges for Global Meat Industry

Animal diseases and food safety concerns

SPS issues and barriers

Health issue awareness (hormones, GMO’s, Halal)

Product quality and safety are passwords to success

Growing number of exporters

Competition globally between meats

Traceability and labelling

Social concerns: Environmental and animal welfare

Symposia Announcement:

Market and Trade Dimensions of Avian Influenza Prevention and Control

(Tuesday, 14 November 2006)

Dairy Value Chains and Comparative Marketing Systems (Wednesday, 15 November 2006)

FAO Headquarters, Rome 14-15 November, 2006

Thank You

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Contact:Nancy MorganFAO, Meat Trade SpecialistNancy.Morgan@fao.orgPhone: 39-06-570-54528Fax: 39-06-570-54495FAO web site: www.fao.org