Firm import demand from Asia, as well as herd rebuilding in North America support stronger meat prices, with beef prices rising to record levels. Poultry overtakes pork to become the most consumed meat product over the Outlook period.
FAOs Meat Price Index, a measure of global meat prices, has remained at historically high levels since 2011. It currently stands some 90% higher than ten years earlier, reflecting the impact of higher feed costs, which more than doubled over the decade. Though a rapid fall of feed costs in 2013 has set the stage for renewed profitability in the meat sector, supply growth is hampered by tighter sanitary and environmental regulations, and sustained costs of energy, water and labour. The structure of world meat trade is evolving due to shifts in the size and location of demand. Market growth is underpinned by higher demand from emerging regions, particularly from rising incomes, population growth and urbanisation, while the location of demand is reshaped by falling or stagnant demand in many OECD countries.
Global meat production rose just over 1% in 2013, led by growth in pig and sheep meat, but slower growth in bovine meat and poultry. Growth in poultry meat production, at 0.5% was the slowest in at least the last twenty years. It reflects not only the impact of high feed prices which persisted in the first half of the year, but also falling production in China, following consumer reaction to its H7N9 avian influenza outbreak. The United States and Canada have been coping with an outbreak of the Porcine Epidemic Diarrhoea virus (PEDv), which has also reduced pigmeat supplies.
Meat trade has stagnated in the past three years at around 30 Mt. This outcome stems from higher prices that limit demand growth in emerging countries, many of which are net importers of various meat products. In 2013, higher imports of bovine and sheep meats were somewhat offset by lower pig and poultry meat imports - particularly from the Russian Federation, as higher domestic production lowered import demand from this typically large meat importer.
A number of current issues, enumerated below, may impact the medium-term market outlook. The first of these is the situation in the North American, and particularly the bovine, meat market. A confluence of factors, such as higher productivity, higher feed costs, disease related issues and the occurrences of droughts, resulted in the North American beef cow herd declining since 2005. Estimates of the United States cow herd in January 2014 indicate the smallest inventory in decades. The recent decline in feed costs, combined with short supplies, has pushed US fed beef prices to record levels, and a herd rebuilding process appears to have started. Conditions in the United States have a significant impact on global bovine markets, and particularly on the Pacific market where it trades. A second issue is linked to the impact disease outbreaks in major meat markets, in particular PEDv in North America and avian influenza in Asia will have in the next years. The third issue relates to the duration of the sharp increase in net meat imports from China. Though most of increased trade can be attributed to the avian influenza H7N9 outbreak in the case of poultry meat, imports of bovine meat, pig meat and sheep meat have all increased in recent years, pointing to a trend increase that would have important implications for global meat markets.
Figure a. World prices in nominal terms, USD/c.w.e or r.t.c1
Figure b. World prices in real terms, USD/c.w.e or r.t.c1, 2
1) US Choice steers, 1 100-1 300 lb dressed weight, Nebraska. New Zealand lamb schedule price dressed weight, all grade average. US Barrows and gilts, No. 1-3, 230-250 lb dressed weight, Iowa/South Minnesota. Brazil average chicken producer price ready to cook.
2) c.w.e. is carcass weight equivalent, r.t.c is ready to cook equivalent.
Source: OECD and FAO Secretariats.