Meat and dairy: demand up, supplies tight

Related tags Dairy products Milk Eu

The demand outlook for the EU's meat and dairy processors is
increasingly positive, but with tight supplies processors will have
to increasingly rely on more expensive sources, reports Ahmed

For the first time in 20 years consumption of beef and veal surpassed EU production in 2003 and is expected to grow further by 2012, according to a forecast report by the EuropeanCommission​.

As more milk is used for the production of cheese and other high value added dairy products, the supply for other uses will become tight during the forecast period to 2012, according to theprojections.

In the meat market EU food processors margins are being substantially hurt by the rising cost of supplies and other inputs this year. Rocketing energy costs have eaten into the margins ofboth feed manufacturers and meat processors, leading them to warn of higher prices.

The Commission finds that the EU meat sector is back to a more normal situation after the extreme market conditions of the past few years, during which it was hit by the second bovine spongiformencephalopathy (BSE) scare, a foot and mouth disease outbreak in 2001 and avian flu in 2003.

Meanwhile overall meat consumption in the EU is projected to increase to about 89 kg per person by 2012 from 87.4 kg in 2004 . Pig meat, with a share of about 50 per cent of the market, is by farthe most preferred meat by EU consumers, followed by poultry, with a 27 per cent share of the market.

Poultry consumption overtook beef and veal in 1996.

The report forecasts beef and veal production will decrease to around 7.6m tonnes by 2012, in line with the structural reduction of the bloc's dairy herd and the impact of the introduction of thesingle farm payment.

A tight domestic supply and a steady demand means food processors will have to rely on more imports entering at full duty, notably from South America.

Pig and poultry production and consumption are expected to keep growing over the medium term, though at a slower pace than in the past decade, with increased trade flows between the newest memberstates and the 15 founders.

Sheep and goat production and per capita consumption are projected to decrease as part of a long-term trend.

After the sharp fall of recorded in 2004, EU-25 production of butter and skimmed milk powder is projected to continue to decrease over the medium term, as more milk is used for the production ofcheese and other high value added dairy products.

Cheese production and consumption are expected to maintain their sustained growth after the slowdown observed in 2002, attributed to the gradual rebound of economic growth.

These projections result in an overall increase in domestic milk demand in the form of dairy products. As supply remains limited by quotas, butter and skimmed milk power exporters will have tolimit their growth. Increases in cheese exports will also be limited, the Commission projects.

Milk production in the EU-25 is projected to increase slightly over the medium term, in line with quota increases, to reach the level of 145m tonnes by 2012. Production in the new member states,which account for about 15 per cent of total EU supplies, is projected to remain stable at about 22m tonnes a year.

Increasing deliveries to dairies are in line with higher quotas, but are offset by the reduction in subsistence milk production. Production of butter in the new member states could display someshort-term growth in response to price increases towards EU levels.

By contrast international meat markets, which are currently disrupted by trade restrictions following animal diseases, are projected to expand in production, consumption and trade. Internationalprices should show moderate strength.

Prospects for the EU's meat exports would mainly emerge from a favourable macro-economic environment of sustained income growth, notably in Asia and Latin America. World meat trade would increaseand prices remain firm over the medium term as growing consumption is mostly expected to take place in countries that are net importers.

World meat market prices are expected to ease somewhat after the surge linked to the absence of major exporters from the world markets due to animal diseases.

For the dairy industry international trade is expected to remain dominated by a strong expansion in global demand in the medium-term. The demand would reflect income growth in many regions of theworld and changes in consumer preferences towards dairy products as a meat substitute.

Population growth, changing diet towards more "western" life style, urbanisation and rising disposable income are forecast to stimulate the consumption of dairy products in many developingcountries, in particular in Asia and Latin America, triggering further price rises for dairy products over the medium term.

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