USDA GAIN: Livestock and Products
05 March 2012
Cattle & Beef
A revision of official census and slaughter numbers in 2010 is the basis for higher estimates of the calf crop and ending inventories in 2011 and 2012. Slaughter is also revised to a higher level as a result of increased feed costs and high carcass prices throughout the EU. The 2011 cattle export figure has been adjusted upwards by more than 100,000 head as Turkey lowered the import tariff for live cattle countering the higher Turkish import tariffs for beef. The 2011 and 2012 beef export figures are adjusted to a lower level accordingly.
Swine & Pork
The 2011 and 2012 pig crop and slaughter figure is adjusted upwards based on higher than expected breeding efficiency, likely caused by the restructuring of the industry. Breeding and fattening is expected to continue on a high level until 2013, the year when the new environment and animal welfare regulations will be imposed. Due to good demand on the world market, most of this additional volume of pork produced is expected to be destined for exports.
Revision of the official 2010 census figure lifts the stock forecasts for 2011 and 2012.
Official census numbers for the cattle herd in December 2010 have been revised up by 444,000 head to 87.4 million head. In addition, slaughter was higher than anticipated due to new figures of backyard slaughtering of young cattle. These revisions are the basis for higher estimates of the calf crop and ending inventories in 2011 and 2012. Slaughter is also revised to a higher level as a result of the situation in the French dairy and beef sector. The French dairy sector experiences uncertainties with new milk contract conditions while the effect of the drought on the beef sector was more significant than previously foreseen. Also slaughter in the United Kingdom has been revised upwards as a consequence of increased feed costs (see graph below). Another factor for the elevated slaughter was the high carcass prices throughout the EU (see graph below). The outbreak of the Schmallenberg Virus (SBV) is not expected to significantly affect calf production or loss, in contrast to exports, in particular to Russia, Northern Africa and the Middle East. Despite the losses in these regions exports will still be 50,000 higher than previously forecast due to the new trade opening in Turkey. The 2011 export figure of live animals has been adjusted by more than 100,000 head as Turkey lowered the import tariff for live cattle countering the higher Turkish import tariffs for beef (see Beef Section).
Export figures are revised lower as Turkey lifted its import tariffs.
The higher than expected slaughter is not expected to result in higher domestic beef supply in 2011 and 2012. This can be explained by the higher portion of young cattle slaughtered, commercially as well as back yard. The import of beef, historically predominantly sourced from South America, remains limited. An important factor is weak EU demand as a result of high prices in combination with the waning buying power of European consumers. Consumption, in particular in France and Italy is declining more than anticipated. Since the Turkish government lowered their import tariffs on beef in May 2010, Turkey became an important market for EU beef exports. In July 2011, however, Turkey adjusted its import tariff to support more live cattle imports instead of beef. The 2011 and 2012 beef exports are adjusted to a lower level accordingly.
The pig crop and slaughter is adjusted higher based on increased breeding efficiency.
In 2011, the EU swine sector started with a significantly smaller breeding stock than a year before; the number of sows and covered sows were reduced by 2.2 percent and 3.2 percent respectively. Possibly this cut is a statistical inaccuracy of the census, but the reduction is reported for the majority of the Member States. Based on this cut of the breeding stock, the pig crop was expected to fall one percent in 2011. Elevated commercial slaughter figures in 2011 suggest, however, that the pig crop must have increased compared to 2010. This can be explained by a significant higher piglet sow ratio (see graph below), likely caused by the restructuring of the industry by which the most inefficient farmers terminated their breeding activities.
The relatively low slaughter weight of the animals, also suggest slaughter of animals at an earlier stage, and thus an acceleration of slaughter, with a significant cut of the stock. Based on this theory, elevated commercial slaughter is anticipated to cause ending inventories to be cut by 1.6 percent. A stronger cut than was foreseen in the Annual Report.
Elevated piglet prices and increased efficiency will keep production on a high level.
Piglet prices recovered strongly during the last quarter of 2011, and the first month of 2012. Based on this positive market circumstances, the pig crop and slaughter is adjusted upwards from the forecast in the Annual Report. This adjustment to higher production levels is only reported in the EU-15 and most pronounced in Spain, Germany, Denmark and France. According this scenario, breeding and fattening will continue at a high level until 2013, the year the new environment and animal welfare regulations will be imposed. Following this scenario of elevated slaughter, the ending inventories for the year 2012 are adjusted lower.
Despite higher pork production than expected, the declining trend remains intact.
Based on the adjustment of slaughter, pork production is estimated at a higher level for the year 2011 and 2012. The forecast
of a lower pork production in 2012 compared to 2011 remains however, intact. Due to good demand on the world market, most of this additional volume is expected to be destined for exports. Pork exporters are benefitting from the increased
demand for pork in particular Russia, South Korea, China and Hong Kong (see graph below). Also the low value of the Euro
and Danish Kroner against the currencies of important competitors (Brazil and Canada) and customers (Japan and China) is
Exports to South Korea might decline, as this market is rebuilding its stock after the Foot and Mouth Disease (FMD) outbreaks. EU exporters are most optimistic regarding exports to China, as more Member States are becoming eligible to export to this market (see Annual Report), despite growing competition from other exporters and Chinese domestic production. During 2011, EU exports of fresh and frozen pork nearly tripled to China, while exports to Hong Kong increased nearly forty percent.
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