Latest developments of beef production in the EU Mark Topliff Senior Analyst AHDB Market Intelligence Brisbane June 2010
Overview of EU cattle sector
Background Over 24 million dairy cows and over 12 million beef cows 60% of EU beef originates from the dairy herd Males 46% Nearly 1/3 of calves from dairy herd fattened as veal Share of cattle slaughterings Veal 10% Females 44%
Main EU beef producers Net production - tonnes EU-27 8.0 m 1. France 1.5 m 2. Germany 1.2 m 3. Italy 1.1 m 4. UK 0.8 m 5. Spain 0.7 m Source: Eurostat
Diversity of beef production systems Grasslands 23% dairy cows 34% suckler cows 33% sheep Distribution of areas and animals per zone Nordic 4% dairy cows Grasslands and maize 11% dairy cows 3% suckler cows Crops 5% dairy cows 4% suckler cows Forage crops and livestock 26% dairy cows 18% suckler cows Crops and livestock 14% dairy cows 10% suckler cows Mountain 11% dairy cows 13% suckler cows Mediterranean 17% suckler cows 48% sheep
EU dairy cow herd declining, suckler herd stable Thousand head 35,000 30,000 25,000 Dairy herd 20,000 15,000 Suckler herd 10,000 5,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: European Commission
Recent influences on production and supply?
Influences on supply and production in the EU Mid term CAP reform implementation Dairy market prospects Disease - Bluetongue Cereal market fluctuations and costs of production Farm structural issues Trade restrictions and competitiveness
Different implementation of Common Agriculture Policy reform FRANCE GERMANY IRELAND Partial coupling Suckler Cow and Slaughter premium + Single Farm Payment Full Decoupling + Regional Farm payment Full Decoupling + Historical Single Farm payment
EU Common Agricultural Policy implementation Decoupling implementation Beef Production and Suckler cows ES AT BE NMS UK GR LX IT IE FR PO NL DK FI SE DE ES FR NMS UK GR ATBE PO NL LX IT DK IE DE SE FI Full decoupling 54% beef production decoupled 41% sucklers cows decoupled Source Eurostat, agra-europe, 2004
Dairy market - EU average milk price Euros per 100kgs 45 40 35 30 25 20 15 10 5 0 2010/2005 price change -4% Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Source: LTO/AHDB Market Intelligence
Bluetongue
UK Animal feed price index Index (2000 = 100) 180 160 140 120 100 80 60 40 20 0 2003 2004 2005 2006 2007 2008 2009 Source: Defra
09/05/2010 EU beef farmgate price Euros per 100 kg carcase wt 400 350 300 250 200 150 Little change in real terms in last 5 years Young Bulls Steers Cows Source: Eurostat 09/01/2005 09/05/2005 09/09/2005 09/01/2006 09/05/2006 09/09/2006 09/01/2007 09/05/2007 09/09/2007 09/01/2008 09/05/2008 09/09/2008 09/01/2009 09/05/2009 09/09/2009 09/01/2010
Costs of production in a French suckler cow and finishing system Unit = / 100 kg live weight 300 270 / 100 kg 250 65 200 50 150 Costs Factor cost Depreciation Operating costs Returns Beef market return 100 50 155 185 Charolais cows finishing bulls and heifers Costs of production Returns Source French Livestock Institute
Structural issues Average age of farmers is high 50s Lack of new entrants/skilled labour coming into industry Low incomes has meant low investment
EU foreign trade declined in last 5 years 000 tonnes cwe (beef & live animals) 600 500 400 300 Main import sources Brazil 35% Argentina 28% Uruguay 18% Australia 4% 200 100 0 Exports Imports 2005 2006 2007 2008 2009 Main export markets Russia, Croatia, Switzerland, Ivory Coast Source: EU Commission
Impact on production and demand
Decline in slaughterings and production 000 tonnes production Production (left scale) 000 head slaughterings 8,500 Slaughterings (right scale) 32,000 8,000 7,500 7,000 6,500 6,000 30,000 28,000 26,000 24,000 Since 2000 Slaughterings -12% Production -4% 5,500 22,000 5,000 2005 2006 2007 2008 2009 20,000 Source: EUROSTAT
Increasing carcase weights Kg carcase weight (all cattle) 285 280 275 270 265 260 255 250 245 240 2000 2001 2002 2003 2004 2005 2006 2007 2008 Weights increased by 8% or 19kg since 2000 Better breeding Desire to increase weight of animal and value Better beef prices = increased feed Source: EUROSTAT
Slow long term beef & veal production decline in France & Italy 000 tonnes cwe 1,800 1,600 1,400 1,200 1,000 800 France Germany Italy UK Spain 600 400 2004 2005 2006 2007 2008 Source: EUROSTAT
What about demand? Beef and veal consumption - tonnes EU-27 8.2 m 1. France 1.6 m 2. Italy 1.4 m 3. UK 1.2 m 4. Germany 1.0 m 5. Spain 0.6 m Source: Eurostat
EU meat consumption dominated by pigmeat 45 000 EU 15 EU 25 EU 27 40 000 35 000 30 000 25 000 20 000 15 000 10 000 5 000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 '000 t cwe 2007 2008 2009 2010 Sheep Poultry Pigmeat Beef & veal Source: Eurostat
Per-capita consumption France Denmark Sweden Italy Ireland UK Netherlands Belgium Austria Finland Malta EU-27 Portugal Slovenia Greece Kg beef per capita 26 26 24 23 22 20 19 19 18 18 17 17 16 16 15 Meat consumption (kg / capita) 100 90 80 70 60 50 40 30 20 10 0 Long term decline in beef, sheepmeat consumption 1998 1999 Total meat consumption per capita = 85 kg Pigmeat = 42 kg Beef = 17 kg 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sheep Poultry Beef & veal Pigmeat
The next 5 years
Future issues for the European Union Common Agricultural Policy reform Current system survives until 2013 Input prices Rising costs Economics Returns not covering costs of production Disease Restrictions add burden and economic impact Environmental impact of beef production Emissions, carbon footprint
Production to decline, consumption remain stable to 2015 000 tonnes 9,000 Production Consumption 8,386 8,429 8,433 8,430 8,500 8,404 8,403 8,400 8,065 8,041 7,973 7,914 8,000 7,869 7,871 7,855 7,500 7,000 6,500 6,000 To 2015 Production forecast to fall largely due to dairy herd changes Consumption to remain relatively stable 5,500 5,000 2009 2010 2011 2012 2013 2014 2015 Source: EU Commission
Which if any of the following actions would you personally be prepared to take in order to reduce your own CO2 emissions? Reduce meat consumption Recycle more Use lower energy light bulbs Reduce Car Mileage Increase use of public transport Reduce overseas holidays Not prepared to take any 0 10 20 30 40 50 60 70 80 90 % Source: AHDB/You Gov, March 2010
The answer to the emissions problem Thank you for your attention! 29