EU beef production continues to decline

Degree of self-sufficiency below 100 percent

According to the provisional livestock census results from May 2003, 15 million cattle and calves were kept in the EU-79,5, around two percent less than in the previous year. With a corresponding drop in slaughtering, the degree of self-sufficiency in EU beef and veal production in 2003 is likely to fall below 25 percent for the first time in 100 years. And in 2004, the gap between generation and demand could widen further.

Production declining

In parallel with the cattle population, slaughtering in the EU also declined in 2003: In the first half of the year, a good ten million large cattle were slaughtered, which was 240.000 animals or 2,4 percent fewer than in the same period of the previous year. For the second half of 2003, too, beef production is expected to be lower than in 2003. The forecast committee at the EU Commission assumes that the EU net production of beef and veal this year will be 7,3 million tons, two percent below the previous year's result. Such a low level of production was last seen in Europe 20 years ago - but at that time the community only consisted of ten member countries!

Gross domestic production is also expected to decrease this year – by 2,8 percent to 7,36 million tons.

Outlook 2004

If one summarizes the assessment of the members of the forecast committee, then the decline in production in the EU will weaken in 2004. Overall, gross domestic production should be around 7,3 million tons, which would correspond to a drop of around one percent compared to 2003. Net production should only be slightly below the previous year's level. However, the change in the OTM system in Great Britain, where previously all animals over 30 months old were destroyed, is not yet included in this calculation. It should also be borne in mind that the possible end of the slaughter premiums at the beginning of 2005 could lead to a shift in production to 2004. It is feared that many producers will still want to market their animals in 2004 in order to collect the premium. A temporary oversupply and price pressure could be the result if no transitional arrangement is made.

EU consumption in 2004 is expected to be around the previous year's level, possibly slightly higher.

deficit grows

If the supply and consumption forecasts are confirmed, then the supply gap in the EU will continue to grow in 2004. An available net production of 7,24 million tons would be compared to a consumption of 7,43 million tons, so that the import requirement could rise to 185.000 tons - without the production-enhancing effect of the changed OTM system and the agricultural reform. In addition, stocks of intervention meat are no longer available in 2004, and stocks of cow meat from the special purchase program have also dwindled noticeably.

Cautious price expectation

Because the consumption of beef and veal in the EU in 2004 is likely to be higher than production, one should actually assume fixed prices in the coming year. However, the members of the forecasting committee were rather cautious in this respect, not least because the growing beef imports from South America are having an increasing impact on the EU price level. In the first quarter of 2004, a price level of EUR 3 per kilogram slaughter weight (cold) is expected for young bulls in the R2,63 trading class; a year earlier it had been 2,68 euros per kilogram. For 2004 as a whole, an average price of EUR 2,62 per kilogram is expected, which would only deviate insignificantly from the 2003 annual average.

Source: Bonn [ZmP]