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Beef Supply to Increase

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Mike

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Beef supply to increase, easing pressure in a tight market

By Ahmed ElAmin




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16/02/2006 - More supplies of beef and pork are expected to come on the market as the EU's as the reform to the Common Agricultural Policy (CAP) takes hold and export restrictions on the UK are eased, according to a forecast report on the bloc's livestock sector.

The report by the US Department of Agriculture (USDA) provides processors with an insight into the evolving sources and the potential costs of their supplies.

EU cattle prices reached record prices towards the end of 2005 as a result of tight supplies. This has led to a slight decrease in beef consumption. The USDA forecasts domestic beef consumption will increase again in 2006, while exports are expected to further decrease.

Cattle slaughter numbers and beef production in the EU are forecast to increase in 2006, mainly because of the end of the over-thirty-month scheme in the UK. As of 7 November 2005, the UK replaced a rule excluding animals over the age of thirty months from the human food supply with a the testing system used in the other EU countries.

This means older animals are now entering the food chain, subject to the rigorous testing scheme for mad cow disease " or bovine spongiform encephalopathy (BSE). In turn, the European Commission is expected to lift the ban on UK cattle from the bloc's wider market early this year.

The easing of the restriction is forecast to make an extra half-a-million extra cattle born after 1 August 1996 available for slaughter for human consumption, the USDA stated in its analysis of the European market.

The extra beef will relieve short supplies in the EU resulting from a reduction in beef imports from Brazil, resulting from the ban due to food-and-mouth disease in the South American country.

As a result of tight EU supplies, EU beef exports are expected to further decrease, the USDA forecasts.

The evolution of the market is being pushed by the full implementation of the CAP reform package by the EU member states. CAP is a system of agricultural subsidies available throughout the bloc.

Specialised beef production is concentrating and increasing in the southern part of Europe, where member states have kept suckler cow and slaughter CAP premiums coupled to production. The northern part of Europe is partly reducing its beef production and concentrating more on dairy production.

Dairy cow inventories continue their long-term decline as a result of increasing milk production efficiency, combined with the fixed milk production quota, the report stated.

Beef cow numbers were increased by 40,000 head compared to 2004, but this can't offset the decline in dairy cows.

The increase results mainly from an increase in beef cows in Portugal to exploit the extra 90,000 slaughter premium rights that were obtained in the CAP reform agreement.

Beef cow herds in Poland, the Czech Republic and Hungary are also expanding, as well as in the UK. A decrease in calf crop is the result of the
decline in cow inventories. This decrease in calf production was aggravated by a decrease in Portugal and Spain as a result of the extreme drought.

Cattle imports were stable, while live cattle exports, mainly to Lebanon and Algeria, decreased even more than previously anticipated. Intra EU cattle trade occurred from Portugal to Spain, as a result of the Portuguese drought, cows and calves traveled from Poland to the Netherlands for slaughter, primarily for veal production, while more Polish calves went to Italy for fattening and slaughter.

Meanwhile, pork production is increasing and is forecast to satisfy increasing demand from domestic consumers and export markets. Exports of
pigs and pork to Eastern and Central European markets are increasing significantly.

EU pork production is forecast to increase about one percent in 2006. The largest increases are expected in Germany and Poland. Pork imports are forecast to further decrease as a result of the higher EU production. EU pork exports are forecast to increase, with the EC estimating an increase of around three percent. European exports to Russia are expected to substitute for the decrease in Russian imports from Brazil.

Exports of the meat have almost doubled in 2005 and are forecast to maintain a high level in 2006, the USDA sated. EU domestic consumption of pork is also forecast to continue its increase through 2006.

Analysts expect that pork demand will be further boosted by the Russian ban on imports from Brazil due to food-and-mouth disease and possibly by the avian flu scare.

The uncertainty in the forecast depends on whether the avian influenza scare will lead to larger displacements of poultry meat by pork. Pork exports in 2006 are also expected to benefit from a favorable market situation, after a decrease in 2005.

A worsening of the avian influenza situation in Russia and central parts of Europe and Asia could also increase demand for exports of pork to replace poultry meat.

Exports to Japan and the rest of Asia are forecast to suffer as Asian consumers are expected to partially turn to beef again following the resumption of beef imports from the US and Canada, the USDA stated.
 

Econ101

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What better time to cut your competitor (Swift) out of an export market?
 

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