Richard Brown, UK based director of GIRA (Global Food Industry Research and Consulting), maintained his yearly tradition of recounting some mishap or other encountered with his shiny, bald pate. This year’s tale explained why it was so suntanned – on the hottest June day for years in England, he was driving for several hours in a car with the top down on his way to a business appointment; the brilliant red had faded to a healthy brown during July, recounts Allan Barber.
His tour of meat trends benefited from less overhead slides than previously which meant he had more time to explain what was happening without rushing the audience through too many facts and figures. He characterised 2015 as the year of consolidation and risky political scenario (think Russia, Greece and China), whereas in 2013 the world had experienced high feed costs and cautious production, while 2014 was a year of contradictions with disease and political disruption beside very high US prices and profits for chicken and pig producers.
After a profitable start to 2015 with better economic growth, present trends at the half year indicated a higher level of supply, but lower demand; the outlook is still not bad, but Brazil’s exports are in a parlous state and the situation in Russia is very doubtful. The major factor has been the change in relative currency values – both the rouble and the Brazilian real have fallen dramatically which substantially reduces the amount of beef Russia can buy.
Russian exports of pork and chicken are 40 percent down because those supplies are needed to feed the domestic market. Domestic meat consumption shows a strong rise in chicken production, believed to be of direct benefit to friends of President Putin, while a similar pattern is expected with pork production, although this is taking longer. Imports have plummeted because of the ban on trade with the USA and EU and, while the ambition is to achieve the same with beef, a sufficient increase in cattle production will take much longer.
Producers’ prices during 2015 show widely divergent patterns depending on the commodity – cattle prices are well up, completely opposite to sheepmeat which has been dramatically affected by the drop in demand from China, while chicken and pigmeat prices have also fallen.
The favourable beef situation is entirely due to the shortage of cattle in the USA where there are very good feed conditions across the country except California which is in drought; good rearing conditions signal more cattle in a couple of years. Prices can consequently be expected to fall again from 2017 or 2018.
Apart from the economic slowdown in China, the anti-corruption campaign is also thought to have had a negative impact on sheepmeat and beef consumption because of a reduction of entertaining in high-end restaurants. Nevertheless, the Chinese enthusiasm for hot pot dining will remain positive for longer term demand which will increase proportionately with the trend to urbanisation. The supply chain includes both imported product and local production, although there is a fear this will remain inefficient because of the impact of bureaucracy.
Among more traditional markets for sheepmeat, EU consumption of meat in general has declined because of changing consumer priorities. Consumers are now, in relative terms, both poor and time-poor, while discounters like Aldi and Lidl are having a significant effect on normal supermarkets. There are implications for lamb in particular because of the difficulty of maintaining presence in the discounters for a premium product.
Brown’s overall judgement is for a good long-term outlook, but the short-term is more challenging.