Global red meat trade flows set to remain firm in 2023

Farmgate cattle and pig prices have reached a new record high as the lamb trade struggles to match levels of early 2021 and 2022, according to the latest market commentary from Quality Meat Scotland (QMS).

Industry news
Published: 06/02/2023

Farmgate cattle and pig prices have reached a new record high as the lamb trade struggles to match levels of early 2021 and 2022, according to the latest market commentary from Quality Meat Scotland (QMS).

Forecasts from leading agriculture analysts point to further instability in the global red meat market in 2023 from both the supply and demand sides, with increased trade flows required to bring markets back towards balance.

Iain Macdonald, QMS Market Intelligence Manager, explained: “Set against slightly reduced world output, global beef demand is forecast to remain resilient despite economic headwinds, with consumption almost unchanged. For this to happen, mismatch between supply and demand at country-level means that global trade in beef will need to rise significantly.”

The United States Department of Agriculture (USDA) has forecast a 0.3% reduction in world production to 59.2 million tonnes in 2023. This is despite beef production being projected to surge by 17% in Australia, as its beef sector continues to rebound from a drought-induced herd liquidation in 2018 and 2019, plus expectations of 2-3% output growth for major producers Brazil, Mexico and China, and a 1% increase in the UK.

Offsetting these gains is a forecast 6.5% fall in output in the USA, the world’s largest beef producer, where drought in key calf producing states was followed by elevated cow slaughter and then fewer young cattle being placed in feedlots. Small declines have also been modelled for Argentina, New Zealand, Canada, Japan and the EU.

Iain said:

“Imports are set to reach 18% of global consumption in 2023, up from 17.7% in 2022 and well above the 16.1% level seen in the pre-pandemic year of 2019. The combination of a relatively tight global beef market and increased trade points to firm beef prices.
“China and Hong Kong will be the main drivers, with an expected 1.5% rise of import volumes as they reduce covid restrictions domestically and re-open to overseas tourists and businesspeople. While China and Hong Kong are set to collectively account for more than 80% of the net increase in beef imports, tight supply is also projected to boost imports to the USA and Japan, while strong demand in Korea is expected to fuel a further lift in imports despite higher domestic output.”

In contrast to the beef sector, the USDA projects global pork output to edge 0.3% higher to 114.1m. This would see the recovery from African Swine Fever (ASF) in China and South East Asia continue, taking production almost 20% above its 2020-low. However, consumption growth is set to outpace this, requiring a slight increase in global imports.

Since China accounts for 48% of world production, just over half of consumption and 21% of imports, it is set to remain an important driver of global pork market conditions. A slight rise in imports has been pencilled in; though, at 2.1m tonnes, volumes would remain well below the highs of 2019-21, where shipments had peaked at 5.3m tonnes in 2020.

However, there is considerable uncertainty around the outlook in China, with the persistent market volatility of recent years continuing into 2023. Wholesale pork prices in China doubled between April and October 2022, but then declined by 35% between the beginning of November and late-January, suggesting a marked improvement in supply since the autumn. A rebound in imports has contributed to the change in market conditions, with monthly volumes picking up through Q4 2022 and managing to show year-on-year growth in December.

Away from China, rising pork production has been forecast in Brazil, Japan, Mexico, the USA and the Philippines in 2023, whereas declines are projected in Canada, South Korea, the EU and the UK. However, with a rising cost of living pressuring disposable incomes across much of the world, pork’s position as a competitively priced protein has led the USDA to project increased consumption and/or imports in most of these countries and regions.

Iain said: “Although China has a stronger foothold on global import demand than before the African Swine Fever Crisis, imports across all other countries are set to be 8% higher this year than in 2018, highlighting that significant opportunities will lie elsewhere.”

The USDA forecasts do not cover global lamb market conditions. “In the UK lamb sector, production is projected to rise this year as a result of a slower marketing profile of the 2022 lamb crop boosting the hogg carryover. At EU level, the EU Commission has forecast a slight uplift in production for 2023 but, with consumption projected to rise by 1%, a 4% lift in imports is modelled, and this should help support UK exports.”

Meanwhile, Beef + Lamb New Zealand have revised their expectations for New Zealand lamb production in the October 2022 to September 2023 season due to a poor lambing. The lamb crop is estimated to have fallen by 2.6%, compared to a 1.4% contraction in breeding ewe numbers, extending the decline in lamb numbers over an eight-year period to 15%. However, slaughter statistics point to a strong start to the processing season, with the kill up nearly 13% year-on-year through October and November, driven by a return to a more normal marketing pattern after a delayed schedule in 2021-22.

Despite increased production and competitive prices, Beef + Lamb New Zealand trade data shows that in Q4 2022, New Zealand lamb export volumes fell by 2.6% compared to a year earlier. Interestingly, sales to China rebounded by 14%, almost matching the highs of Q4 in 2019 and 2020, whereas the volume shipped to Europe fell by 17%, suggesting a rebalancing of activity. Moving into 2023, New Zealand lamb continues to look price competitive, with farmgate prices around 20% lower than in early 2022.

In Australia, Meat and Livestock Australia are anticipating continuing recovery from drought in 2023, with good grazing conditions boosting producer confidence despite softer farmgate prices. The other side to reduced farmgate prices is export competitiveness and, coupled with higher availability and tight supply in New Zealand, this points to Australia’s lamb processors becoming more active in export markets in 2023.

Iain added: “It should be noted that Australia’s lamb shipments to the UK are restricted by a tariff-rate quota and, due to firm sales in 2022, any further increase in 2023 is likely to depend on the free trade agreement between the UK and Australia entering force and expanding tariff-free quota access.”

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