The beef market in Germany and the EU

Cautious optimism

On the slaughter cattle market, positive surprises have been rare in recent years. German farmers must have been all the happier about the fixed prices for bulls and cows for slaughter in the past few weeks. The domestic supply was by no means as small as the fixed prices would have it appear. Rather, the battle numbers even exceeded the previous year's values ​​quite significantly. Although the fattening of young bulls in Germany is likely to continue to decrease in the coming years, the EU Commission is relatively optimistic in its long-term forecasts.

The results of the livestock census from May this year are not yet available. However, it seems clear that specialized cattle fattening was severely reduced in the run-up to decoupling. The first results from individual federal states show that the decline in the number of young bulls is in some cases in the double-digit percentage range. This trend could possibly continue until the turn of the year. At least that is what the persistently high rate of cattle slaughtering in Germany suggests. This year, despite the smaller number of livestock, almost three percent more cattle were hooked on a weekly average than in 2003. The proportion of young bulls slaughtered increased from around 40 percent in March to almost 46 percent in June.

According to the current state of knowledge, there is a much lower reduction in the number of dairy cows than some observers had expected, despite the very low milk prices in recent months. The fact that the milk premium is only decoupled on the basis of the individual farm reference quantity available on March 31, 2005 may have played a role here. For the cattle premiums, on the other hand, the reference period is from 2000 to 2002.

Better sales and hardly any stocks

So far, slaughter and supply in Germany have been above the previous year's mark and thus higher than initially expected for this period. Nevertheless, cattle prices were able to remain at a relatively high level. Not even in the summer holidays did the quotations get the usual setback. Apparently, the market accepted the larger offer without any problems. Among other things, consumption by private households was relatively significantly higher than in the previous year, according to surveys by the Society for Consumer Research.

Beef exports also apparently developed better than last year. By May, local companies had sold around 156.000 tonnes of beef abroad (product weight), which was almost six percent more than a year earlier. A little over 15 percent of total exports went to third countries, mainly Russia. In addition, around 244.000 calves and 92.000 cattle for slaughter went abroad by May, which was 15 percent and 31 percent more than in the previous year. The main buyers for calves were the Netherlands and Italy. Slaughter cattle were delivered 60 percent to third countries and 40 percent to other EU countries.

The extensive reduction in intervention stocks is also likely to have had a particularly positive effect on demand on the beef market. The demand for beef for processing and export had to be largely covered from the current market. This circumstance is likely to have sustained producer prices.

Tighter supply, rising prices?

In the medium term, most observers believe that there will be a significant decline in specialized beef production, at least in Germany. The currently positive price trend is unlikely to change that much. In any case, in order to make profitable cattle fattening possible without premiums, the prices would have to be a lot higher than they are now.

Both the EU Commission and some market observers believe that higher cattle prices are possible, at least in the long term. The development of the offer on the European market will be decisive here. The EU Commission estimates that consumption will change little in the old EU. A further decline in consumption is only expected in the new EU countries. The new EU citizens already consume two thirds less beef per capita than consumers in the old EU.

Production less than consumption

The Commission's experts expect only a moderate decline in production in the enlarged EU in the long term. From 2003 to 2011, this should not even be two percent. There should be a further reduction in beef production of around six percent, especially in the new EU countries. Meanwhile, experts from Brussels expect production in the old EU in 2011 to be almost as large as in 2003. In the meantime, however, supply could grow strongly. From 2005, the meat from slaughter cows over 30 months old can be marketed again in Great Britain. Even then, beef production in Europe lags behind consumption.

In 2003, European consumption exceeded production for the first time. In all likelihood, this will not change in the medium and long term. This means that the supply from abroad is also increasing. By 2011, the Commission expects imports to increase by around 30 percent. Meat exports, on the other hand, are expected to decrease by around a quarter during this period.

Source: Bonn [ZmP]