Beef, poultry, and pork farmers were poised to have a great 2017. Chinese demand was driving global pork exports while global poultry production was set to increase despite a decline in Chinese consumption. US beef exports were expected to rise as Australia looked to rebuild its herd. Then a corruption scandal in Brazil early in 2017 darkened the rosy outlook. Brazilian beef and chicken exports suffered severe and immediate consequences.
But by the end of 2017, the problems are a distant memory for global meat exporters. Meat production and consumption increased this year. This trend is expected to continue in 2018, but meat’s environmental impact may be a long-term concern for global production.
In March 2017, Brazilian government officials and inspectors were embroiled in a widespread corruption probe dubbed “Operation Weak Flesh.” The investigation ensnared two of the largest meat processors in the world, JBS S.A. and BRF S.A., and led to concerns over the safety of meat imported from Brazil. Several countries, including the EU and China, suspended meat imports from Brazil soon after the scandal broke. The US would later ban fresh beef imports from the country in June citing safety and oversight concerns.
Brazilian beef rebounded by June and would go on to have a banner year despite slower-than-expected growth. Brazilian beef exports totaled 1.76 million tonnes in 2017 compared to 1.70 million tonnes in 2016. Looming safety concerns could still dampen Brazilian exports in 2018, but many are optimistic that trade opportunities will boost shipments in 2018. Minerva S.A., a top meat company, expects fresh beef exports to the US to resume in the first quarter of 2018.
The US resumed beef exports to China in 2017 to much fanfare. China had halted US beef exports 14 years ago after cases of bovine spongiform encephalopathy, better known as mad cow disease. At that time, the loss of the Chinese market was inconsequential considering the country imported just 26,000 tonnes of beef in 2003. That number soared to 412,000 tonnes in 2013 and sits at 925,000 tonnes in 2017. However, US beef exports to China in the near future will be limited by the supply of eligible cattle. Cattle that satisfy Chinese specifications could come from the supply that already meets EU standards, but US ranchers may adjust production if there’s stronger-than-expected demand from China. For now, US beef competes for the high-end Chinese market with offerings from Australia and Canada.
Brazilian poultry exports also suffered during the meat scandal. Brazil is the largest frozen chicken exporter in the world with more than 40 percent of the total global trade coming from the country. Trade restrictions similar to those on beef were imposed on Brazilian chicken, which led to decreased exports in the first two quarters of 2017. But then by August 2017, Brazil was exporting more chicken than ever. The steady rise of global poultry consumption and exports ensures that, barring a new scandal, any lingering safety concerns will only have a slight impact on Brazilian chicken exports in 2018.
2016 world chicken consumption of 87.37 million tonnes is projected to grow to 88.14 million tonnes in 2017. Global production will increase as well, with the US expected to produce a record 19 million tonnes in 2018. Cheap feed supplies bolstered by soaring soybean production in the US and Brazil can provide an additional boost to chicken production next year. However, there remains some volatility with countries experiencing bird flu outbreaks leading to decreased consumption. Such is the case in China where domestic consumption has declined over the last two years.
US chicken exports have been slow to recover after a highly pathogenic avian influenza (HPAI) outbreak in 2014-2015. More than 50 million chickens and turkeys were killed or destroyed in the US, and the HPAI outbreak led to widespread restrictions on US chicken exports. After bottoming out at 2.9 million tonnes in 2015, chicken exports have climbed to an estimated 3.1 million tonnes in 2017. After US exports were banned in 2015, Brazil quickly filled the void. Now the country provides 90 percent of Chinese chicken imports. For now, China remains out of reach for US chicken, but there is always the possibility that a surprise deal can unlock this key market to American poultry.
China’s pork consumption has stagnated since 2014. After reaching a record 57 million tonnes, consumption has slowly settled to 54.9 million tonnes in 2017. While the USDA projects Chinese pork demand to reach 56 million tonnes in 2018, a ceiling seems to be in sight. By 2029, currently slowing population growth in China will have turned into a declining overall population.
While China’s protein appetite is leveling off after decades of growth, pork remains the most consumed meat in the country by a wide margin. Consumers are unlikely to completely abandon pork and instead may look to higher quality cuts and/or reduce other meat consumption based on health trends.
China’s efforts to reduce pollution and stabilize pork prices will impact domestic production and imports in 2018. Hundreds of pig farms near lakes and rivers have already been shuttered as part of this new policy. Large corporations began expanding in the country’s northeastern provinces to supply the steady demand for pork. We expect that the increase in domestic production will lead to a decline in imports, which could lead to top international suppliers looking for new markets.
Outside of China, growing pork demand in several markets has led to a projected 2 percent increase in global production in 2018. Increased pork consumption in Mexico, the Philippines, Argentina, Chile, and Colombia will lead to a 3 percent increase in global exports next year, according to the USDA. US pork production and exports will grow next year with Mexico and the Philippines being important markets. While the European Union remains the world’s top pork exporter, the US has inched closer and could supplant the EU in the near future.
The year ended well for beef, chicken, and pork despite a rough start to 2017. Looking ahead, these upward trends look to continue even as major producers undergo transitional periods. China has been shutting down small pig farms throughout 2017 as part of its efforts to clean up the air and reduce water pollution. Smaller, older farms have shuttered, but large companies have picked up the slack by building more modern facilities. We have seen no decline in domestic production.
Elsewhere, the din surrounding the environmental impact of meat consumption continues to grow louder. Cattle produce methane emissions and raising them requires a lot of natural resources. A tax on meat has been discussed for several years, but typically faces instant and fierce opposition. However, environmental concerns may make beef taxes more palatable to some jurisdictions in the near future. Similarly, deforestation caused by increased soybean plantings in Brazil has led to the first ever soy expansion moratorium in the country. Using Gro Intelligence, analysts can identify potential shifts in the global meat trade before they are pressing concerns for consumers and producers.
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