Global red meat trade to remain stable in 2023

Cattle and hog prices have reached a new all-time high as the lamb trade struggles to match early 2021 and 2022 levels, according to the latest market commentary from Quality MEAT Scotland (QMS).

Forecasts by leading agricultural analysts point to further volatility in the global red meat market in 2023 on both the supply and demand sides, with more trade flows needed to bring markets back into balance.

Ian McDonald, market intelligence manager for QMS, explained: “With a modest decline in global production, global beef demand is forecast to remain robust despite economic challenges. At the same time, consumption will practically not change.”

The United States Department of Agriculture (USDA) forecasts a 0.3% decline in global production to 59.2 million tons in 2023. This is despite a projected 17% rise in Australia's beef production as its meat sector continues to recover from massive drought-driven livestock drawdowns in 2018 and 2019. In addition, production is expected to rise by 2-3% in major producers in Brazil, Mexico and CHINA and a 1% increase in the UK.

This increase is offset by a projected 6.5% drop in US production., the world's largest beef producer, where drought in key beef-producing states saw a significant increase in cattle slaughter and fewer young cattle placed in feedlots. A slight decline in beef production is also expected in Argentina, New Zealand, CANADA, Japan and the EU.

As Ian McDonald notes: “Beef imports are expected to reach 18% of global consumption in 2023, up from 17.7% in 2022 and well above the 16.1% seen in pre-pandemic 2019. The combination of a relatively tight global beef market and increased trade point to resilient beef prices.

“China and Hong Kong will be the main drivers, with an expected increase in imports of 1.5%, as they lifted covid restrictions and allowed entry for foreign tourists and businessmen. While China and Hong Kong together will account for over 80% of the net increase in beef imports, supply shortages are also projected to lead to more imports to the US and Japan, while strong demand in Korea is expected to contribute further growth of imports, despite the increase in domestic production.”

In contrast to the beef sector, the US Department of Agriculture forecasts a 0.3% increase in global pork production to 114.1 million. This is due to the continued recovery of the pig population in China and Southeast Asia, which declined after African swine fever (ASF). As a result, pork production in this region will be almost 20% above the 2020 low. However, consumption growth is expected to outpace this figure, requiring a modest increase in global imports.

As China accounts for 48% of global production, just over half of consumption and 21% of imports, it will remain an important determinant of the global pork market. Imports will also grow slightly; although volumes at 2.1mt will remain well below 2019-21 highs, when shipments peaked at 5.3mt in 2020.

However, there is significant uncertainty about the outlook in China as the persistent market volatility of recent years will continue into 2023. Wholesale pork prices in China doubled between April and October 2022, but then fell by 35% between early November and late January, indicating a marked improvement in supply since the fall. The recovery in imports contributed to a change in market conditions, with monthly volumes increasing during Q4 2022, and in December they managed to show an increase on an annualized basis.

In addition to China, pork production is projected to increase in Brazil, Japan, Mexico, the US and the Philippines in 2023, while Canada, SOUTH KOREA, the EU and the UK are projected to decline. However, with rising costs of living putting pressure on disposable incomes in many parts of the world, pork's position as a competitively priced protein has led the USDA to forecast increased consumption and/or imports in most of these countries and regions.

Even though China is in a stronger position as a global pork importer than before the African swine fever crisis, imports to all other countries will be 8% higher this year than in 2018, according to Ian McDonald, highlighting that significant EXPORT opportunities will also open up in other countries.”

USDA forecasts do not cover the global lamb market. “In the UK sheep meat sector, production is forecast to pick up. At the EU level, the EU Commission has forecast a modest increase in production for 2023, but with a projected 1% increase in consumption, a 4% increase in imports is expected and this should help support UK lamb exports.”

Meanwhile, New Zealand industry organization Beef + Lamb has revised its expectations for New Zealand lamb production for the October 2022 to September 2023 season due to lambing issues. However, slaughter statistics point to a successful start to the processing season, with slaughter up nearly 13% year-on-year in October and November, driven by a return to a more normal distribution pattern following a delay in the 2021-22 schedule.

Despite increased production and competitive prices, New Zealand beef and mutton trade data show that New Zealand mutton export volumes fell 2.6% in Q4 2022 from a year earlier. Interestingly, sales to China rose by 14%, almost equaling the highs of the fourth quarter of 2019 and 2020, while shipments to Europe decreased by 17%, indicating a rebalancing of activities. And in 2023, New Zealand lamb is still price-competitive, with producer prices about 20% lower than at the start of 2022.

The Australian meat industry continues to recover from the drought, with good grazing conditions boosting producer confidence despite declining livestock prices. The other side of declining livestock prices is export competitiveness, and combined with higher availability and limited supply in New Zealand, this indicates that Australian lamb processors will become more active in export markets in 2023.

Ian added: “It should be noted that Australian mutton supplies to the UK are capped by a tariff quota and due to solid sales in 2022, any further increase in 2023 is likely to be subject to the entry into force of the UK-Australia free trade agreement.” .