Meat Trends and Trade An EU Perspective

1. Meat � Trends and Trade � An EU Perspective 18th IMS World Meat Congress 2010 Buenos Aires, 28 September 2010 Lars Hoelgaard, Deputy Director-General

2. Buenos Aires, 28.09.2010 2 Headlines CAP-reform and Doha EU meat Trends

3. Buenos Aires, 28.09.2010 3 CAP today (1) Reform of the last 20 years Lower intervention prices and safety net Reduction/abolition of export refunds (cereals, milk, wine, F&V, pig meat, olive oil, tobacco) Improved market access (TRQs, bilateral agreements) Consequence � market orientation and increased competition

4. Buenos Aires, 28.09.2010 4 CAP today (2) Market support measures largely replaced by direct payments to farmers Decoupled from production Coupled to Cross Compliance (health, environment, animal welfare) � sanctions if non compliance From WTO Amber Box to Green Box � non-trade distorting (Annex 2 - 6 - AA - 1994)

5. Buenos Aires, 28.09.2010 5 CAP expenditure and CAP reform path(2007 constant prices) Sources: European Commission - DG Agriculture and Rural Development (Units I.1/L.1) and DG Economic and Financial Affairs (AMECO database) Updated: 5.3.2010 Annual expenditure, in 2007 constant prices. This graphic shows how the CAP has evolved through the evolution of the CAP expenditure. In the 80s the expenditure was mainly due to price support through market mechanisms (intervention and export subsidies). In the end of the 80s this expenditure in market mechanisms boosts due to the agricultural surpluses. In 1992 there is the first big shift, due to the Mac Sharry reform. The market mechanisms (in red and yellow) are reduced and replaced by direct payments (in blue). These payments were paid per hectare or per animal. Thus price support is replaced by producer support. Finally, spending on Rural Development measures also increase (in purple). In 2003, one can see the impacts of the 2003 reform, with direct payments shifting to decoupled payments (green). Payments are no longer paid per ha or per animal but paid in function of what the farmer received in a reference period. Spending in rural development also increases. Spending as been stabilized and despite the successive enlargements, the overall spending as a share of the GDP has actually decreased in nominal terms: 0.5% of GDP in the 80s to 0.4% now (graphic line). Stable expenditure level since mid-1990s despite enlargements Significant shift from market expenditure to direct payments and increased expenditure for rural development Decreasing share of CAP in GDP. However, slightly increasing in 2009 due to economic crisis (-5% in GDP of EU-27)Sources: European Commission - DG Agriculture and Rural Development (Units I.1/L.1) and DG Economic and Financial Affairs (AMECO database) Updated: 5.3.2010 Annual expenditure, in 2007 constant prices. This graphic shows how the CAP has evolved through the evolution of the CAP expenditure. In the 80s the expenditure was mainly due to price support through market mechanisms (intervention and export subsidies). In the end of the 80s this expenditure in market mechanisms boosts due to the agricultural surpluses. In 1992 there is the first big shift, due to the Mac Sharry reform. The market mechanisms (in red and yellow) are reduced and replaced by direct payments (in blue). These payments were paid per hectare or per animal. Thus price support is replaced by producer support. Finally, spending on Rural Development measures also increase (in purple). In 2003, one can see the impacts of the 2003 reform, with direct payments shifting to decoupled payments (green). Payments are no longer paid per ha or per animal but paid in function of what the farmer received in a reference period. Spending in rural development also increases. Spending as been stabilized and despite the successive enlargements, the overall spending as a share of the GDP has actually decreased in nominal terms: 0.5% of GDP in the 80s to 0.4% now (graphic line). Stable expenditure level since mid-1990s despite enlargements Significant shift from market expenditure to direct payments and increased expenditure for rural development Decreasing share of CAP in GDP. However, slightly increasing in 2009 due to economic crisis (-5% in GDP of EU-27)

6. Buenos Aires, 28.09.2010 6 CAP today (3) Farmers decide what and how much to produce based on market signals Respect of Good Agricultural and Environmental Conditions (GAEC) Direct payments provide an element of income stability in times of increased price volatility Result: A more sustainable and competitive EU agriculture

7. Buenos Aires, 28.09.2010 7 CAP and WTO - disciplines Domestic support � Amber/Blue/Green Box CAP reform ? Green Export subsidies Export refunds � 2013 Export credits STE�s Market access - Duty CutFalconer paper � July 2008 0-20% 50% 20-50% 57% 50-75% 64% >75% (66) (73)% (EU on average 54% cut) Non-trade concernsGI�s

8. Buenos Aires, 28.09.2010 8 CAP today (4) So we are ready for a Doha deal Are others?

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10. Buenos Aires, 28.09.2010 10 Bovine meat

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12. Buenos Aires, 28.09.2010 12 EU Trade of Beef and Veal Meat

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14. Buenos Aires, 28.09.2010 14 Medium-term forecast for EU beef and veal market

15. Buenos Aires, 28.09.2010 15 Some highlights on EU beef/veal market Continuous de-stocking of the milk herd � but milk quotas disappear 2014/15 Limited domestic beef/veal supply Constrained beef/veal consumption by economic situation Increasing imports from Mercosur due to sustained demand From net exporter to net importer due to CAP reform

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22. Buenos Aires, 28.09.2010 22 Medium-term forecast for EU pigmeat market EU production, consumption, trade and intervention stocks (million tonnes cwe)

23. Buenos Aires, 28.09.2010 23 Some highlights on the pigmeat market Major structural adjustments due to reduced profitability: Effect of feed prices particularly cereals + soy Land, capital and environmental constraints Slower pace on increasing domestic production Expected slow decrease in pork exports: more international competition Projected moderate consumption to outpace some production increase

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26. Buenos Aires, 28.09.2010 26 EU Trade of Poultry Meat

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29. Buenos Aires, 28.09.2010 29 Some highlights on the poultry market Increasing production triggered by higher EU domestic demand Quick adjustment of market: positive margin despite increasing feed costs EU exports increasingly constrained by international competition Growing poultry meat imports: - preferential import quotas from Brazil and Thailand Strong consumer preference - Increasing market share for processed poultry meat and preparations

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32. Buenos Aires, 28.09.2010 32 EU Trade of Sheep and Goats meat Meat

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35. Buenos Aires, 28.09.2010 35 Some highlights on the sheepmeat market Significant fall of domestic production (Blue Tongue, lower profitability, impact of decoupling aid, etc.) However, future production to decline more gradually EU market prices well above historic prices due to tight supplies Imports to increase at a modest rate (depending on import quota filling rates) Consumption to decline at lower rate than production

36. Buenos Aires, 28.09.2010 36 Medium-term forecast for EU Meat market

37. Buenos Aires, 28.09.2010 37 Some highlights on the EU meat market Total meat production to show moderate increase in the coming years Confirms trend of EU as net importer of beef, sheep and poultry EU exports capability facing uncertainties (domestic demand � financial/economic crisis � Exchange rate evolution for the � Pig meat remains the most preferred meat. Increasing consumption share for poultry and decline for beef and sheep The gap of prices between EU meat and main exporting countries has been reduced

38. Buenos Aires, 28.09.2010 38 Despite the fact that we are undergoing a somewhat silent period in the DDA negotiations, we are optimistic that an Agreement will be reached within the near future and we are hopeful that all WTO members will be satisfied with the result. The deal would obviously generate billions of euros of additional trade flows through increased market access, reduced domestic support and export subsidisation, and contribute to the welfare of all countries signing it. Such a boost is needed, especially at this juncture, for the world economy given the financial crisis and a bleak economic outlook for the coming months. The deal would also consolidate a result that ensures the likelihood and possibility for development in developing countries. Despite the fact that we are undergoing a somewhat silent period in the DDA negotiations, we are optimistic that an Agreement will be reached within the near future and we are hopeful that all WTO members will be satisfied with the result. The deal would obviously generate billions of euros of additional trade flows through increased market access, reduced domestic support and export subsidisation, and contribute to the welfare of all countries signing it. Such a boost is needed, especially at this juncture, for the world economy given the financial crisis and a bleak economic outlook for the coming months. The deal would also consolidate a result that ensures the likelihood and possibility for development in developing countries.

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40. Buenos Aires, 28.09.2010 40 Trends - EU Pig meat � continue to be a strong player internationally Beef � diminishing role � net importer. However link to milk production � quotas disappear in 2014/15 Poultry � can we hold our position? Sheep � production/consumption under pressure � 78% self sufficiency Overall EU consumption of meat stable WTO - consequences