Avian influenza reflected in market swings for poultry

The report provides an insight into the forecast supply and prices for a wide variety of agricultural products processors use to make their products. Overall the Commission forecasts that the prices for cereals will largely remain stable, while demand for meats will continue to rise, possibly pushing up prices.

In the case of poultry, producers have managed to keep the glut on the European market in storage, helping to push prices up to about the same as it was a year ago, according to the report.

The average EU price in June 2006 for whole birds was nearly at the same level as in June 2005 and 6.4 per cent higher than the more representative average paid from 2001 to 2005. This is a rebound from the March 2006 price of 131.3 €/100 kg, a level which was 9.8 per cent lower than the five-year average.

"Based on current market indications, the short-term disruption linked to avian flu is assumed to have little impact on the medium-term outlook that should remain relatively positive as competitive prices with respect to other meats, strong consumer preference and increased use in food preparations should continue to play in favour of poultry,"​ the report stated.

The Commission's experts forecast that per capita consumption will increase to about 24.1 kg/year by 2013, from around 23.2 kg/year in 2005, with a stronger growth in the new member states, where poultry meat should benefit from a growing consumer preference.

Poultry meat production remained stable in 2005 but is expected to decline slightly in 2006 in response to lower demand due to the avian influenza scare, the Commission reported.

The H5N1 influenza strain was detected for the first time in European wild birds in January 2006. Precautionary and control measures were adopted both at national and EU level to prevent a further spreading of the disease. A limited number of France and the Netherlands poultry population has been vaccinated.

Despite the protection measures which were adopted, H5N1 was detected for the first time in a French turkey farm in February 2006. As a result, about 40 non-EU countries have banned French poultry imports.

Several member states have also reported a considerable drop in poultry meat consumption and an accumulation of private stocks, accompanied by decreasing market prices.

Following a 6.3 per cent decline in 2005 and a short-term recovery in 2006-2008, the EU poultry exports outside of the bloc are projected to stagnate due to strong competition from the rest of the world markets.

The EU's 25 members will continue to be net exporters of poultry meat, although at a declining rate as more and more imports begin to enter the bloc. Poultry imports into the bloc rebounded by 11.4 per cent in 2005, with increased demand for frozen fillets, cooked and processed poultry meat.

Meanwhile EU egg production continues to grow steadily to meet a rising demand. Egg production reached 6.3m tonnes in 2005 and is expected to further increase to 6.6m tonnes in 2013, benefiting from increasing demand as well as lower feed costs.

Consumption is forecast to expand to 6.5m tonnes in 2013 from 6.2m tonnes last year. Per capita consumption would increase from 13.6 kg/capita in 2005 to 14 kg/capita in 2013, the Commission forecast.

Meanwhile the medium-term outlook for the pig meat market is expected to benefit from rising demand and production, while beef production is expected to decline due to the gradual withdrawal of subsidies for the market and strong overseas competition.

Total per capita meat consumption is projected to increase by 2.2 per cent in all by 2013.

A relatively steady demand and tight domestic supply are expected to result in firm prices over the projection period, attracting more imports of beef entering at full duty, notably high-quality beef cuts from South America.

A slight increase of consumption due to higher supplies in 2006 is expected to be followed by a relative stagnation over the medium term. In the new member states the potential increase -- fuelled by rising income levels -- would be broadly offset by the sustained price increase and the low consumer preference for beef.

EU-25 net production beef production fell by 2.5 per cent in 2005. A slight rebound is expected for 2006 with the re-entry of beef on the UK and EU's markets.

Overall EU-25 beef production is expected to decrease over the medium term to just below 7.5m tonnes in 2013, a reduction of five per cent from 2005.

Meat exports outside the bloc fell by 33.5 per cent in 2005 as a combined effect of a strong euro, relatively high internal prices, cuts in export refunds and lower net production, the Commission stated.

Pig meat is likely to remain favoured by consumers as - following a slight decrease in 2004 to 2005. Per capita pork consumption is projected to increase to 44.1 kg/year by 2013 from 42.8 kg/year in 2005.

EU-25 pig meat production is projected to exceed 22m tonnes by 2013. Production would be concentrated in specialised French, German, Spanish, Dutch and Italian regions as well as in Denmark.

In the dairy markets, EU-25 milk production increased slightly in 2005, reaching 142.4m tonnes with deliveries growing by one per cent to 131.6m tonnes.

Milk production is expected to follow broadly the evolution of the milk reference quantities over the projection period, with total production exceeding 144m tonnes by 2013.

A sustained demand, driven by continued consumer preference, strong industrial demand and expected lower prices due to the decrease in support prices of butter and skim milk powder could continue to boost cheese production, the Commission forecast.

Cheese production increased by 1.1 per cent in 2005, and is expected to expand further over the medium term by 10 per cent altogether.

Cheese consumption in the EU-25 increased by 1.4 per cent in 2005 and is expected to continue growing. EU-25 per capita consumption is projected to rise to 19 kg in 2013 from 17.4 kg in 2005, with a significant growth of 39 per cent in the new member states.

"The present volatility of the butter market is expected to persist over the short-term, resulting in reduced exports and increasing intervention stocks, but the resulting price decline should provide enough incentive to further reduce production and thus improve the market balance over the medium term,"​ the Commission stated.

Meanwhile cereal stocks in the EU should continue to stay at a high level over the next two marketing years as they would stand at more than 66m tonnes up to 2007. They would then start falling gradually to reach 55.8m tonnes in 2013, the report forecasts.

The current high level of production meets the expansion of domestic consumption and cereal exports.

The domestic use of cereals is foreseen to increase slightly due to the growth in the livestock industries and the emerging bioethanol and biomass demand.