Global meat prices are forecast to remain high in real terms over the next decade due to changing market fundamentals of slower production growth and stronger demand, according to a new report.

The forecast is contained in 10 year projection for global agricultural commodities released by the Organisation for Economic Cooperation and Development (OECD) and the United Nation’s Food and Agriculture Organisation (FAO).

After growing at 2.3pc per annum in the past decade, the 2013-2022 report predicts that growth in global meat production will slow to a more
moderate 1.6pc per annum in the next decade.

The slower rate of growth is attributed primarily to higher input costs and competing demand for land and water from alternative crops.

Of the additional production that does occur, developing countries are expected to account for approximately 80 percent of that output to 2022.

Poultry status as the cheapest and most accessible source of meat protein underpins the expectation that it will account for nearly half of the additional meat consumed in 2022 compared to now.

While meat consumption continues to enjoy one of the highest rates of growth among major agricultural commodities, the report suggests that with demand in per capita terms in major developing markets approaching the levels of developed countries, annual rates of consumption growth will slow in the next 10 years.

In developing countries, annual per capita meat consumption is forecast to increase by 2.6 kg rwt (retail weight) per person over the next decade, with poultry accounting for 60pc of this increase. 

Growth in demand will be led by the emerging economies of the BRICS countries (Brazil, Russia, India, China, South Africa) which are projected to post a 4kg rwt gain in consumption. That figure rises to 8kg rwt per person if India is excluded, reaching over 60kg rwt by 2022, approaching the level of 66kg rwt in the OECD area.

While remaining high in per capita terms, consumption in the OECD area has largely been stagnant for the past decade, due to various factors including population aging and changing demographics as well as increased health and dietary awareness.

World meat exports are expected to increase by 19pc by 2022; an annual increase of 1.6pc which compares to 4.3pc per annum in the previous decade. Poultry and bovine meat shipments are the primary drivers of export growth, which together account for 80pc of the additional trade.

Forecast high meat prices are underpinned on the demand side by rising incomes from rapid growth in the developing countries, and on the supply side by high input costs, notably for feed grains, energy related inputs and labour.

The report notes that the combined effect of higher output prices and increased production costs tend to favour production in developing countries, where low input production systems prevail.
While growth in both production and trade is envisaged in the short term for poultry, pig, sheep and buffalo meats, bovine meat markets will initially be constrained by depleted herd numbers in major exporting regions, notably in the developed countries.

Focus on China

In a special focus on China, the report notes that China’s consumption growth is expected to slightly outpace its production growth by some 0.3pc per annum,and, as a result, a further but modest opening of China’s agricultural sector is anticipated.

With comparatively little agricultural land and water resources, China has made food security and self sufficiency in the key food crops of rice and wheat a top policy priority. Agricultural output grew 4.5 times over the 1978-2011 period following agricultural and rural reforms. However, food price inflation has been rising in recent years, and output is anticipated to slow in the next decade with increasing resource and rural labour constraints.

Livestock, both the meat and dairy sectors, will continue to expand, with increasing feed requirements which will result in higher imports of coarse grains, likely beyond the current tariff quota levels.
China is expected to become the world’s leading consumer of pigmeat on a per capita basis, surpassing the European Union by 2022.

The full report with detailed 10 year outlooks for each commodity will be released on June 26.

To view the initial summary of report which has been released on the OECD website, click here.