In its latest Livestock and Products report for the European Union (EU), the United States Department of Agriculture (USDA) mentioned that there is a "structural unprofitability" in the EU 27 cattle sector, which has worsened due to high input costs and lack of labor. This makes the industry unattractive for successors.
Adding to the pressures are the "incessant" regulatory requisites by the European Commission (EC), which have led to uncertainties and have disincentivized investments.
In this context, the USDA expects that the cattle herd in the EU will continue to contract this year and the next. At the end of 2023, the herd is expected to have contracted by 0.8% to 74.2 million head. Meanwhile, by the end of 2024, the cattle herd is expected to have contracted by 0.54% to 73.8 million head.
Meanwhile, beef production is expected to be 6.5 million metric tons (mt) this year, down 3.3% from 2022's numbers. For 2024, beef production is expected to be 6.44 million mt, representing a decline of 0.9% compared to 2023's expected figure. This is roughly in line with the anticipated declines in cattle slaughter, which are expected to be 2.9% in 2023 (22.65 million head) and 1.3% in 2024 (22.35 million head). The fall in production in 2023 should be faster than the decline in cattle slaughter due to a reduction in the average weight per carcass, which in itself was caused by higher feed prices. The average weight is expected to recover by 2024 as feed prices ease, but it won’t be enough to offset the decline in the slaughter pace.
Meanwhile, beef consumption is expected to decrease by 1.6% year-on-year (YoY) in 2023 and by 0.6% YoY in 2024. While there is a structural decline in preference for beef in some EU countries, as reported in past Tridge analyses, overall high prices, especially when compared to pre-pandemic levels, seem to be putting the most pressure on domestic beef demand.
European Beef Prices Recovering from Multi-Year Lows
According to the latest data from the EC, beef prices (adult male, indicative) in the EU are recovering from the 17-month lows of EUR 4.78 per kilogram (kg) touched in mid-August. So far into September, the EU index is at a nine-week high of EUR 4.85/kg, up by 1.5% from the aforementioned low. The increase has been mainly driven by Italy, where prices are up 10% since mid-August, but there have been generalized increases in other major producer countries. Prices have been supported by ongoing lower supply in the area, but seasonality is favorable. Prices tend to reach their lowest level in the year by mid-July (holiday peak), but demand recovers as autumn nears.
Compared to the five-year average, current price levels remain considerably higher. While overall inflation easing has led to lower prices compared to last year, their gap compared to the previous year continues to seem enormous. As Tridge has consistently reported, this is coming from the domestic supply side (lower production, lower expectations, and general unprofitability).
Source: Tridge and EU Commission