Spanish Beef Sector Expected to Face Declines in Cattle Herd, Slaughter Numbers and Beef Production This 2023

According to a voluntary Livestock and Products report for the USDA released this June, the Spanish cattle sector is forecasting local cattle production to continue declining this 2023 on the back of higher input costs. The total cattle herd, the amount of slaughter, and beef volume are all expected to decline this year. The decline could be exacerbated by ongoing dry conditions in Spain, which is increasing feed costs. Higher production costs in H1 2022 accelerated cattle slaughter, leading to more beef production despite a lower average carcass weight. Nonetheless, cattle slaughter, according to the report, has trended down since late 2022. Last year, beef production in Spain totaled 732 thousand mt, rising 1.9% compared to 2021. For 2023, total beef production is expected to be around 700 thousand mt, which would represent a decline of 4.4% YoY.

Spain and Italy are leading the decline in European beef production. In its latest Beef Situation report (May 24th), the European Commission mentioned that beef production in the EU 27 declined “sensibly” in February, leading to a 2.6% YoY decrease for the first two months of the year. Most of the decline was driven by production losses in Spain and Italy. In the meantime, beef imports were reported increasing by 12% YoY in the same two-month period on the back of lower supply.

The decline in production is affecting European prices, but more notably in Spain. It’s worth noting that beef prices in Spain, according to European Commission data, started to climb at a faster pace than the EU 27 average price in Q4 2022, as domestic production started to decline. As of the last week of May 2023, prices in Spain were currently 20% above their levels in week 1 of 2022, while the EU average level is 15% above. As we mentioned in a previous Tridge Analysis, European beef prices are easing from the record highs earlier this year but this trend is only clearly marked in Germany due to plunging demand.

Source: Tridge and European Commission

Beef demand in Spain is rising, driven by the HRI sector. In the annexes of the latest European Commission Meat Observatory meeting (June 6th), Eurocommerce reported that sales of meat in Spain were down 12.8% YoY as of November 2022. The decline was sharper for beef in particular. The decline in demand was driven by record high prices, triggering a substitution effect favoring cheaper protein. Nonetheless, this decline referred only to home consumption. The USDA report mentioned that Spanish beef consumption rose in 2022 and is trending higher this 2023 thanks to the hotels, restaurants, and institutions sector. Demand from this sector is also driving beef imports up.

According to the USDA, 2023 will mark the fifth consecutive annual decline in European beef production. In its latest semi-annual Livestock and Products report for the European Union (released in early March 2023), the American agency predicted that European beef production in 2023 will decline by 0.4% YoY, as cattle slaughter is expected to decline by 0.6% in annual terms as well. High input costs remain one of the main causes behind the general decline in the industry in the EU 27. Moreover, there is ongoing uncertainty over the implementation of new environmental restrictions, which are likely to further disincentivize cattle herd growth.