CTA
Small fontsize
Medium fontsize
Big fontsize
English |
Switch to English
Français
Switch to French
Filter by Agriculture topics
Commodities
Regions
Publication Type
Filter by date

Executive Brief Update 2011: Beef sector

About this update

This brief was updated in July 2011. The original executive brief was published in June 2008 and is available on request from agritrade-mail@cta.int

Other publications in this series and additional resources on ACP—EU agriculture and fisheries trade issues can be found online at http://agritrade.cta.int/

1. Background and key issues

Traditionally six ACP countries exported beef to the EU market under tariff-rate quotas. No new ACP beef exporters emerged following the granting of duty-free quota-free (DFQF) access under the Everything But Arms arrangement in 2001. Equally no new ACP beef exporters emerged when DFQF access was granted under various (Interim) Economic Partnership Agreements (I)EPAs. Indeed, only two of the six traditional ACP beef exporters currently export to the EU, although the EU remains a major market for these exporters. For Namibia, this market access has promoted a major structural development of the livestock sector.

Reform of the Common Agricultural Policy (CAP), by allowing EU market prices to fall, and by promoting a stricter application of sanitary and phytosanitary (SPS) and food safety standards, has made the EU beef market less commercially attractive to ACP beef producers. Exchange-rate factors now increasingly influence marketing decisions. EU reforms have encouraged investment in moving up the value chain and strengthening marketing activities, to serve ‘quality differentiated’ luxury purchase components of the EU market.

There has been a contraction in EU beef production, and, since 2003, the emergence of a substantial beef deficit on the EU market. This has seen increased competition from duty-paid beef exports from large advanced developing countries and a decline in the ACP share of the EU beef market. Any reduction of duties on imports from suppliers in major advanced developing countries under new EU free-trade area (FTA) arrangements would further erode ACP margins of tariff preferences and exert a downward pressure on EU beef prices. In the context of high global beef prices, tariff concessions could increase the relative attractiveness of EU markets and reverse the recent trend towards targeting non-EU markets by major beef exporters like Brazil.

However, for most ACP countries, national and regional beef markets are the key to the future development of the livestock sector. While the EU is no longer a major beef exporter, lower quality beef cuts are commonly exported to African markets, where they can potentially hold back the development of intra-regional trade, given the patterns of beef trade in the regions affected. EU beef traders are also involved in a triangular trade in lower quality beef exports to African markets. In certain market components, EU exports of poultry meat can also impact on the regional beef trade.

EU beef production is strongly influenced by policies and support payments in the dairy sector. It is estimated that EU dairy farmers receive €5 billion per annum in ‘direct aid payments’, while extensive additional support and market management tools are also in place. The reform of the EU dairy regime could impact on EU beef production, although increased yields are expected to account for any expanded production. As a consequence the ongoing process of CAP reform is only likely to slow down the rate of decline in EU beef production, not reverse it.

 

2. Latest developments

2.1 Developments in global beef markets

In recent years global beef prices have been subject to considerable price volatility, with the beef sector being ‘the most severely affected by the falling demand, associated with the global economic downturn’, according to the Organisation for Economic Co-operation and Development (OECD) and the UN Food and Agriculture Organization (FAO). Analysis from OECD/FAO and the Food and Agriculture Policy Research Institute (FAPRI) suggests that in the next 10 years, beef prices will on average be between 22% and 31% above the 2000–09 average price levels. After 2015, price rises will begin to ease off as production responds to firmer prices. World beef production is projected to increase by between 17% and 25% by 2019, with Brazil’s share increasing to more than one-third of the total. On the import side, Russia is expected to ‘considerably reduce its net imports’ in the coming period, due to ‘growing domestic production’ (see Agritrade article ‘ Prospects for global beef markets to 2019’, February 2011). This development could potentially have implications for the patterns of ACP–EU trade in beef, with Russia a major destination for EU beef exports and three ACP countries (Côte d’Ivoire, Nigeria and Angola) among the top six destinations for EU beef exports.

Table 1: International beef prices: US cents/lb

  2006 2007 2008 2009 2010 2011 (Q1)
Annual average 115.82 118.04 121.10 119.63 152.32 ……..

 Source: USDA, http://www.indexmundi.com/commodities/?commodity=beef&months=12

 

Table 2: Monthly prices US cents/lb and US$/kg

1 2 3 4 5 6 7 8 9 10 11 12
2010: US cents/lb
133.88 141.75 152.10 164.75 157.75 144.81 145.39 152.50 152.50 154.75 156.50 171.12
2011: US cents/lb
185.63 183.68 …..                  
2010: US$/kg
2.95 3.12 3.35 3.62 3.47 3.19 3.20 3.36 3.36 3.40 3.44 3.76
2011: US$/kg
4.08 4.04 ….                  

 Source: USDA, http://www.indexmundi.com/commodities/?commodity=beef&months=12

 

2.2 Developments in the EU market

Forecasts from the European Beef Forecasting Working Group suggest that there will be ‘some improvement in the European beef market during 2011 as a further tightening in supplies, stronger international demand and a more stable demand situation help trade ... These developments are expected … to have a positive impact on cattle prices as the year progresses ... Beef supplies in 2011 across the E-15 region are forecast to fall by around 2% to 7.1 million tonnes’, although in some EU countries production is projected to increase (in Poland by 17% from 2007 to 2020) ‘Supplies of beef available for consumption is forecast to fall by around 1% to 7.3 million tonnes’, with ‘some expected increase in retail prices during 2011’ (see Agritrade article ‘ EU beef prices likely to improve’, January 2011).

This tighter market situation and a strengthening of the retail price of beef can be expected to benefit ACP beef exporters. However, this will be influenced by exchange-rate movements. EU consumption is forecast to continue along its current downward trend, with EU beef consumption in 2020 being 3.1% below the depressed levels of 2010. However, this overall decline masks divergent trends. Per capita beef consumption in EU15 countries (the 15-member EU up to end-2003) is projected to decline by 6.8% compared to a 3.9% increase in EU12 countries (those which acceded after 2003). This will still leave considerable scope for further expansion of beef consumption in newer EU member states as economic growth takes place.

EU production will decrease even faster than EU consumption, declining by 6.4% between 2010 and 2020, creating an expanded demand for beef imports. The 2013 round of CAP reform will mainly impact on the beef sector through any changes to the system of coupled payments made under the dairy regime, and the implementation of the existing commitments to the phasing-out of dairy production quotas. It is unclear whether the dairy sector will be classified as ‘sensitive’ (in which case coupled payments would be retained) (see Agritrade article ‘ Divisions highlighted at last chance for ministerial inputs to EC CAP pr...’, April 2011). In terms of the abolition of production quotas, it is expected that any increase in production will arise from improved yields, with the only effect in the beef sector being a slight slowing down in the rate of decline in beef production.

The European Commission’s (EC’s) overall assessment is that in the coming years the EU beef sector will face difficult times, with high feed costs and depressed demand hindering capital investment in production improvements.

Table 3: EU beef production and consumption (actual 1997–2008 and projected to 2020)

Actual production and consumption (tonnes cwe [carcase weight equivalent]) Projected production and consumption (tonnes cwe)
Year Consumption Net production Year Consumption Net production
1997 7,109,000 7,889,000 2009 8,240,000 7,936,000
1998 7,395,000 7,624,000 2010 8,151,000 7,868,000
1999 7,648,000 7,686,000 2011 8,055,000 7,657,000
2000 7,259,000 7,394,000 2012 7,957,000 7,510,000
2001 6,710,000 7,266,000 2013 7,997,000 7,579,000
2002° 7,986,000 8,061,000 2014 8,086,000 7,714,000
2003 8,267,000 7,948,000 2015 8,060,000 7,675,000
2004°° 8,540,000 8,307,000 2016 8,014,000 7,574,000
2005 8,465,000 8,066,000 2017 7,939,000 7,458,000
2006 8,566,000 8,133 000 2018 7,925,000 7,424,000
2007 8,631,000 8,470,000 2019 7,906,000 7,379,000
2008 8,470,000 8,253,000 2020 7,899,000 7,361,000

 Notes: ° EU25 from 2002–2003; °° EU27 from 2004 onwards

Source: EC, ‘Prospects for agricultural markets and income in the EU’ series. The 2009 and 2010 editions can be found at: http://ec.europa.eu/agriculture/analysis/markets/index_en.htm, earlier editions going back to 1999 can be found at: http://ec.europa.eu/agriculture/analysis/markets/archive_en.htm

Since 1997 the EU beef trade position has been transformed, exports have steadily and dramatically declined, while imports have steadily risen. Imports are expected to increase by 41% between 2010 and 2020, with exports declining by 57%.

Table 4: EU beef imports and exports (actual 1997–2008 and projected to 2020)

EU beef imports and exports Projections of EU beef imports and exports to 2017
Year Imports Exports Net Trade Position Year Imports Exports Net Trade Position
1997 387,000 971,000 +584,000 2009 428,000 124,000 –304,000
1998 348,000 695,000 +347,000 2010 438,000 136,000 –302,000
1999 385,000 872,000 +487,000 2011 473,000 127,000 –346,000
2000 379,000 577,000 +198,000 2012 507,000 119,000 –388,000
2001 350,000 498,000 +148,000 2013 545,000 113,000 –432,000
2002 424,000 522,000 +98,000 2014 560,000 112,000 –448,000
2003 439,000 392,000 –47,000 2015 558,000 108,000 –450,000
2004 548,000 315,000 –233,000 2016 574,000 100,000 –474,000
2005 614,000 213,000 –401,000 2017 792,000 95,000 –497,000
2006 619,000 186,000 –433,000 2018 602,000 90,000 –512,000
2007 541,000 113,000 –428,000 2019 614,000 84,000 –530,000
2008 379,000 162,000 -217,000 2020 619,000 78,000 –541,000

Source: EC, ‘Prospects for agricultural markets and income in the EU’ series. The 2009 and 2010 editions can be found at: http://ec.europa.eu/agriculture/analysis/markets/index_en.htm, earlier editions going back to 1999 can be found at: http://ec.europa.eu/agriculture/analysis/markets/archive_en.htm

Figures submitted to the meeting of the Single Common Market Organisation (CMO) Management Committee on 22 April 2010 show the dominant role played by Russia as a destination of EU beef and live animal exports. Russia’s beef import policy appears to have some bearing on the EU’s beef export trade to the main ACP markets, with EU exports to the three main ACP markets increasing when beef exports to Russia decline and declining when they increase. Any increase in EU exports to Côte d’Ivoire and Nigeria, resulting from a considerable reduction in Russian beef imports, could potentially disrupt intra-regional trade flows in West Africa from neighbouring cattle exporting countries.

Table 5: Destinations of EU exports of beef and live animals (tonnes and percentage share)

  2006 2007 2008 2009
  tonnes % tonnes % tonnes % tonnes %
Russia 145,342 49.7 87,277  35.2 102,368 35.1  50,660 20.4
Switzerland  10,162 3.5 14,457  5.8  25,965 8.9  19,061 7.7
Croatia  9,723  3.3 16,460  6.6  19,919  6.8  24,905 10.0
Côte d’Ivoire  4,938 1.7  6,949 2.8  8,969  3.1  13,380  5.4
Angola  8,628  3.0 11,087 4.5  7,775  2.7  7,488  3.0
Nigeria  172  0.1 16,174  6.5  2,265  0.8  167  0.1
Extra-EU25/27 292,382  100 247,730 100 291,622 100 248,199 100

Note: These figures include live cattle exports and so result in higher total figures. In addition the percentage shares of ACP countries in EU exports of lower quality beef cuts is underestimated since the total figures include both live exports and high quality beef exports, which serve very different market components.

Source: ‘Review of the situation on the EU beef and veal market’, Single CMO Management Committee, 22 April 2010, DG AGRI, European Commission

While EU beef imports have risen steadily, in recent years, following the stricter application of EU hygiene rules to Brazilian beef exports, the EC has faced some difficulties in finding alternative sources of beef imports. These difficulties have promoted higher beef prices and thereby enabled two ACP beef exporters to expand their exports to the EU. Botswana’s beef exports have approached levels last seen in 2007 and have increased beef export revenues, allowing incentive payments to be made to producers to stimulate the production of beef of quality acceptable to the EU market. Namibia meanwhile expanded its beef exports by 54.5% between 2006 and 2009.

The granting of improved market access arrangements to the USA and Canada, following an interim resolution of the beef hormone dispute, is not expected to have a major market impact, given the limited volumes involved.

Table 6: Sources of EU imports of beef and live animals 

  2006 2007 2008 2009
  tonnes % tonnes % tonnes % tonnes %
Brazil 331,762 65.7 363,939 65.4 171,454 43.4 149,007 34.6
Argentina 82,865  16.1 97,656  17.6 92,924  23.5 122,494 28.4
Uruguay 45,350  8.8 39,544  16.8 66,402  16.8 79,144  18.4
Botswana 7,118  1.4 13,929 2.6 10,395  2.6 11,452  2.7
USA 956  0.2  2,746  0.5 6,547 1.7 9,609   2.2
Namibia 8,063  1.6 10,467  1.9 10,348  2.6 12,457  2.9
Australia 12,366  2.4 10,019 1.8 12,957 3.3 16,937  3.9
New Zealand 7,195 1.4 5,756  1.0 12,455  3.2 15,783  3.7
Extra-EU 513,160   556,024   385,063   431,182  

Source: ‘Review of the situation on the EU beef and veal market’, Single CMO Management Committee, 22 April 2010, DG AGRI, European Commission

 

2.3 Standards and quality issues

EU beef producers are increasingly arguing that beef imports from third countries do not meet the same standards applied within the EU and are calling for more rigorous enforcement of EU regulations, as well as the internationalisation of certain EU standards (e.g. with regard to animal welfare). This position gained political support when in February 2010 the European Parliament went so far as to call for all imports of meat into the EU to be produced from animals which have been raised in conformity with EU animal welfare requirements (see Agritrade article ‘ Greater enforcement of animal-welfare regulations called for’, June 2010).

In March 2011 the conclusions of the EU Agricultural Council emphasised the need for ‘a level playing field between the EU and third-country producers’ in terms of compliance with EU standards. This could see a tightening of the application of EU standards and their ‘internationalisation’, with the latter development potentially impacting on the intra-regional beef trade in some ACP regions, as exporting countries seek to harmonise to EU standards.

The issue of quality labelling has been an area of intense policy debate in the EU in 2010. In the beef sector consideration is being given to the establishment of a ‘Community animal-welfare label modelled after the EU organic label’. The key to these labelling schemes is that they persuade consumers to ‘pay a price premium’ for the labelled products. The promotion of ‘quality-differentiated’ EU beef production is seen as an important means of dealing with the competitive challenge posed by growing levels of beef imports, by competing on quality, not price.

These labelling requirements could carry implications for ACP beef exporters. This calls for careful study of the EC’s December 2010 ‘quality package’ proposals, which were explicitly tabled in the context of the pressures farmers face from ‘the economic downturn, concentration of retailer bargaining power and global competition’ (see Agritrade article ‘ EC “quality package” tabled’, February 2011.

In an era of duty-free, quota-free access for ACP exporters, SPS, food safety and animal welfare regulations will play an increasingly important role in trade flows. Against this background the question arises: what can ACP governments do to get to grips with these new trade-related challenges?

An August 2010 ICTSD report looked at how EPA agreements could more effectively assist ACP countries in getting to grips with SPS, food safety and animal welfare challenges. It noted the varied ability of companies in different ACP countries to meet SPS and technical standards, and hence their varied ability to trade effectively under the various EPAs. The analysis maintained that EPA agreements could help to reduce the trade restrictive effects of EU SPS and food safety rules, but that in their current form ‘EPAs fall short of their promise’, since they ‘neither contain detailed provisions on SPS and TBT [technical barriers to trade] measures nor set out procedural guidelines for operationalising key disciplines in these areas’. It also expressed the view that the development cooperation provisions of EPAs fall far short of requirements in terms of assisting ACP governments in getting to grips with SPS challenges. The analysis called for the establishment of special technical committees ‘to deal with TBT and SPS barriers to trade’, with these committees being backed up by ‘specific development cooperation commitments and mechanisms for their implementation’ (see Agritrade article ‘ Review of the treatment of NTBs [non-tariff barriers] under (I)EPAs posted’, September 2010. While steps are being taken in this direction, it is essential that attention be paid to the operational applicability of these arrangements in the context of the challenges faced.

2.4 Developments in ACP beef exports to the EU

Since 2007 the Namibian beef industry has been intensifying efforts to move up the value chain and promote ‘quality differentiated’ beef exports. 2010 and early 2011 saw an extension of these efforts. New markets were established and developed in Denmark and Belgium. The ‘environmentally friendly specifications of Nature’s Reserve’ and its adherence to ‘stringent ethical, quality and hygiene requirements’ were seen as critical in sealing these deals. This represents a concrete manifestation of the success of Meatco’s new marketing strategy, delivering new markets to add to those already established in the UK and Germany (and beyond the EU in Norway and Switzerland) in the most high-value components of the EU beef market (see Agritrade article ‘ Need for intensified dialogue of evolving food safety policy highlighted’, April 2011). This market diversification also provides some insulation against exchange-rate volatility. In 2010 the rand appreciated by approximately 18% against major EU currencies (the euro and sterling), reducing revenues on beef export sales to the EU market (earnings on every euro’s worth of meat sold fell from R10.65 to R9.01). Indeed, reports suggest that earnings in 2010 declined by almost 30% compared to 2008 levels as a result of currency movements. These reduced revenues came in addition to rising input costs which saw the throughput at Meatco’s abattoirs decline.

Despite these difficulties, Meatco anticipated in October 2010 that the shortage of beef in the EU market and growing demand from China would boost both EU and global prices. According to data from the US Department of Agriculture (USDA) this price recovery took off in November 2010, showing an 18.3% increase by January 2011. With a significant depreciation of the rand against the euro, pound and Danish krone in the first six weeks of 2011 (by approximately 9%), these price increases offered real opportunities for income gains in 2011.

In the course of 2010 the danger of the loss of preferential access to the EU market as a result of delays in concluding the EPA negotiations receded. However, the need for continuous investment in maintaining Namibia’s favourable animal health status was highlighted at the Namibian Livestock Producers Organisation annual conference in October 2010.

The discovery in February 2011 of contamination by drug residues in Namibian cattle processed through a feed-lot therefore caused considerable concern. However, the effective traceability system that was in place allowed meat products from the 600 affected cattle injected with the drug to be traced and withdrawn from the food chain. This prompt action, alongside the discontinuation of the use of phenyl butazone, improved the screening of cattle sent for slaughter, and intensifying cooperation on SPS issues, was felt to be enough to avert any trade disruption (see Agritrade article ‘ Need for intensified dialogue of evolving food safety policy highlighted’, April 2011). These developments nevertheless highlighted the importance of raising the level of cooperation on SPS, food safety and animal welfare issues, so as to prevent inadvertent contravention of the evolving EU rules, which could disrupt efforts at market repositioning.

Meanwhile in Botswana, the beef sector, which is central to agricultural production, remains beset by low productivity and a growing threat of foot-and-mouth disease (FMD). Currently the government maintains extensive programmes of support for the sector, including:

  • a high level of tariff protection on meat products (an average of 17.4% but with some rates as high as 43.7%);
  • a single marketing channel for exports linked to an obligation to buy all cattle placed for sale;
  • the operation of a price stabilisation fund and an investment fund through the Botswana Meat Commission (BMC);
  • provision of government loans to BMC;
  • highly subsidised measures for vaccination, quarantine and animal disease control;
    • government cost-sharing for traceability schemes.

Against this background of government support, the BMC improved its financial position in recent years, benefiting in particular from increases in EU beef prices following the restrictions placed on Brazilian beef exports. Good returns on the EU market enabled incentive prices to be offered for cattle destined for the EU market, increasing the availability of meat for export to the EU. 2010 saw the implementation of a restructuring plan for BMC’s European operations, involving the adoption of a ‘market-led rather than production-driven’ strategy likely to mirror Meatco’s successful marketing strategy, but with the additional dimension of providing marketing services to beef exporters from third countries (Uruguay and Italy) as a revenue-earning measure.

These plans however could well be undermined by the suspension of Botswanan beef exports to the EU following findings of ‘non-compliance with EU abattoir hygiene and animal traceability standards’. The industry has a substantial agenda of issues to be addressed, and the government is implementing an 80 million pula (€8.49 million) emergency programme to address the shortcomings identified in the Food and Veterinary Office report. With a FMD outbreak also overhanging the sector, export prospects look grim for the remainder of 2011 (see Agritrade article, ‘ The cost of closure of the EU market to Botswana beef exports’, June 2011).

The level of government investment in beef production in Botswana needs to be seen against the background of more general economic difficulties. Diamond export revenues have fallen 43%, while in all but one month since 2008 Botswana has been running a trade deficit. The fiscal consequences of this economic downturn are now feeding through into budget process. While this has not immediately impacted on livestock sector expenditures, SACU revenue declines resulting from the economic downturn could well become permanent, which would imply a fiscal deficit of as much as 6% of GDP. Any review of the SACU revenue-sharing arrangement would be likely to compound these revenue declines, and prompt increased pressure to reduce levels of government support to the beef sector. Any such course of action could impact on the net income retained by cattle farmers and hence undermine the number of cattle offered for slaughter to BMC. Analysts however argue that, outside a handful of countries, beef exports are marginal in terms of the overall development of the livestock sector in sub-Saharan Africa.

2.5 Developments in ACP intra-regional trade

Within Africa there is tremendous potential for the development of the beef sector, given the expanding national and regional demand for beef. Analysts have argued that domestic and regional livestock markets are the key to the development of the livestock sector in sub-Saharan African. Even in Southern Africa, given the process of preference erosion that is under way on the EU market, efforts are being made to develop production for regional markets. In Namibia this ranges from the development of high-quality vacuum-packed quality-differentiated beef cuts for the Woolworths supermarket chain in South Africa, through the development of canned and chilled meat products from northern communal areas for export to Angolan, Zimbabwean and South African markets, to the conclusion of new bilateral arrangements for trade in meat products with countries with huge market potential such as the DRC.

This process of market diversification, placing products on a wide range of markets where they yield the greatest returns at any given time, makes solid commercial sense in an era of price- and exchange-rate volatility.

Beyond Southern Africa, the West African region is illustrative of the tremendous potential for the development of the livestock sector based on national and regional markets. The region has a cattle population of over 60 million head, with the livestock sector in ECOWAS contributing some 44% of agricultural GDP and providing livelihoods for millions of people. While 98% of regional beef consumption is met from domestic production, demand is growing at twice the rate of supply (4%, compared to 2% per annum). In addition, per capita consumption is low by international standards, between 14 and 20% the level of per capita consumption in the EU. Tremendous scope for expansion of commercial beef production therefore exists. Scope also exists for the expansion of trade in feedstuffs from coastal zones to the cattle-raising hinterland.

Currently trade flows largely take place from inland producers to major coastal country markets, such as Côte d’Ivoire, Nigeria and Ghana, mainly in the form of live cattle. According to the WTO, ‘some WAEMU [West African Economic and Monetary Union] countries (e.g. Benin) import large quantities of meat from non-WAEMU countries on an MFN [most favoured nation] basis rather than from neighbouring member countries that have an exportable surplus (such as Burkina Faso and Mali) owing to the serious obstacles hindering trade within the Union’. These include concerns relating to SPS and quality standards, which are a serious impediment to trade, but extend way beyond, to include a variety of non-tariff obstacles. Such barriers range from levies which have replaced former import duties, through unofficial ‘wildcat’ taxes, to physical and logistical infrastructure constraints. Together these factors create major problems of price competitiveness on coastal urban markets.

All of these factors hold back the creation of a functioning single market in cattle and beef products in West Africa, despite the policy commitment to the free movement of goods. In order to reduce costs and enhance competitiveness in the beef sector, it is important to: remove levies and unofficial taxes; harmonise standards and SPS regulations; facilitate trade and investment in processing infrastructure; and make logistical improvements.

Both Burkina Faso and Benin are implementing major action plans for development of their livestock sectors. These focus on:

  • raising animal productivity by improving feed availability;
  • facilitating trans-border trade and the movement of cattle;
  • improving animal health and establishing effective crisis response capacities (in response to animal disease outbreaks and droughts).

However attention also needs to be paid to developing policies to promote processing of beef products prior to export. This requires major investment in the development of processing, transportation and handling of beef products, as well as the harmonisation of standards for beef products at the regional level.

Questions have also been raised about the effectiveness of regional trade policies in supporting the development of beef sectors and intra-regional trade. With animal products seen as staple foods, tariffs are a low 5% under the WAEMU common external tariff (CET). Studies suggest that the beef sector is one of the sectors most vulnerable to trade liberalisation. Overall the ECOWAS Secretariat maintains that ‘imports of animal products are one of the development constraints on the agriculture and livestock sub-sectors in the region’ and represent a ‘drain’ on the regions resources. It is against this background that the ECOWAS Commission has argued for policies which sustainably develop ‘the natural comparative advantages of the sahelian and savannah countries in animal production’.

On 4 February 2009, ECOWAS ministers of livestock, trade and food security undertook to:

  • strengthen production systems by improving veterinary services, protecting land rights of pastoralists, enhancing feed availability, improving herd quality and facilitating trade, through the harmonisation of national regulations;
  • implement concrete measures to facilitate cross-border trade;
  • promote greater processing by harmonising standards;
  • share market information more efficiently;
  • enhance training and research in the livestock sector;
  • support all actors in the livestock chain in accessing financing to improve production and competitiveness throughout the supply chain;
  • define the CET so as to ‘promote the regional livestock sub-sector and enable regional supply to replace imports from outside Africa’.

Similar efforts are under way in East Africa to eliminate non-tariff barriers to trade and facilitate greater intra-regional trade within the feed–cattle–beef products production chain. These efforts aim to address the situation of ‘disturbingly low’ levels of intra-regional trade which currently take place.

This provides the background to the treatment of trade in livestock products within the various EPA negotiations which are under way. These efforts also need to be seen in relation to current EU exports of meat products (both beef and poultry, which in some market components are interchangeable) to coastal African countries. A number of these trade flows could potentially disrupt efforts to promote greater intra-African trade in beef, and steps should be taken where necessary to ensure coherence between EU trade in beef and poultry products and national and regional efforts to promote the development of the livestock sector in Africa.

3. Implications for the ACP

 

3.1 Increasing market opportunities in the EU

Expanding EU beef imports could be expected to create opportunities for ACP beef exporters such as Namibia and Botswana. This is likely to be particularly the case if a tight EU market situation coincides with a continuation of high world market prices and an ongoing reluctance on the part of Brazilian exporters to take on the challenge of stricter EU SPS standards. Under these circumstances and with production difficulties being faced in Argentina, this could serve to support EU market prices to the benefit of ACP exporters. However this will be critically affected by exchange-rate movements, with exchange-rate volatility, in the context of increased global price volatility, making effective forward planning extremely difficult in ACP countries.

It will also be affected by progress in the EU–Mercosur FTA negotiations. The granting of tariff concessions for beef in this context may provide the financial incentive for Brazilian beef exporters to ‘bite the bullet’ and fully comply with EU SPS and food safety requirements. If this occurs, Brazilian beef exports could rapidly increase, relieving the pressure on EU markets which currently keeps EU beef prices high. The outcome of the EU–Mercosur negotiations in the beef sector is thus of considerable importance to the future ACP–EU beef trade, as is the outcome of the WTO negotiations in the beef sector (see Agritrade article ‘ EU farmers release data on concerns over EU–Mercosur negotiations’, April 2011).

3.2 Addressing the impact of EU beef exports on intra-regional trade

Efforts are under way in West Africa to try to address a situation in which SPS controls favour the importation of livestock products from beyond the region. Policy initiatives seeking to create the commercial space for greater intra-regional trade in livestock products in West Africa therefore need to be coordinated with the deployment of EU trade support tools and the operationalisation of EPA commitments on the use of traditional trade policy tools (e.g. import licensing arrangements).

3.3 The internationalisation of EU production standards

While EU efforts to ensure equivalence of production standards on beef imports into the EU are primarily aimed at Mercosur beef exports (see Agritrade article ‘ EU-Mercosur negotiations relaunched, Central American negotiations concl...’, June 2010), it seems likely that the ACP beef trade could equally get caught up in the stricter enforcement of EU SPS, food safety and animal welfare regulations. Given the high fixed costs of compliance and the limited volumes of ACP exports, the formal extension of animal welfare and other rules to all producers wishing to export meat products to the EU would be likely to result in higher increases in unit costs in ACP countries than in advanced developing countries. This could result in the de facto closure of the EU market, not because ACP producers do not comply with EU animal welfare and other standards, but because the costs of setting up systems to verify compliance is simply not warranted by the volume and total value of the meat products exported.

‘Aid for trade’ support could potentially play a significant role in supporting ACP exporters in adjusting to these changes, as could improved mechanisms for information exchange on the future evolution of EU standards. A timely sharing of information in this regard could allow investments in meeting future standards to be incorporated into routine reinvestment activities.

The problem of the cost effects of stricter EU SPS and related standards could also in part be addressed by targeting quality-differentiated markets with value-added consumer-ready products. By generating a greater value on exports this enhances the commercial sustainability of exports in the face of increased SPS-related costs. This option is currently being vigorously pursued by elements of the Namibian beef sector. However, it is likely to remain an ongoing challenge with the balance of benefits being influenced by developments largely beyond the control of beef sector operators, notably exchange-rate movements.

 

3.4 EPAs and SPS issues

Realising the potential of EPAs for facilitating trade, and helping ACP exporters to overcome obstacles posed by the stricter application of more rigorous SPS standards and the emergence of more clearly articulated quality standards, hinges on the adoption of clear and comprehensive policies to address these issues. The consequences for developing country partners in the ACP need to be taken up and addressed in the design and application of EU standards and through supporting flanking measures (including expanded ‘aid for trade’ support to capacity-building at private  and public sector levels in ACP countries).

This suggests a need to establish a clear development dimension to all aspects of EU SPS, food safety and food quality policy, in order to meet in full the commitments made under the Cotonou agreement to ‘the progressive removal of barriers to trade between the parties’. Critical to this would be the establishment of special technical committees as part of the EPA agreements to address potential SPS- and TBT-related barriers to trade resulting from current and evolving EU regulations. Such committees would need to be supported by the availability of dedicated financing instruments to address issues related to SPS and food safety as they arise.

 

3.5 EU quality labelling

From the perspective of ACP beef exporters a critical concern is ensuring that EU animal welfare labelling requirements (and other forms of ‘quality’ labelling) do not act as impediments to trade or reduce the scope for ACP exporters securing premium prices. Some ACP beef exporters have already sought to position themselves to meet any EU animal welfare labelling requirements, as part of a wider trade restructuring strategy aimed at serving ‘quality differentiated’ meat product markets. Nevertheless the ‘small print’ of any EU animal welfare labelling scheme is likely to have important cost implications and should therefore be carefully scrutinised before it becomes part of formal EU regulations.

 

Main sources

1. EC, ‘Prospects for agricultural markets and income in the EU, 2010– 2020’, December 2010

http://ec.europa.eu/agriculture/publi/caprep/prospects2010/fullrep_en.pdf

2. EC, ‘Agriculture commodity markets: Outlook 2010-2019’, July 2010

http://ec.europa.eu/agriculture/analysis/tradepol/worldmarkets/outlook/2...

3. OECD–FAO, ‘Agricultural outlook 2010’ (forecasts to 2019)

http://www.oecd-ilibrary.org/agriculture-and-food/oecd-fao-agricultural-...

4. CTA, ‘The role of livestock for ACP countries: Challenges and opportunities ahead’, Brussels Development Briefings, 2009

http://brusselsbriefings.net/2009/06/05/1st-july-2009-%E2%80%9Cthe-role-...

5. ECOWAS/OECD/SWAC, ‘Livestock and regional market in the Sahel and West Africa: Potentials and challenges’, 2008

http://www.oecd.org/dataoecd/10/8/41848366.pdf

6. ICTSD, ‘Sanitary, Phytosanitary and Technical barriers to Trade in the EPAs between the EU and the ACP countries’, August 2010

http://ictsd.org/downloads/2010/09/prevost_web_final.pdf

7. EC, monthly analysis of EU agricultural commodity and food price developments

http://ec.europa.eu/agriculture/analysis/markets/foodprices/index_en.htm

8. Index Mundi, monthly and daily world market prices for beef

http://www.indexmundi.com/commodities/?commodity=beef

9. Meatco Namibia, press releases on developments in beef marketing

http://www.meatco.com.na/news

10. WTO, Trade Policy Reviews providing access to analysis of beef-sector trade policies for a variety of African beef-producing countries

http://www.wto.org/english/tratop_E/tpr_e/tp_rep_e.htm

Comment

Terms and conditions