OECD-FAO forecast production growth but falling prices for beef and lamb

Friday, 17 July 2020

By Bethan Wilkins

The OECD and FAO have jointly published the latest report on the World Agricultural Outlook for 2020-2029.

In a nutshell, prices are expected to fall in real terms for most agricultural commodities, with productivity improvements expected to eclipse higher demand and potential resource constraints.

World meat prices:

Source: OECD-FAO Agricultural Outlook 2020-2029

Global agricultural production is expected to grow over the coming decade, but at a slower rate than previous decades. However, the sector is particularly exposed to the effects of climate change, and is under pressure to intensify sustainably. This may ultimately give rise to more volatile food supplies and prices over the coming decade, particularly if no adaption measures are implemented.

Beef

In the short term, beef prices are expected to decline relatively quickly. This is due to ample beef supplies in major producing countries such as Argentina, Brazil and the US, following a rapid increase in herd size in recent years. However, as herds decline and production growth eases, prices are then projected to increase slowly, though this will still represent a decline in real terms relative to 2019 levels.

Beef production is expected to rise by about 7% over the decade overall. About 80% of the growth is expected to come from developing countries, which will increase their share of output by a couple of percentage points, reaching 58% by the end of the period.

Consumption growth will continue as populations and incomes grow in developing countries; per capita beef consumption in Asia is expected to increase by 3%, although it will remain well below developed countries. Per capita beef consumption is set decline overall, with pork and poultry increasingly favoured in countries where beef consumption is currently high.

Sheep meat

Sheep meat prices are projected to remain relatively high, despite some decline in “real terms”. Supplies are expected to remain constrained in the two leading global exporters, Australia and New Zealand, for at least the first part of the outlook period, due to flock contraction. This will limit supplies available for international trade, maintaining upward price pressure.

Sheep meat production is still expected to increase by 13% overall across the outlook period. However, this is mostly due to higher production in Asia (+14%), and to a lesser extent, Africa (+20%).

A growing population will also support increasing sheep meat consumption. Chinese demand is particularly set to increase, aided in the medium-term by the pork sector’s struggle with African Swine Fever.

High prices may constrain growth on a per capita level though, particularly in the Middle Eastern and North African countries where poultry is set to be increasingly favoured.

Bethan Wilkins

Senior Analyst - Red Meat

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