Required Report - public distribution

**Date:** 7/15/2005

**GAIN Report Number:** E35141

E35141

**EU-25**

**Livestock and Products**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)Norval E. Francis

U.S. Mission to the EU

**Prepared by:**

Yvan Polet

**Report Highlights:**

Beef production in the EU is decreasing in 2005. This results from
increases in the beef herd in the NMS that do not offset EU-wide
decreases in dairy herds, which result from increased milk production
per cow. While domestic consumption is stable after recovering from the
BSE scares, the decrease in beef production leads to increased beef
imports, mainly from Brazil, and a decrease in exports. This trend is
forecast to continue in 2006.

Pig slaughter and pork production in the EU is reaching a low in 2005,
mainly in the EU-15 as most NMS are increasing production after
accession. This lower production results in a decrease in domestic
consumption as a consequence of high pork prices, while pork exports to
Japan and Russia are expected to remain stable. As swine inventories are
increasing again across the EU, pork production is forecast to increase
in 2006. This will presumably lead to an increase in consumption and
slightly higher exports.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Unscheduled Report

Brussels USEU \[BE2\]

\[E3\]

Table of Contents

[Executive Summary 4](#executive-summary)

[Cattle 5](#cattle)

[Beef 7](#beef)

[Swine 8](#swine)

[Pork 10](#pork)

[Policy 11](#policy)

[Market adjustments resulting from CAP reform and Enlargement
11](#market-adjustments-resulting-from-cap-reform-and-enlargement)

[Impacts of Animal Welfare legislation
13](#impacts-of-animal-welfare-legislation-also-see-gain-34089---animal-welfare-legislation-in-the-eu---update)

[BSE related issues 13](#bse-related-issues)

This report is the result of active collaboration with the following EU
FAS colleagues in the member states:

Xavier Audran from FAS Paris covering France

Petra Choteborska from FAS Prague covering the Czech Republic

Bob Flach from FAS The Hague covering the Benelux

Michael Hanley from FAS Dublin covering Ireland

Steve Knight from FAS London covering the United Kingdom

Roswitha Krautgartner from FAS Vienna covering Austria

Hasse Kristensen from FAS Copenhagen covering Denmark

Asa Lexmon from FAS Stockholm covering Estonia, Finland, Latvia and
Sweden

Sabine Lieberz from FAS Berlin covering Germany

Alberto Menghini from FAS Rome covering Italy

Jana Mikulasova from FAS Prague covering the Slovak Republic

Andreja Misir, from FAS Zagreb covering Slovenia

Ferenc Nemes from FAS Budapest covering Hungary

Leonor Ramos from FAS Lisbon covering Portugal and Spain

Piotr Rucinski from FAS Warsaw covering Lithuania and Poland

Stamatis Sekliziotis from FAS Athens covering Greece

As Bulgaria and Romania are scheduled to accede to the EU as of 2007,
Cristina Cionga from FAS Bucharest also contributed to this report.

# Executive Summary

Total EU cattle herds are decreasing in the EU, as increases in beef
cattle do not offset the decreases in dairy herds. The increases in beef
cattle are mainly in the NMS. This trend will continue in 2006. As a
consequence of the decrease in cattle herds, slaughter and beef
production is decreasing too. Cattle slaughter is recovering in the NMS
after the significant decline in 2004, because of the export of large
numbers of cattle to the EU-15. It is expected that the drought may lead
to an increase in slaughter in Spain and Portugal, as farmers run out of
forage. With EU beef consumption being fairly stable again after
recovering from the BSE scares, beef imports are increasing, mainly from
South-America, and beef exports are decreasing. Since the EU became a
net importer of beef in 2003, all beef stocks have been sold and beef
prices have crept up to a historical level. This has prompted the EC to
decrease export refunds significantly over the past year.

EU pig production is reaching a low in 2005 and more specifically in the
EU-15, as most NMS, except Hungary and the Slovak republic, are
increasing production after accession. Pig production is forecast to
increase again throughout the EU in 2006, except in the Benelux and
Italy. As a result, pig slaughter and pork production also decrease in
2005. This mainly results in a decrease in consumption in the NMS and to
a lesser extent in the EU-15, as a consequence of the high pork prices.
Exports, to Japan and Russia mainly, are expected to remain stable. In
2006, pork production is forecast to increase again, which will
presumably lead to an increase in domestic consumption and a further
slight increase in exports.

# Cattle

  ------------------- ----------- ----------- ---------- ----------- ---------- -----------
  **Country**         **EU-25**                                                 

  Commodity           Animal                                                    
                      Numbers,                                                  
                      Cattle                                                    
                      (1000 Head)                                               

                      USDA        Posts       USDA       Posts       USDA       Posts
                      Official    estimates   Official   estimates   Official   estimates
                      \[old\]     \[new\]     \[old\]    \[new\]     \[old\]    \[new\]

  Market Year         2004                    2005                   2006       

  Total Cattle Beg.   87,478      87,478      86,200     86,674      0          85,900
  Stocks                                                                        

  Dairy Cows Beg.     23,965      23,963      23,550     23,435      0          23,125
  Stocks                                                                        

  Beef Cows Beg.      12,038      12,324      11,950     12,379      0          12,475
  Stocks                                                                        

  Production (Calf    31,640      31,553      31,240     31,060      0          30,850
  Crop)                                                                         

  Extra EU25 imports  55          68          50         60          0          55

  **TOTAL SUPPLY**    119,173     119,099     117,490    117,794     0          116,805

  Extra EU25 exports  435         433         400        350         0          320

  Cow Slaughter       7,145       7,520       7,050      7,400       0          7,275

  Calf Slaughter      6,080       5,942       6,030      5,900       0          5,925

  Total Slaughter     29,720      29,249      29,040     28,750      0          28,650

  Loss                2,818       2,743       2,650      2,794       0          2,585

  Ending Inventories  86,200      86,674      85,400     85,900      0          85,250

  **TOTAL             119,173     119,099     117,490    117,794     0          116,805
  DISTRIBUTION**                                                                
  ------------------- ----------- ----------- ---------- ----------- ---------- -----------

Sources: EU FAS Offices

**2004**

Beef cow inventories were revised up from the last report due to the
availability of previously missing data in some of the NMS. Trade
figures were also updated, as full year 2004 data became available.
Slaughter figures were revised down, mainly as the result of lower than
previously expected slaughter in Germany. However, slaughtering at the
end of 2004 was high in Germany, Denmark, Sweden and the United Kingdom,
because farmers sought to benefit from slaughter premia before their
abolition with the implementation of decoupling as part of the CAP
reform in 2005 in those countries. Benelux slaughter increased as a
result of renewal of the dairy herd, while Portuguese slaughter
increased as farmers are activating the additional slaughter premia that
had been granted to Portugal. Ending inventories were also revised, as
December 2004 census figures for the EU have been published.

**2005**

Dairy cow numbers are continuing their long-term decline, as average
milk production per cow further increases and milk production is limited
by production quota. The beef cow herd is increasing as farmers in some
of the NMS, mainly Poland, the Czech Republic and Hungary, are switching
from dairy production to beef production. Beef cowherds in the EU-15
remain fairly stable overall. The decrease in the total cowherd results
in lower calf births.

Cattle export is expected to decrease mainly as a result of lower German
exports to Lebanon, which will only be partly offset by increased
Benelux exports of breeding cattle to Algeria. As a result of decreasing
calf crop, cattle slaughter is also expected to decrease by almost 2
percent from 2004. This decrease is occurring in the EU-15, as cattle
slaughter in the NMS is actually recovering from a massive decrease in
2004, which was triggered by the large exports of mainly Polish cattle
to the EU-15. However first quarter import figures of cattle into
Germany show a drastic decline from Poland (↓85%) and the Czech Republic
(↓68%). This and the effect of decoupling is expected to lead to a
decrease in slaughter in Germany of about seven percent compared to the
elevated slaughter figures of 2004. Cattle slaughter in Spain and
Portugal is expected to increase because farmers dispose of younger
animals in response to forage shortage, which is provoked by the
drought. In Spain, this problem was exacerbated by the fact that farmers
had reduced slaughter and increased herds in 2004. Dairy herd renewal
and restructuring are the main factors that influence cattle slaughter
numbers in most Northern EU member states. Ending inventories in 2005
are expected to be almost one percent down from 2004. In Spain,
inventories are also expected to decrease mildly as a result of
constraints related to the outbreak of Blue Tongue Disease (BTD) in the
key cattle breeding provinces of Andalucia and Extremadura.

**2006**

Dairy herds are expected to continue their decrease, partly offset by an
increasing beef herd. As a result, a slight decrease in calf crop is
forecast for 2006. With stable cattle imports, this decrease in
production is forecast to lower cattle exports and slaughter. Cattle
exports are forecast lower because the EU market has become deficient
and high prices with good profitability are taking away incentives to
export. This is particularly the case for France. This decrease in
extra-EU export, however, hides important cattle trade flows inside the
EU. Increases in exports of German calves are expected to other EU
member states, like The Netherlands and Italy, who still have CAP
slaughter premia coupled. Farmers in Poland are expanding their cattle
herds, while new investments in slaughter and processing capacity will
only gradually become operational to absorb this increased production.
Cattle ending inventories in 2006 are forecast to further decrease.

  ----------------------------- ------------- ------------- -------------
  **Cattle calf crop production                             
  (Top 5 EU-25 member states)**                             
  1000Head                                                  

                                **2004**      2005          **2006**

  France                        6,820         6,800         6,770

  Germany                       4,678         4,550         4,465

  United Kingdom                3,012         3,000         3,000

  Italy                         2,700         2,650         2,650

  Benelux                       2,500         2,475         2,475

  Benelux is closely followed                               
  by Poland and Spain                                       

                                                            

  **Cattle slaughter (Top 5                                 
  EU-25 member states)**                                    
  1000Head                                                  

                                2004          **2005**      **2006**

  France                        5405          5320          5280

  Italy                         4197          3950          4000

  Germany                       4141          3850          3750

  Benelux                       2825          2785          2785

  Spain                         2684          2750          2750

  Benelux: Belgium, The                                     
  Netherlands and Luxembourg                                
  are treated as one market                                 

                                                            

  **Cattle exports (Top 5 EU-25                             
  member states)** 1000Head                                 

                                2004          **2005**      **2006**

  Poland                        121           100           75

  Germany                       142           70            70

  Hungary                       51            48            45

  France                        49            45            42

  Benelux                       13            14            14
  ----------------------------- ------------- ------------- -------------

# Beef

  --------------------- ----------- ----------- ---------- ----------- ---------- -----------
  **Country**           **EU-25**                                                 

  Commodity             Meat, Beef                                                
                        and Veal                                                  
                        (1000 Head;                                               
                        1000MT CWE)                                               

                        2004                    2005                   2006       

                        USDA        Posts       USDA       Posts       USDA       Posts
                        official    Estimates   official   Estimates   official   Estimates
                        \[old\]     \[new\]     \[old\]    \[new\]     \[old\]    \[new\]

  Slaughter (Reference) 29,720      29,249      29,040     28,750      0          28,650

  Beginning Stocks      59          59          0          0           0          0

  Production            8,077       7,941       7,950      7,825       0          7,800

  Extra EU25 imports    485         583         550        625         0          650

  **TOTAL SUPPLY**      8,621       8,583       8,500      8,450       0          8,450

  Extra EU25 Exports    350         358         300        250         0          225

  TOTAL Domestic Use    8,271       8,225       8,200      8,200       0          8,225

  Ending Stocks         0           0           0          0           0          0

  **TOTAL               8,621       8,583       8,500      8,450       0          8,450
  DISTRIBUTION**                                                                  
  --------------------- ----------- ----------- ---------- ----------- ---------- -----------

Sources: EU FAS Offices

**2004**

Beef imports into the EU were considerably higher than previously
anticipated, with 90 percent imported from South-America. This was the
result of the lower than anticipated slaughter. EU beef exports were in
line with previous forecasts. Domestic consumption ended slightly below
forecasts because of the increase in beef prices. Domestic consumption
figures may even be slightly overblown because of the building of
commercial beef stocks at the end of 2004 in those member states that
decoupled slaughter premia at the beginning of 2005.

**2005**

EU beef production is expected to decrease in line with decreasing
cattle slaughter. Veal production in The Netherlands is also expected to
fall short of the high 2004 production, because of a lack of calves
available, mainly from Germany. This decrease in production is expected
to lead to an increase in beef imports of about 7 percent in 2005. EU
beef exports, most of them to Russia, are expected to further decrease
because of high EU beef prices. The recent decrease in export refund
levels by 20 percent is also hampering further exports. Because of this
increasing beef production deficiency on the European market, the
decrease in export refunds and in anticipation of the loss of market
share in the U.K. when Over Thirty Month Scheme (OTMS) is ended, Ireland
is already focusing its beef exports more to the European continent.
Domestic consumption is expected to further decrease by a quarter of a
percent in continuation of the long-term trend and, mainly in the NMS
but also in other countries such as France, because of the high beef
price.

**2006**

EU beef production is forecast to decrease further. This forecast is not
taking the effect of a likely end to the U.K. OTMS in 2006 into
consideration. As a result, forecasts are that beef imports will further
increase and exports will further decrease as the EU deficit for beef is
widening. Despite expectations of lasting high beef prices in the EU
market, forecasts are for a slight resumption in domestic consumption
throughout the EU in 2006.

  ------------------------------- ------------- ------------- -------------
  **Beef production (Top 5 EU-25                              
  member states)** 1000MT                                     

                                  2004          **2005**      **2006**

  France                          1,542         1,520         1,510

  Germany                         1,290         1,263         1,225

  Italy                           1,148         1,122         1,116

  Spain                           702           715           720

  United Kingdom                  709           701           683

                                                              

  **Beef consumption (Top 5 EU-25                             
  member states)** 1000MT                                     

                                  2004          **2005**      **2006**

  France                          1,614         1,615         1,612

  Italy                           1,436         1,441         1,464

  United Kingdom                  1,364         1,370         1,380

  Germany                         945           940           935

  Spain                           647           650           655

                                                              

  **Beef exports (Top 3 EU-15                                 
  member states)** 1000MT                                     

                                  2004          **2005**      **2006**

  Ireland                         57            60            60

  Germany                         82            55            50

  Benelux                         30            32            32

  Spain                           34            30            30

  Italy                           31            27            25
  ------------------------------- ------------- ------------- -------------

# Swine

  --------------------- ---------- ----------- ---------- ----------- ---------- -----------
  **Commodity**         **Animal                                                 
                        Numbers,                                                 
                        Swine                                                    
                        (**1000                                                  
                        Head)                                                    

                        USDA       Posts       USDA       Posts       USDA       Posts
                        official   estimates   official   estimates   official   estimates
                        \[old\]    \[new\]     \[old\]    \[new\]     \[old\]    \[new\]

                                                                                 

  Market Year Begin     2004                   2005                   2006       

  TOTAL Beginning       152,701    152,793     151,100    151,657     0          152,500
  Stocks                                                                         

  Sow Beginning Stocks  14,360     14,590      14,260     14,282      0          14,350

  Production (Pig Crop) 251,000    252,316     252,100    252,000     0          253,700

  Extra EU25 imports    0          0           0          0           0          0

  TOTAL SUPPLY          403,701    405,109     403,200    403,657     0          406,200

  Extra EU25 exports    320        372         310        400         0          400

  Sow Slaughter         3,790      3,803       3,630      3,730       0          3,720

  Total Slaughter       241,530    241,816     240,000    240,000     0          242,200

  Loss                  10,751     11,264      10,890     10,757      0          10,600

  Ending Inventories    151,100    151,657     152,000    152,500     0          153,000

  TOTAL DISTRIBUTION    403,701    405,109     403,200    403,657     0          406,200
  --------------------- ---------- ----------- ---------- ----------- ---------- -----------

Sources: EU FAS Offices

**2004**

Swine beginning inventories were updated to match an EC review of swine
inventories. As a result, pig crop was revised. Extra EU exports of pigs
were higher than previously anticipated. These exports included
slaughter pigs from Poland to Russia and from Hungary to Romania, as
well as piglets from The Netherlands, Germany and Austria to Croatia and
Romania. Intra-EU trade of live pigs is also significant. Piglet exports
from Denmark to Germany increased at the expense of Dutch exports, which
shifted to the NMS. Germany and Italy imported slaughterpigs from the
Benelux, Denmark and France, while Czech slaughterpigs were exported to
Hungary mainly. Total pig slaughter numbers were also reportedly higher
than previously anticipated. This was mainly because Poland and the
Czech Republic reported higher than expected pig slaughtering. Swine
ending inventories for 2004 were updated as EC December census numbers
were published.

**2005**

EU pig crop is expected to decrease only marginally from 2004, as the
European pig cycle reaches its bottom. Exports of mainly piglets, from
The Netherlands, Germany and Austria to the Balkan countries and
Romania, are expected to further increase in 2005. Pig slaughter is
expected to decrease by about one percent, mainly in Hungary, Poland,
The Czech Republic and the Slovak Republic. Swine ending inventories are
expected to increase throughout the EU, but more pronounced in Hungary,
Poland, Portugal and the Benelux. Pig numbers are expected to further
decline in the Czech and Slovak Republic, Spain and in the United
Kingdom.

**2006**

With inventories increasing, pig crop is also forecast to increase,
especially in the NMS. Exports of piglets to Croatia and Romania are
forecast to stabilize, as expectations are that domestic pig production
will increase in these countries as a result of foreign investments. Pig
slaughter is forecast to increase by one percent and ending inventories
are forecast to further increase. The largest increases in slaughter
should occur in Poland, Hungary, Denmark, Germany, Ireland and Italy.
Only Austria, Sweden and the Czech Republic are forecast not to have
reached the bottom of their pig cycle yet by the end of 2006.

  --------------------------------- ------------ ------------ ------------
  **Pig crop production (Top 5                                
  EU-25 member states)** 1000Head                             

                                    **2004**     **2005**     **2006**

  Germany                           43,729       42,750       42,850

  Spain                             40,180       39,250       39,300

  Benelux                           32,800       34,050       33,600

  Denmark                           26,498       26,550       27,000

  France                            26,199       26,220       26,260

  Benelux: Belgium, The Netherlands                           
  and Luxembourg are considered one                           
  market                                                      

                                                              

  **Swine slaughter (Top 3 EU-15                              
  member states)** 1000Head                                   

                                    **2004**     **2005**     **2006**

  Germany                           46,321       46,600       46,700

  Spain                             38,065       37,989       38,000

  Benelux                           25,597       26,340       26,340

  France                            25,555       25,400       25,420

  Poland\*                          23,228       22,520       23,900

  \* Poland slightly surpasses                                
  Denmark                                                     

                                                              

  **Swine exports (Top 3 EU-15                                
  member states)** 1000Head                                   

                                    2004         **2005**     **2006**

  Poland                            123          100          100

  Hungary                           80           100          90

  Benelux                           51           70           70

  Germany                           48           70           70

  Austria                           24           30           30
  --------------------------------- ------------ ------------ ------------

# Pork

  -------------------- ------------- ----------- ---------- ----------- ---------- -----------
  **Country**          **EU-25**                                                   

  **Commodity**        **Pigmeat**                                                 
                       (1000 MT                                                    
                       CWE)(1000                                                   
                       HEAD)                                                       

                       USDA official Posts       USDA       Posts       USDA       Posts
                       \[old\]       estimates   official   estimates   official   estimates
                                     \[new\]     \[old\]    \[new\]     \[old\]    \[new\]

  Market Year Begin    2004                      2005                   2006       

  Slaughter            241,530       241,816     240,000    240,000     0          242,200
  (Reference)                                                                      

  Beginning Stocks     24            24          0          0           0          0

  Production           21,200        20,851      21,100     20,720      0          20,900

  Extra EU25 imports   26            20          25         20          0          20

  TOTAL SUPPLY         21,250        20,895      21,125     20,740      0          20,920

  Extra EU25 exports   1,350         1,436       1,300      1,430       0          1,450

  TOTAL Domestic Use   19,900        19,459      19,825     19,310      0          19,470

  Ending Stocks        0             0           0          0           0          0

  TOTAL DISTRIBUTION   21,250        20,895      21,125     20,740      0          20,920
  -------------------- ------------- ----------- ---------- ----------- ---------- -----------

Sources: EU FAS Offices

**2004**

Updates to previous estimates don't change the picture much, as a
downward review of pork production translates in a downward review of
pork consumption. Provisionally final pork export figures turned out
higher than previously estimated.

**2005**

Pork production in 2005 is expected to slightly decrease, more or less
in line with the decrease in pig slaughter. In the EU-15, decreases in
production in Italy, Spain and Denmark are forecast to more than offset
increases in the Benelux, Germany and the United Kingdom. However, pork
production decreases in the Czech Republic, Hungary and Poland are
forecast to more than offset the production increase in the EU-15.
Imports and exports are expected to remain stable overall. Increases in
export from the EU-15, mainly to Japan, Korea and Russia, are forecast
to offset decreases in exports from the NMS to Russia. Domestic
consumption of pork is expected to slightly decrease because of high
pork prices and lower supplies. Especially in the NMS pork consumption
is expected to decrease about 3 percent, while pork consumption in the
EU-15 would remain stable.

**2006**

Pork production is forecast to increase again in 2006, in line with
expectedly increased slaughter. Pork imports are forecast to remain
stable. Pork exports are forecast to increase, as Polish exports to
Russia should resume gradually after Polish plants get export approval
again from the Russian inspection services. Domestic pork consumption in
the NMS is forecast to recover, as local production is expected to
increase, thus increasing supplies and lowering pork prices. This is
forecast to lead to lower exports to the EU-15. EU-15 pork consumption
is forecast to remain stable, as increased domestic production will
substitute lower imports from the NMS.

  -------------------------------- ------------ ------------ ------------
  **Pig meat production (Top 5                               
  EU-25 member states)** 1000MT                              

                                   **2004**     **2005**     **2006**

  Germany                          4,308        4,350        4,360

  Spain                            3,191        3,180        3,180

  Benelux                          2,353        2,420        2,420

  France                           2,064        2,058        2,060

  Denmark\*                        1,804        1,780        1,820

  \* Denmark slightly surpasses                              
  Poland                                                     

  Benelux: Belgium, The                                      
  Netherlands and Luxembourg are                             
  considered one market                                      

                                                             

  **Pig meat consumption (Top 3                              
  EU-15 member states)** 1000MT                              

                                   **2004**     **2005**     **2006**

  Germany                          4,307        4,300        4,300

  Spain                            2,564        2,550        2,550

  Italy                            2,237        2,236        2,258

  France                           1,967        1,960        1,940

  Poland                           1,616        1,600        1,670

                                                             

  **Pig meat exports (Top 3 EU-15                            
  member states)** 1000MT                                    

                                   2004         **2005**     **2006**

  Denmark                          507          500          500

  Germany                          224          290          290

  Benelux                          139          145          145

  France                           122          110          120

  Poland                           141          80           100
  -------------------------------- ------------ ------------ ------------

# Policy

## Market adjustments resulting from CAP reform and Enlargement

EU **beef** consumption has virtually entirely recovered from the
consumption crises that resulted from the BSE scare. However, markets in
the EU-15 and the NMS evolve in very different ways, as beef consumption
per capita in the NMS is traditionally less than half per capita
consumption in the EU-15. Beef production has been responding in various
ways in different MS on the BSE crisis. The differences between MS in
the implementation of the 2003 CAP Reform and the market effects of the
2004 Enlargement have enhanced these evolutions and the full impact of
these changes will further remodel EU beef markets.

The large pre accession price differential in cattle prices between
EU-15 and NMS led to an extra flow of cattle imports from the NMS into
the EU-15 in the second half of 2004. These extra 0.3 million head or a
60 percent increase (Hungary up about 170.000 head; Poland up about
100.000 and the Czech Republic up 25.000) of cattle were mainly exported
to Italy and The Netherlands. This increased flow of cattle imports into
the EU-15 barely allowed for the compensation for the decrease in cattle
supplies in the EU-15. Slaughter in the NMS decreased significantly as a
result, also because many slaughterhouses hadn't met EU sanitary
requirements by the time of accession. The price differential rapidly
decreased, which led to a significant increase in beef prices and
consequently a decrease in beef consumption.

In the EU-15 beef production is restructuring as a result of the
implementation of the 2003 CAP Reform. The fact that MS are implementing
the reform in different years leads to some short-time market
influences. At the end of 2004, slaughter went up significantly in MS,
including Belgium, Germany, Portugal and the UK, that had decided to
decouple cattle slaughter premia at the beginning of 2005. This
phenomenon is not expected to occur at the end of 2005, as most MS
implementing the reform in 2006, including France and Spain, are keeping
the slaughter premia coupled. However, differences in the way and the
level MS are decoupling beef premia are leading to more structural
sector adjustments. Roughly speaking, Northern European countries,
including Germany, are decoupling all beef premia. As a result, it can
be expected that beef production from suckling cows and beef cattle will
decline or even disappear completely in time. Add to that the EU-wide
long-term decline in dairy herds because of increasing milk production
efficiency, and it can be safely forecast that total beef production in
Northern Europe will decrease. In the Southern part of Europe, from the
Benelux down to the Iberian Peninsula and Italy, part or all beef premia
will remain coupled. This means that the beef cattle herd is not likely
to decrease much, only the dairy herd.

Another structural problem for EU beef production is that, with the
decrease of the total cowherd, calf birth numbers are expected to
decrease significantly. A June 2005 study by the French "Institut de
l'Elevage", named " *Beef Production Outlook in the EU-25 for 2012*",
even forecasts a decrease in calf births of more than 2.5 million per
year or a decrease of 18 percent (even a decrease of 28 percent of
calves born from dairy cows). The study argues that the EU could import
up to 200.000 calves from Ukraine and Belarus, and roughly another
200.000 calves will become available again from the UK after the ending
of the OTMS. Most of these calves could supplement the Dutch veal
sector. Italy would also import part of these calves, together with some
increased imports from the countries in former Yugoslavia. EU beef
production would greatly have to uphold production from increases in
slaughter weight.

The **swine/pork** market is only indirectly impacted by the 2003 CAP
Reform from lower feeding costs as grain prices are reduced through the
reform. Enlargement is playing a much bigger role as it invigorated
trade between the EU-15 and the NMS. Piglet exports from the EU-15 to
the NMS increased significantly, while increased exports of
slaughterpigs went the other way. Pork trade increased both ways; higher
quality cuts to the EU-15 and more "sausage" meat to the NMS. The pig
sectors in Poland, Hungary and the Czech Republic are expected to expand
in the future, as a result of foreign investments from Danish, Dutch and
German, but also third country, including U.S., producers and
processors. The competitive feeding costs, lower environmental limits
and the proximity of important export markets in Russia, Ukraine and
other countries are the main drivers.

## Impacts of Animal Welfare legislation (also see GAIN 34089 - Animal Welfare Legislation in the EU - Update[^1])

New legislation on animal welfare standards during transport is likely
to discourage long distance transport of cattle and pigs in the future.
The new restrictions on travel times and stocking densities, as well as
requirements for drinking/feeding and a controlled atmosphere, will
raise the cost and economic feasibility of these transports
significantly. Some feel a solution would be to ship meat, not live
animals across the EU.

More info on European animal welfare programs is available at the EC
webpage <http://europa.eu.int/comm/food/animal/index_en.htm>.

## BSE related issues

Several BSE related issues could impact the EU beef market in the next
few years.

-   It is broadly expected that the UK will end its OTMS sometime in
    2006 and will switch to the animal testing regime as practiced by
    the other MS. The EC Beef Management Committee has already included
    discussions on necessary accompanying market management measures on
    their agenda, but no proposal has been issued yet.

-   The OIE recently overturned the BSE classification system in the
    Terrestrial Animal Health Code[^2] and provided for only three BSE
    risk categories. While the EU as a whole is to be included under the
    Controlled Risk group, some individual MS, such as Finland, may
    apply to be listed in the Negligible Risk group.

**Visit our website:** our website
**[www.useu.be/agri/usda.html]{.underline}** provides a broad range of
useful information on EU import rules and food laws and allows easy
access to USEU reports, trade information and other practical
information.

**E-mail**: <AgUSEUBrussels@usda.gov>

**Related reports from FAS EU**

USEU

+------------+-----------------------------------------------+--------+
| **Report   | **Title**                                     | #      |
| number**   |                                               | ###### |
|            |                                               | # Date |
+------------+-----------------------------------------------+--------+
| E35040     | [EU honors U.S. request to change rules on    | 3/     |
|            | licensing for pig meat import                 | 1/2005 |
|            | TRQ](http://www                               |        |
|            | .fas.usda.gov/gainfiles/200503/146118979.pdf) |        |
+------------+-----------------------------------------------+--------+
| E35023     | [BSE/TSE Situation in the EU-25 -             | 2/     |
|            | update](http://www                            | 7/2005 |
|            | .fas.usda.gov/gainfiles/200502/146118750.pdf) |        |
+------------+-----------------------------------------------+--------+
| E35018     | [Livestock                                    | 1/3    |
|            | semi-annual](http://www                       | 1/2005 |
|            | .fas.usda.gov/gainfiles/200502/146118695.pdf) |        |
+------------+-----------------------------------------------+--------+
| E35001     | [New EU Common Agricultural Policy starts in  | 1/     |
|            | some EU                                       | 3/2005 |
|            | countries](http://www                         |        |
|            | .fas.usda.gov/gainfiles/200501/146118406.pdf) |        |
+------------+-----------------------------------------------+--------+
| E34089     | [Animal Welfare Legislation in the EU -       | 11/1   |
|            | Update](http://www                            | 6/2004 |
|            | .fas.usda.gov/gainfiles/200411/146118064.pdf) |        |
+------------+-----------------------------------------------+--------+

**Austria**

+-------------+----------------------------------------------+--------+
| **Report    | **Title**                                    | #      |
| Number**    |                                              | ###### |
|             |                                              | # Date |
+-------------+----------------------------------------------+--------+
| AU5011      | [Second Confirmed Case of BSE in             | 6/2    |
|             | Austria](http://www.                         | 3/2005 |
|             | fas.usda.gov/gainfiles/200506/146130086.pdf) |        |
+-------------+----------------------------------------------+--------+

**Czech Republic**

+-------------+----------------------------------------------+--------+
| **Report    | **Title**                                    | #      |
| Number**    |                                              | ###### |
|             |                                              | # Date |
+-------------+----------------------------------------------+--------+
| EZ5002      | [Czech Authorities Confirm 17th Case of      | 2/     |
|             | BSE](http://www.                             | 9/2005 |
|             | fas.usda.gov/gainfiles/200502/146118770.pdf) |        |
+-------------+----------------------------------------------+--------+

**France**

+-------------+----------------------------------------------+--------+
| **Report    | **Title**                                    | #      |
| Number**    |                                              | ###### |
|             |                                              | # Date |
+-------------+----------------------------------------------+--------+
| FR5013      | [BSE Situation in France - February          | 2/1    |
|             | 2005](http://www.                            | 0/2005 |
|             | fas.usda.gov/gainfiles/200502/146118773.pdf) |        |
+-------------+----------------------------------------------+--------+

**Germany**

+-------------+----------------------------------------------+--------+
| **Report    | **Title**                                    | #      |
| Number**    |                                              | ###### |
|             |                                              | # Date |
+-------------+----------------------------------------------+--------+
| GM5006      | [BSE in Germany -- Update Covering           | 1/2    |
|             | 2004](http://www.                            | 6/2005 |
|             | fas.usda.gov/gainfiles/200501/146118576.pdf) |        |
+-------------+----------------------------------------------+--------+

  -----------------------------------------------------------------------
  These reports can be accessed through our website
  [www.useu.be/agri](http://www.useu.be/agri) or through the FAS website
  <http://www.fas.usda.gov/scriptsw/attacherep/default.asp>.

  -----------------------------------------------------------------------

[^1]: <http://www.fas.usda.gov/gainfiles/200411/146118064.pdf>

[^2]: <http://www.oie.int/eng/info/en_statesb.htm#evaluation>