Industry Trend Analysis - Trade Disruption To Impact EU Meat Producers - JAN 2018

BMI View: The EU meat and livestock sector faces significant upheaval over the coming years due to the cumulative impact of Brexit, CETA and a possible EU-Mercosur free trade agreement. The outcome of trade negotiations with the United Kingdom and with Mercosur will determine the future of the European meat industry. Most of the risks are to the downside and we expect significant trade disruption to ultimately cau se a contraction in the sector.

We expect the EU meat sector to face significant pressure over our forecast period, due to the drop in aggregate demand that will result from Brexit, the implementation of the EU-Canada Comprehensive Economic and Trade Agreement (CETA), and the probable conclusion of another trade deal with Mercosur (a trading bloc that includes highly competitive meat-exporting countries such as Argentina, Brazil and Uruguay). In addition, changes to the EU Common Agricultural Policy due to come into effect in 2020 may confer a greater degree of flexibility to Member States regarding the distribution of subsidies to different agricultural sectors, according to the EU Commissioner for Agriculture, Phil Hogan ( see 'Stricter Environmental Requirements Expected In Post-2020 CAP' November 21 2017). This could, in turn, lead to reduced payments for livestock farmers in some countries. We believe that these developments, whether individually or in conjunction with each other, will reduce the EU meat sector's profitability and lead to a significant restructuring of trade flows between the EU and the rest of the world.

1. Chinese Import Demand To Slow

EU Meat Trade Surpluses Will Narrow
Select Meats - Trade Surplus ('000 tonnes)
f = BMI forecast. Sources: USDA, BMI

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