European Animal Health Markets and Opportunities Published May 2007

This report examines the size, structure and development of the EU market, and profiles the European operations of leading animal health product manufacturers. > About the report > Executive summary > Order

In the last decade, Europe's cattle producers have weathered difficult market conditions, caused by crises such as BSE and the UK's foot and mouth epidemic in 2001. Although consumer confidence in beef has recovered since the early part of this decade, cattle numbers have continued to decline in the majority of EU member states.

Cattle numbers in the EU-27 totaled just under 88.5 million in December 2006 - down by 1% on year-earlier figures. The EU herd has expanded by around 19% following the accession of ten new member states in 2004, and of Bulgaria and Romania at the beginning of 2006.

The most significant contributors to that increase are Poland, where numbers currently total 5.3 million, and Romania, which has a national herd of approximately 2.9 million.

France boasts the largest national cattle herd in the region, with a population of 18.9 million - equivalent to more than 21% of the EU-27 total. Herds in Germany (12.6 million) and the UK (just under 10 million) are also substantial. Some 47% of EU cattle are raised in these three countries.

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Europe's cattle producers have weathered often difficult market conditions during the past ten years. Demand and prices were hit in 1996 by the BSE crisis in the UK, and concerns surrounding BSE surfaced more widely at the beginning of this decade when cases were reported by governments in a number of other European countries. The UK was also hit by a major foot and mouth disease epidemic in 2001.

Consumer confidence in beef has recovered since the early part of this decade, and producer prices have improved as a result of stronger demand. Cattle numbers have continued to decline in the majority of EU member states, however. The French herd has contracted by well over one million head since the beginning of the decade, though reductions have been marginal in each of the past two years.

Numbers in Germany have fallen more sharply - down by almost two million since the late 1990s - and provisional figures indicate a further 2.5% decline during 2006. The UK herd, which expanded in the years immediately following the 2001 FMD outbreak, has also contracted more recently, and numbers were down by 2.5% at the December 2006 census.

EU cattle numbers

Note: December census; p = provisional; e = estimate, based on trends at mid-year counts. Source: Eurostat and Animal Pharm estimates

Gross indigenous beef production in the EU-27 fell by 3% to just under 8.2 million tonnes in 2005. Comprehensive figures for 2006 were not available at the time of writing, but production is believed to have risen following the lifting of the ban on UK beef exports, which led to the slaughter of more than 200,000 older animals in that country, and is believed to have seen UK beef production rise by over 100,000 tonnes to approximately 875,000 tonnes.

France is the region's leading beef producer, accounting for 20% of net output in the EU-25 during 2005, when its production totaled more than 1.5 million tonnes. Germany and Italy each produce over one million tonnes of beef and veal annually, while production in the UK and Spain exceeds 700,000 tonnes. Together, these five countries are responsible for over two-thirds of EU beef production.

While production in the UK rose sharply during 2006, beef output was flat in Germany and declined in France, Italy and Spain. Aggregate production in the region's five leading markets totaled just over 5.3 million tonnes - up by a little over 1% on year-earlier figures.

Beef production in the EU's five biggest markets

Source: USDA

Dairy cow numbers in the EU-27 have fallen by more than two million since 2002, to an estimated 24.3 million in December 2006. The structure of cattle herds in individual countries varies markedly, with dairy culls accounting for the majority of beef production in some member states, while specialist beef breeds are reared widely in others.

Throughout the turbulent period faced by EU beef producers in recent years, the dairy sector has remained relatively stable. The market in this sector is governed by quotas on milk production, however, and with output capped, increases in productivity mean that herd sizes are generally in gradual but long-term decline.

Germany boasts the region's largest dairy herd, with dairy cow numbers there totaling just over four million. Substantial dairy herds also exist in France, the UK and Italy, while the Netherlands, Ireland and Spain also boast dairy cow numbers of one million or more. Milk production remains an important facet of livestock agriculture in many of the EU's new member states, and a substantial proportion of cattle herds in central and east European countries are kept primarily for dairy purposes. Dairy cow numbers in Poland total over 2.6 million, representing the EU's third biggest national herd.

Dairy cow numbers in the EU's five biggest dairy herds

Source: Eurostat

Dairy cow numbers fell by more than 1% in all five of these countries during 2006, and were down on year-earlier figures by over 2% in four out of the five. The sharpest decline was registered in Poland, where numbers fell by more than 4%, and where the dairy herd has now contracted by over 10% since 2002.

Future trends in the cattle sector

Cattle numbers in the EU have been declining for a number of years now, and further reductions in the size of the EU herd are anticipated in the next five years. Dairy cow numbers will continue to fall as a result of quota-imposed caps on production, which mean that fewer animals are required as productivity rises. Some of the sharpest declines are anticipated in new EU member states, as producers there adjust to the imposition of quotas, and as levels of mechanization and improved husbandry regimes drive up productivity.

CAP reforms, which have seen beef premiums decoupled, will also tend to drive a reduction in cattle numbers as inefficient beef producers go out of business, and as higher cereal feed prices reduce incentives for farmers to target intensive beef production. This has already begun to affect beef production since the introduction of the reforms in 2005, though the sizeable one-off increase in UK slaughterings helped to mask that trend in 2006.
Latest European Commission projections forecast a decline in gross indigenous beef and veal production of around half a million tonnes between 2005 and 2013, with output in the latter year totaling just over 7.7 million tonnes. And while the EU milk quota regime will be a major downward driver of cattle numbers in the region, restructuring within the beef sector will also contribute to a reduction in the EU herd.

Cattle numbers are forecast to fall by approximately 6% between 2005 and 2013. A reduction on that scale would see the EU-27 herd fall by more than five million head to 84 million. Rates of contraction will not be uniform, however, and herd sizes in specialist beef rearing areas of Spain, France, Belgium and the Netherlands, where most cattle premiums are still coupled, will actually increase in the near future.

While rising feed prices will have an impact on producers in future, beef farmers in Europe have enjoyed a period of particularly strong prices during the past year. Prices remained strong in the sector despite a sharply increased flow of UK beef onto the market, thanks to a combination of factors that included scares over avian influenza (prompting consumers to purchase beef and other meats instead of poultry) and reduced imports from South America. With EU beef production continuing to fall, prices should remain reasonably strong in the medium term, with imports expected to bridge the widening gap between regional output and consumption.

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