The US Department of Agriculture (USDA) has issued a bleak assessment of the European beef market in a recent report.

It says the volumes of beef produced in Europe this year will be double what it had previously forecasted and this in turn, will see beef prices fall over the course of the year.

One of the key drivers of the expansion in beef production this year is developments in the dairy industry with the abolishment of the dairy quota in April 2015.

The USDA says this led to a strong expansion of the dairy herd in both 2014 and 2015.

As a result of this expansion, the calf crop increased in 2015 and is expected to increase again in 2016. Also, it highlights that the slaughter of the dairy herd is forecast to remain at high levels due to continued low milk prices.

The USDA says the surge of slaughter and beef production in 2015 was forecast in its Annual Report, but based on official figures appears to have been underestimated.

The 2015 boost in beef production is expected to be double the volume projected earlier, it says.

This year, the USDA forecasts that slaughter and production levels are expected to be sustained.

“With stagnating domestic consumption all EU Member States, and without an export outlet, this supply will be stockpiled and will result in pushing domestic prices downward.

“Based on an oversupply in 2015, beef exports are expected to surge in 2016,” the USDA says in its report.

US beef imports

The USDA has also forecast that the value beef imports into the US will be $2.2 billion lower to $5.0 billion.

It says the strong pace of imports in 2015 resulted in record-high cold storage stocks, while a recovery in U.S. beef production will further dampen demand for imported beef, resulting in reduced volumes and average unit values in 2016.

This will come as unwelcome news to both the Minster for Agriculture, Simon Coveney and Bord Bia who both have pinned significant hopes on the US market as an important outlet for Irish beef this year.