Falling oil prices to impact positively on EU farm production costs

The lower oil prices projected for the next 12 months will lead to a reduction in energy-related production costs across all agricultural commodities, according to the European Commission.

This prediction is contained in the organisation’s outlook for arable, dairy ad meat products in Europe, covering the next 24 months. After a weak recovery at an annual basis of 1.3% in 2014, the Commission is forecasting EU economic growth to slightly gain strength over this two year-outlook period (1.7% and 2.1% respectively).

The EU unemployment rate is expected to continue to decline from the 2012-2014 highs to reach 9.8% in 2015 and 9.3% in 2016. This could contribute to a strengthening of EU food consumption especially of meat and cheese.

Early forecasts for the 2015/16 harvest are showing a good level of cereal production at more than 300 million tonnes. This is a result of the generally favourable weather conditions experienced over the past five to six months. The projections compare favourably with the total volume of cereals produced in 2014/15 – now estimated at 327m tonnes. Where protein crops are concerned early estimates for 2015/16 indicate a 1.0% increase in the area planted out across Europe.

The Commission is projecting a contraction of EU milk deliveries in the first quarter of this year, compared to 2014. For 2015 as a whole milk deliveries are expected to increase by around 1%. Further supply increase can be expected especially in the countries where the number of dairy cows remains significantly higher than the year before according to the December livestock survey: Ireland (+4.2%), the Netherlands (+0.8%) or Germany (+0.7%).

In 2014, total EU beef production is estimated to have increased by 2.1% above 2013 levels. This follows several years of decline, where beef production is concerned.  During the year ahead total beef output could further increase by close to 2%, as the EU production capacity has risen. Some further culling of dairy cows is expected and prospects for internal and external demand are quite positive. Beef prices were on a declining trend until July 2014, after which they started to recover since. They remain well above the 2007-11 average, reaching €383/100 kg by mid-February 2015.

After several years of contraction in EU pig numbers, preliminary December 2014 livestock survey data indicated an increase of 1.2% in the breeding sow herd. Despite a sustained recovery in consumption, the strong drop in EU exports and increased supply on the domestic market drove pig meat prices down below their 2007-11 average. The European Commission announced the opening of a private storage aid scheme for pig meat at the end of February this year to stimulate in order to stabilise producer margins.

Please be considerate of others when commenting. All comments posted are subject to our commenting policy. Comments violating this policy will be removed without notice.