A new report on EU agriculture has a positive outlook for agriculture in the medium term, including dairying.

Cereal prices, which set the tone for most market outlook prospects, are still expected to remain above historical averages in the EU, but significantly below the 2010 and 2012 peaks, the report on agriculture says .

Total meat consumption is trending downwards, with poultry meat the only sector for which both production and consumption are projected to increase, it also says.

EU dairy prospects remain particularly favourable in the longer term, due to growing world demand, despite an expected deterioration of prices in the short term, the agriculture report says.

Arable crops
The global medium-term outlook for arable crops shows solid world demand and stable prices, leading to large EU cereal exports. In the EU, domestic demand for cereals and oilseeds is driven by feed use and first-generation biofuel production.

On the supply side, arable area in the EU is expected to decline slightly (in line with the long-term trend), with production therefore depending on marginally better yields and the reallocation of crop areas.

Bigger populations and strong economic growth in developing countries are expected to support higher world meat demand and favour a rise in EU meat exports. EU meat production is expected to increase to 44.9 million tonnes, driven mainly by sustained expansion in poultry meat, the report on agriculture says.

After two years of sharp decline, EU beef production is expected to recover in 2014-15 on the back of the recent increase in the dairy herd (in the EU, around two thirds of beef production comes from the dairy herd).

However, beef production is expected to return to its historical declining trend soon after, to reach a level of 7.6 million tonnes in 2024, slightly below that of 2014. After several years of a decreasing trend, sheep and goat meat production and consumption are expected to stabilise at the current level thanks to improved profitability.

Milk and dairy products
Despite some downward price pressure in the current market situation, medium-term prospects for milk and dairy commodities are favourable, driven by steadily growing world demand, the agriculture report says.

Milk production is expected to increase in the EU, as well as in other main milk-producing regions of the world. EU milk prices are expected nevertheless to remain relatively firm at around 350 EUR/t thanks to slowly growing domestic consumption, which still absorbs close to 90% of EU production.

Milk deliveries could reach 158 million tonnes by 2024, i.e. 12 million tonnes more than in 2014. However, the expansion of EU milk production is limited by increasing production in competing parts of the world, the rate of world import growth, environmental constraints and the limited potential for higher consumption in the EU.

Production is expected to concentrate further in regions with lower production costs and where farmers and dairies have invested most.

Agricultural income

Real agricultural income per labour unit is expected to increase slightly (+6 %) in the EU-28 during the outlook period. This aggregate number for income per worker hides two opposite dynamics.

On the one hand, total agricultural factor income in real terms deteriorates as production costs grow at a faster pace than output prices.

On the other hand, this is more than offset by a strong outflow of labour as a result of structural change. Although the income gap between the EU-15 and the EU-N13 is closing, this gap remains substantial.