What is the short-term outlook for EU agricultural markets?
Dairy and meat prices recovering, milk collection growth remaining strong, olive oil exports to reach a new record level in the EU – these are some of the observations of the European Commission in its outlook report, published this week.
According to the commission, for the third edition this year, the short-term outlook faces the challenge of “factoring in the consequences of the Covid-19 crisis, where many uncertainties remain”.
However, the commission notes that compared to other sectors though, the impact of the crisis on the agri-food sector is expected to remain limited. The emerging patterns seem to mostly reinforce existing trends, such as an increase in demand for local food, short supply-chains and online food sales.
Notable exceptions are cereals (in particular wheat) and sugar, with both having suffered from adverse weather or plant health conditions.
According to the commission, EU beef production first decreased by 2.4% in the first half of 2020 due to Covid-19 lockdown measures and lower demand from foodservice.
Demand has been recovering with the reopening of restaurants and tourism catching up, leading to an overall estimated decline in beef production of 1.4%. In 2021, a further decline of 1.5% is estimated due to a reduction of herd size in some EU countries. Consumption of beef is also projected to decline by 2.1% in 2020.
EU poultry production is expected to increase in 2020 by 1%, supported by a shift in demand from other meats to poultry during lockdown. The reopening of foodservices and strong demand at retail level further contributed to this increase. Similarly, a modest growth of 1% is forecast for 2021.
Regarding sheep and goat meat, EU production declined significantly in the first half of 2020. Overall, production in 2020 and 2021 will respectively drop by 3% and 2%, assuming smaller herds, fewer ewes and a stagnating domestic demand.
Milk and dairy
The overall EU milk collection should grow by 1.4% in 2020, thanks to an increase in milk yield, favourable pasture conditions until July and affordable feed.
Competitive EU prices of skim milk powder, whole milk powder and butter continue supporting EU exports. For all three of these dairy products, export demand is growing in 2020, reaching particular high levels for skim milk powder (850,000t) and butter (320,000t), supporting production growth.
EU consumption of cheese continues to be negatively impacted by foodservice closures, which could result in a slight decline of 0.2% in 2020. Still, EU exports are expected to grow by 5% with a positive global demand, resulting in a production increase of 0.7%.
Total EU cereal production is estimated at 274.3 million tonnes, 6.8% below last year, with soft wheat production down to 115.5 million tonnes, and maize production at 63.1 million tonnes, mostly due to adverse weather conditions that weighed on yields.
Trade over the 2020/2021 marketing year is expected to decline, in particular due to wheat exports falling to 24 million tonnes, a 35% decrease year-on-year. Maize imports would increase, driving overall cereals imports up slightly.
Regarding the fruit and vegetable sector, EU production of apples is forecast at 11.5 million tonnes for 2020/2021, 2% below the five-year average.
EU production of oranges is estimated at slightly above 6.2 million tonnes for 2019/2020, 5% less than the previous year. Overall consumption is declining, 2% lower than the previous year.