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EU optimistic in latest short-term outlook
Wednesday, 14 July 2021
By Kat Jack
Improved economic growth and the progression of Covid-19 vaccination campaigns have contributed to positive prospects in the EUs summer short-term outlook. The economic recovery of the EU is underway, and stronger than previously forecast, with EU real GDP expected to grow 4.6% on the year in 2021. The reopening of foodservice and easing of travel restrictions in the EU, aided by the progress in vaccinations, is expected to have a positive impact on EU food consumption overall.
For dairy, production had a slow start to the year due to cold weather, although performance was variable – Germany and France were down by over 2% in Jan-April, but Irish collections were up over 8%. Going forwards, production is forecast to recover, so that total 2021 production will be up 0.8% on the year before. EU wholesale prices have been generally improving through the year so far. This is expected to support farmgate milk prices, and partially offset rising feed costs.
Cheese manufacture was preferred over butter in Jan-April, with production up 3%. Butter production fell over the same period as fat availability dropped. Going forwards, it is expected that improved availability of milk, and fat, will see butter production increase. The expectation for the full year 2021 is for butter production to grow 1% and cheese to grow 0.8%.
Export demand is supporting EU powder markets, particularly from China. Production of whey powder, SMP and WMP are all expected to grow. In the case of SMP, it is thought increased demand could lead to a slight decline in private stocks in 2021. Whey production was bolstered in Q1 by strong Chinese demand and increased cheese production, both of which are expected to slow down over the rest of the year. Overall however, whey production growth is expected to remain positive.
The outlook for EU dairy markets looks reasonably optimistic for 2021, showing recovery from 2020. However, uncertainties and economic risks will remain while the pandemic situation persists.
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