EU outlook forecasts tight supplies for dairy, beef, pork and lamb

The Spring 2022 edition of the EU short term outlook for agriculture has been released. Unsurprisingly a key theme was the impact of the Russian invasion of Ukraine. However, the outlook takes an optimistic view over the impact of the conflict on the EU agri-food sector, suggesting that food, feed, and fertiliser availability are not a primary concern, although affordability may be. The EU is largely self sufficient in many agricultural output commodities, but imports many inputs.

Key points from the report:

• Rising input costs a key theme for all sectors with many raw commodity prices increasing
  • Freight
  • Gas and oil
  • Fertiliser
• Many EU livestock producers are already looking at adjusting rations.
• Fewer pigs on the ground also reducing demand for animal feed
• Cereals prices are forecast to remain high through to 2023 harvest
• Total EU cereals production forecast to be +1.5% year on year
• EU fuel demand forecast to decline, reducing demand for biofuels
• The EU has also put measures in place to try and increase crop production areas for the coming harvest by increasing area
• Some concern over crop conditions in Southern Europe

Dairy

• In 2021 EU milk deliveries declined (-0.4% yoy)
  • Driven by the continued reduction in herd size
  • High input prices limit growth in milk yields
• In 2022 milk deliveries forecast to be stable on 2021 levels
  • Volumes decline year on year in H1
  • In H2 volumes to be above year earlier levels
  • Feed affordability key to production trends
• Production of cheese to rise, driven by a rise in export demand
• Whey demand could benefit from the price rises in other proteins
  • There could be increased usage in animal feed
• SMP and WMP production declined last year
  • With export demand easing due high prices
• SMP production could slightly grow this year (+1.5% yoy)
  • Some countries looking to build stocks as part of food security programs

Beef

• During 2021 EU beef production marginally declined (-0.3% yoy)
• In 2022 EU beef production is forecast to decline again (-0.9% yoy)
  • High input prices could lead to lower carcase weights and earlier slaughtering
• EU beef exports fell last year (-4.4% yoy)
• Exports to rise in 2022 (+1% yoy)
  • Growth constrained by domestic production
  • Tight global market to continue to support prices
• Imports lower last year (-7.3% yoy)
  • Driven by foodservice closures
• In 2022 imports to rise (+5% yoy)
  • Reopening of foodservice increasing demand

Pig meat

• High input costs have pushed already negative margins even further into the red
  • Recent output price rises (32% mom) have not been sufficient to offset the rise in input prices
• In 2022 production forecast to decline (-3% yoy)
  • Driven by high input costs
  • Last year sow numbers declined (-3.6% yoy)
  • ASF limiting production in affected countries
  • Could see lighter carcase weights
• Exports suffered in 2021 due to lower demand from China with the trend expected to continue through 2022 (-2.2% yoy)
• Imports expected to increase (+9.1% yoy)
  • Driven by improved trade with the UK

Sheep meat

• Production in 2021 recovered to 2019 levels (+3%)
• In 2022 production forecast to fall back (-2%)
• Flock size has been reduced
• High feed will impact production in some countries
• Lower production to support prices
• Trade volumes forecast to remain at low levels with potential to reduce further

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