EU short-term outlook for agricultural markets: uncertainty dominates

By Bethan Wilkins

The EU Commission has recently published the latest edition of its short-term outlook for agricultural markets. Note the outlook is now for the EU-27, so excludes the UK.

The commission believes EU pig meat production could grow slightly (+0.7%) in 2020, similar to recent USDA forecasts. This is based on an expectation of continuing export demand from China encouraging herd expansion in Spain and favouring higher slaughter weights.

However, there are certainly downside risks to this forecast. Processing disruptions have affected some parts of Europe recently, and export demand was disrupted in early 2020. Producers may well be cautious about any expansion plans this year.

Further growth of EU pig meat exports is expected in 2020 (+12%). Chinese production should fall further, so strong import demand continues. This means the commission expects carcase prices to continue at high levels, despite the reduction in foodservice demand. High prices and strong export demand continue to draw product from the EU market to export, meaning that pig meat consumption is expected to fall this year again.

While it is true that the Chinese meat supply gap remains significant, there are also potential challenges for the export outlook. US competition could play an increasingly important role in exports this year, as large supplies weigh on US prices. When combined with logistical limitations, particularly container availability, export growth might not be able to reach previous expectations.

The slight rise in pig meat production is expected to contribute to a rise in overall EU meat production this year; poultry is also set to increase, but this is partly offset by a decline in beef/veal and sheep meat. However, this outlook is also uncertain. Poultry production could be challenged by COVID-19, both from a logistical and demand perspective.

Production prospects are less disrupted in the cereals and oilseeds sector. Estimates for spring and summer crop sowings are favourable, so EU cereal production for 2020/21 is pegged 2% higher than the 5-year average. This assumes no major weather disruptions during the season.

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