Wednesday, 15 July 2020
By Felicity Rusk
The EU Commission has recently published the summer edition of its short-term outlook for agricultural markets. This is an outlook for the EU-27 and so excludes the UK.
Milk production within the EU-27 is expected to increase by 0.7% in 2020*, to 148 billion litres. This is a slight upwards revision from their previous spring forecast (0.5%). However, this growth only comes in the first half of the year, with production in both Q3 and Q4 expected to be around 0.2% lower than last year.
Improvements in milk yields has been the main driver of production, through a combination of higher usage of purchased feeds and good quality pasture. While the milking herd is expected to continue to decline (-0.6%), the growth in yields more than compensates for the smaller herd size.
The forecast assumes that feed prices will remain relatively good as well as favourable conditions for pasture growth.
Butter production is forecast to increase by 3% on the year off the back of additional milk supplies. EU prices have remained competitive on global markets, which is expected to support export volumes throughout the year (+15%). While consumption at foodservice has fallen, a rise in home cooking and baking has supported retail purchases and is expected to compensate. As such, consumption is expected to remain relatively stable.
In contrast, the rise in consumption of cheese at the retail and some manufacturing sectors is not expected to compensate for the loss at foodservice. As such, consumption is expected to fall by around 0.4% on the year. Lower domestic consumption mean the Commission have lowered their expectations of production growth. Cheese production is forecast to increase by 0.3% on the year, and stock levels could increase by 30,000 tonnes by the end of the year. Predictions for exports are more positive, with volumes expected to increase by 2% on the year, predominantly due to increased shipments to Japan and the UK.
SMP production is forecast to increase by around 5% this year, supported by the additional milk supplies. This growth in production has been driven by strong export demand. While exports are expected to decline by 10% this year, it must be noted that export volumes were particularly high in 2019. As such, export volumes this year are likely to be more in-line with 2018 levels.
WMP demand is expected to remain relatively strong, as consumers continue to purchase ‘affordable treats’, such as chocolate and confectionary, despite the economic downturn. Production is forecast to rise by 0.5% to meet the rise in domestic consumption (0.8%) while exports are predicted to remain steady.
*Please note that this includes milk deliveries for 29 February.
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