What is the EU outlook for agri markets in 2021? – Agriland

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EU beef and poultry production is expected to fall this year – but there is good news on the price forecasting front for EU dairy, pig and sheep farmers, according to the latest short-term outlook report issued by the European Commission.

Published on Monday (July 5), the commission’s summer outlook – the “Short-term Outlook for EU agricultural markets in 2021” – offered an overview of where the markets are at present for European producers.

First off, it was noted that EU beef production is expected to decrease by 1.4% in 2021, mainly due to a reduction of cow herd in the beef and dairy sector combined with lower demand from food services. However, the report noted:

“Exports to high-value markets should continue to increase thanks to recent trade agreements (e.g. Canada, Japan) and while other destinations show a small decline despite the shortage of beef at world level.”

Turning to dairy, the report notes that the EU milk collection dropped in the spring due to cold weather that delayed the seasonal peak.

However, an expected growth recovery of about 2% is anticipated for the months of May and June – as well as an increase of approximately 0.8% in EU milk collection in 2021.

“Yield could grow at a lower pace than in 2020 (1.6%) due to a slow start at the beginning of the year while cows’ slaughtering could accelerate towards the end of the year and result in a dairy herd reduction of around 0.9%,” the report noted.

It was highlighted that EU dairy prices continue improving, mainly due to the Chinese demand which drives world prices. This, the outlook says, should support raw milk prices and to some extent offset rising feed costs.

It was also noted that the EU butter and SMP production “could recover” after a drop at the beginning of the year during which cheese was a preferred option, together with whey for which export demand remains strong.

The EU butter price was 5% above the five-year average in April, while EU whey exports are expected to grow by 7% in 2021, driven by demand from China.

Despite an expected drop in the EU consumption, drinking milk production could remain stable due to an increasing import demand from China, the European Commission document says.

On the sheep front, the report said:

“The EU sheep meat market faces strong global and domestic supply shortages (EU production being stable), leading to relatively high prices. Exports from New Zealand are partly redirected to Asia, while facing at the same time higher shipping costs.

“The current trade situation between the EU and the UK adds downward pressure on exports and imports,” it was added. Sheepmeat availability is forecast to drop by 1.2% in the EU this year.

Turning to tillage, it was highlighted that prices for the main arable crops “continued their rally” over the spring.

High demand from China on several commodities, high demand from the US biodiesel industry and uncertainties around production levels and trade practices put world prices on an upward trend, the report states.

In 2021/22, EU cereal production could increase at 288.7 million t (+4% year-on-year). Similarly, EU oilseed and protein crops production could reach 30.1 million t (+9.5%) and 4.6 million t (+6.7%), respectively, the outlook notes.

EU domestic consumption could increase as well, especially in feed cereals (+0.5%) and vegetable oils. While EU imports of cereals could decline, oilseed imports are expected to remain high (+17%/5-year average).

Meanwhile, EU pigmeat production is expected to continue increasing in 2021.

This, the outlook says, is because “additional production in some EU countries more than compensated the decrease due to ASF [African swine fever]”.

Although the exports to UK are strongly reduced, overall EU pigmeat exports should grow again in 2021, it was added.

Finally, poultry production in the EU is expected to decrease in 2021, with demand “not expected to rebound sharply” with the reopening of foodservices, and overall exports should decrease. Despite high prices, margins are under pressure because of high feed costs, the report says.