Many uncertainties remain around the scale of the impact of the coronavirus crisis and the economic recovery. Nonetheless the food supply chain has proven resilient throughout the crisis. With lockdown measures being progressively lifted all over Europe, demand in particular for restaurants, bars and cafés should pick up, although not back to 2019 levels in the short run due to reduced households’ purchasing power. Prices are also picking up as a consequence.
As noted in the spring edition of this short-term outlook, the COVID-19 outbreak and related measures taken by Member States created a demand shock rather than a supply one. This is reflected in the good production prospects for various sectors such as dairy, sugar, pigmeat, olive oil, wine and tomato. Exports perspectives remain good overall.
The latest short-term outlook report for EU agricultural markets, published on 6 July 2020 by the European Commission, presents a more detailed overview of the latest trends and further prospects for each agri-food sector.
For 2020/21, EU cereal production is forecasted at 286.3 million tonnes, a decrease of 2.7 percent compared to 2019/20, but still 1.7 percent above the 5-year average. This is explained by a lower acreage of winter cereals but also dry conditions during crop development, especially for wheat.
Rainfalls in late May and June relieved pressure on summer crops. Cereal EU consumption is estimated to decrease by 0.6 percent in 2019/20 mainly due to a reduced demand from bakeries and food service, as a consequence of lockdown measures. However this reduced demand should not last, with a regrowth expected in 2020/21.
Regarding oilseeds and protein crops, in 2020/21 rapeseed production should be at a similar level than in 2019/20 with 15.4 million t. Sunflower production is due to reach 10.4 million tonnes, a 3.7 percent increase compared to 2019/20. Production of soya beans and protein crops should also increase, to reach 2.8 million tonnes and 4.5 million tonnes respectively. A slight decline in crushing volumes in 2020/21 is foreseen with a stable protein meal demand and an expected slow recovery of vegetable oils use.
2020/21 sugar production is due to stay at the same level as in 2019/20, despite a 3 percent decrease in sugar beet area. Lower demand for ethanol and lower sales in food service are expected to result in lower EU consumption of sugar in 2019/20.
In 2019/20, EU olive oil production remained 4% below the 5-year average. The lockdown measures contributed to an increase in retail sales and the use of olive oil in the food industry (e.g. canned goods), however uncertainties around the 2020 summer season are expected to contribute further to lower foodservice demand. Overall, EU consumption could still grow by 6% in 2019/20. In 2020/21, the EU olive oil production is due to further increase and reach 2.3 million tonnes (up 20% compared to the 2019/20).
While wine consumption is expected to decrease by 7% due to Covid-19 measures, vinified production for other uses, such as vinegar and brandies, is due to increase by 33%. This is in particular thanks to the exceptional measures put forward by the Commission allowing crisis distillation. Strongly impacted by the Covid-related measures, EU wine exports and imports are due to decline by 7% and 8% respectively in 2019/20.
Regarding the fruit and vegetable sector, apple prices have been very high in the past months, due to a small crop in 2019/20 and a high demand during confinement. A record low production of 3.1 million tonnes is expected for peaches and nectarines due to adverse weather conditions and grubbing of area due to structurally low prices and high production costs. This will have a positive impact on prices, which already increased by 19% in the first seven weeks of the season compared to the same period last year. Fresh tomato production is due to remain stable in 2020, with a decline of production in Spain compensated by an expected increase in Poland. EU consumption of fresh tomatoes is due to slightly decline by 1% in 2020.