Summer 2023 edition

EU farmers’ resilience continues to be challenged, with lower commodity prices and input costs remaining above average. In addition, the EU experienced contrasting and difficult weather events in spring. These are likely to have negative impacts on crop production, especially through reduced yields and quality for several agricultural commodities.

However, there have been some early signs of positive market prospects, as growth of some input costs has slowed down or even declined since Spring 2023 edition. Energy inflation is contained while natural gas prices have dropped to pre-2022 levels but remain still above pre-COVID levels. This contributes to a lower but still uncertain pressure on the EU fertiliser market.

EU food inflation showed first signs of stabilisation since January 2021 but remains high and above the general inflation level. A possible decrease of retail food prices to levels comparable to the beginning of 2021 has not yet come. Other costs of living stay high as well, so household budgets remain constrained.

These issues form the basis for the summer 2023 edition of the short-term outlook report. Market outlooks are provided for the 27 EU members. In addition to the short-term outlook, the Commission also publishes a statistical annex. The longer time series of EU balance sheets are available in Agri-food data portal.

Market fundamentals

Compared to spring 2023 macroeconomic forecast, no major changes have been introduced in the summer. Energy inflation continued declining despite efforts of OPEC+ countries to limit supply. In addition, natural gas prices dropped in line with a seasonal trend but remain volatile as seen in the course of June 2023 when EU prices peaked up again. Nevertheless, the overall declining of natural gas prices compared to summer 2022 allowed EU to gradually increase the production of nitrogen fertilisers. This should continue to help easing some pressure on input costs in 2023. 

Weather developments continue challenging the future production prospects. In spring, they contributed to reduced growth of yields, an impact of which is still to be fully seen when the new season unfolds. 

EU food inflation has stabilised since April 2023 but remains still high and above general inflation level. Monthly food inflation is still positive (+0.4% in May). Therefore, consumer decisions continue to be strongly driven by price considerations, which supports a switch to retailer brands or a substitution with relatively cheaper products within the same category (for example meats and oils) or between categories (for example less fresh fruit and vegetables). 

Some EU exports have shown a recovery, in particular dairy products, while in other cases, for example meats, exports continue being challenged due to low EU price competitiveness and a lower demand resulting from high inflation globally.

Arable and specialised crops

EU cereal and oilseed production could increase in 2023-24, by 5% and 8% respectively. Considering this, and an in-progress improvement of logistics facilitating transit of Ukrainian grains to its traditional markets outside the EU, EU imports are likely to decline. At the same time, EU exports of cereals could further grow. EU sugar beet production is likely to be higher in 2023-24, despite delayed start to the beet sowing campaign. This could translate into lower imports, and a slight increase in exports. Biofuel use continues benefitting from increasing blending rates, which, together with transport fuel demand support stability in 2023. More residues and waste could be shifted to biofuel production, as well as more rapeseed to biodiesel thanks to a higher availability.

2023-24 EU olive oil consumption and exports remain weak, driven by lower availability (almost -40%) which leads to higher prices. In the case of wine, ending stocks of 2022-23 are higher, and even increasing for red and rosé wines which causes a concern for some producing regions. 

EU production of peaches and nectarines in 2023 suffers from adverse weather conditions, with lower production for fresh consumption while larger quantities could be channeled into processing. In the case of tomatoes, production for processing is recovering while production for fresh consumption remains stable. High retail prices continue constraining fresh products more than the processed ones.

Animal products

Despite growth of EU milk deliveries in spring, this trend is likely to be reverted in the second part of the year, driven mainly by increasing slaughterings. The EU raw milk prices continue decreasing while input costs stay high even if some of them already showed some decline or stabilisation. This could continue putting a downward pressure on milk deliveries. Overall, 2023 EU milk deliveries could be 0.2% lower than last year. 

Lower EU prices contribute to recovery of exports of some dairy products, in particular butter and skimmed milk powder (SMP) for which higher exports are expected in 2023. At the same time, domestic use and consumption remain challenged by lower purchasing power. 

EU beef production is expected to decrease further in 2023 by 2%, mainly due to a structural adjustment in the beef and dairy sector, despite high beef prices. 

A smaller breeding herd as well as African swine fever (ASF) push EU pigmeat production further down in 2023, by 5.5%, despite lowering feed prices. 

As production costs are coming down from very high levels and due to lower occurrence of highly pathogenic avian influenza (HPAI), EU poultry production could benefit from a quicker recovery of 2.4% in 2023.

The historically low EU sheep and goat flock pushes slaughterings down by 1% in 2023, despite high domestic prices. More imports from New Zealand and the UK are expected, due to favourable lambing conditions and high EU prices.

EU balance sheets are available in Agri-food data portal, both in a form of tables and graphs.

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