Autumn 2022 edition
EU farmers continue to face many challenges, driven by hot and dry weather, the impact of Russia’s invasion of Ukraine on energy prices, and food price inflation. A high degree of uncertainty remains regarding Ukraine’s capacity to produce, store and export its commodities.
The 2022 summer was one of the hottest in recorded history and droughts were observed in most parts of the EU. This affected the growth of summer crops and flower fertility, resulting in lower yields. In addition, heat stress to animals and the spread of animal diseases have posed significant challenges to the livestock sector.
These issues form the basis for the autumn 2022 edition of the short-term outlook report. Market outlooks are provided for the EU-27. In addition to the short-term outlook, the Commission also publishes associated documents, including statistical annexes and balance sheets.
Sustained adverse risks have called for a further reduction in the euro area’s real GDP growth projection, especially if Russia’s invasion of Ukraine continues into 2023 and/or gas supplies need to be rationed.
Fossil fuel markets are due to remain very tight and prices are expected to stay high and volatile. Marginal crude oil production increases will become harder and harder while demand has recovered post Covid-19.
EU natural gas prices will also remain high and volatile especially due to uncertainties in Russian supplies, pending the implementation of the RePowerEU strategy to reduce dependency on fossil fuels. This could also create further pressure on electricity prices, being an important input for farmers and the food supply chain as a whole.
Usable cereal production is projected at 270.9 million t for 2022/23, a 5.1% decrease over the 5-year average (and a 7.8% decrease year-on-year). This is in no small part due to the drought conditions that affected maize in particular (-19.3% on the 5-year average).
The poor harvest, combined with high cereal prices and an anticipated decrease in meat production, is expected to reduce the use of cereals for feed by 2.3% year-on-year. Food use is expected to increase slightly (+0.7% year-on-year). However, trade of cereals could grow by 12.3% compared to the previous marketing year (including +6.5% of exports and +24.7% of imports).
Strong EU oilseed production (especially of rapeseed) is expected in 2022/23 (32.2 million t, +8.5% above the 5-year average). 2022/23 EU sugar production is forecast at 15.5 million t, 5.8% below the 5-year average as both beet planting area and yields were reduced. Sugar consumption is also expected to decrease due to increasing prices.
EU olive oil production is expected to decline in 2022/23 by 25%, with a drop observed in almost all the main EU producing countries, except Greece. To some extent, the lower availability is likely to be covered by increased imports while EU exports could decline, especially those to more price-sensitive markets. In addition, lower availability in the main EU producing countries and ongoing pressure on consumer prices might lead to a decline in EU consumption (-9%).
Conversely, 2022/23 EU wine production is forecast to increase (+1.5% year-on-year). The final production figures will be determined by water and thermal stress, impacting both the quantity and quality of grapes, and potentially leading to an early harvest. EU consumption could resume its historically decreasing trend from 23 L to 22.6 L per capita after two years of distress due to COVID-19.
Consumption of fresh apples is expected to go down to 12 kg per capita for 2022/23, mainly due to rising inflation pressure and a general reduction in fresh fruit consumption. Higher electricity prices, high production in Poland and the expected lower quality should increase the share of usable apple production used in processing.
EU orange production is expected to decline in 2022/23 to one of the lowest levels since 2015/16 due to adverse weather conditions, particularly in Spain. Despite the low orange production and expected higher prices, the amount for fresh consumption could decrease at a lower rate than that for processing.
Milk and dairy products
Hot and dry weather over the summer worsened grass availability and quality, in addition to lower yields of the main crops used for feed. Many farmers already used part of their winter feed in summer, leading to lower yield growth (0.4%) as well as further herd reduction (-0.9%). The milk content (both fat and protein) could also be impacted negatively, worsening the milk processing outlook even more.
Among all dairy products, only EU cream production could grow, absorbing a large part of the fat availability. Anticipation of even higher processing costs for drying milk powders could likely cover for some current shortages for butter, but production is expected to drop. EU cheese production could again become a preferred option, driven by high prices, while both exports and domestic use remain stable.
The competitiveness of EU milk powders is suffering from prevailing high prices, hampering exports and therefore preventing production growth despite the positive growth of whey and domestic use of skimmed milk powders.
The start of 2023 could remain challenging for farmers when coping with high input costs and what is likely to be a weaker demand. Assuming normal weather conditions, it is expected that the yield growth could be slightly higher (0.6%) and could compensate for a further reduction in the dairy herd (-0.8%). As a result, EU milk collection could drop modestly, by 0.2%.
EU beef production is expected to decrease by 0.6% in 2022, mainly due to a structural adjustment in the beef and dairy sector, despite high beef prices. EU exports should decrease by 1% due to record-high domestic prices and despite good export prospects to some existing high-value markets. EU imports from the UK and Brazil are on the rise.
Sustained high feed costs as well as African Swine Fever (ASF) continue to limit the growth of EU pigmeat production. While China is resuming pre-ASF import levels, some EU pigmeat exports are finding their way to the UK and other overseas destinations. This is despite high pigmeat prices.
EU poultry production growth continues to be limited by high input prices – especially feed and energy – and Highly Pathogenic Avian Influenza. Additionally, very high poultry prices means relatively less competitive exports. On the other hand, the suspension of duties on products coming from Ukraine favours poultry imports.
Despite the historical low EU sheep and goat flock, slaughterings are not expected to go down in 2022. However, large differences between EU countries exist. EU imports should grow in 2022 by 10% and another 4% next year, still below pre-COVID levels, leading to sustained high domestic prices. Trade should grow further in 2023.
EU balance sheets are also available in Agri-food dataportal, currently including cereals, oilseeds, olive oil, milk and dairy products, and meats, both in a form of tables and graphs.