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Agriculture and rural development
News article9 December 2021Directorate-General for Agriculture and Rural Development

EU agricultural outlook 2021-31: potential impact of EU fat consumption reduction and of Chinese self-sufficiency in meat and dairy

Medium-term agricultural outlook

EU production of butter, cheese and pigmeat is expected to drop, in the scenario where total fat consumption in the EU decreases to the World Health Organisation (WHO)-recommended level. Exports will compensate some of the foregone EU consumption. In the scenario where China reaches self-sufficiency in meat and dairy, EU pork is most affected, leading to a decline in production and prices. Lower domestic prices lead to an increase in consumption. These are a few of the projections in the two scenarios included in the European Union agricultural outlook for 2021-31 report published on 9 December 2021 by the European Commission.

The first scenario looks at a gradual reduction to the WHO-recommended level of total fat consumption of 30% at EU level. This shift is projected to lead to a decline in daily per capita calorie supply by 304 kcal in 2031. Carbohydrates and protein fall by about 20 kcal in total while the ratio of plant to animal-based calories remains stable (at 2.5:1). The scenario projections lead to a weekly per capita consumption decrease of 17g for butter, 84g for cheese, 119g for pigmeat, 179g for vegetable oils and 345g for fresh dairy products.

Consumption and prices of the fattier commodities decreases, but high import demand from the rest of the world improves the EU trade balances. For instance, the EU becomes a net exporter of sunflower oil under this scenario, with a positive balance of 0.2 million tonnes, presumably driven by increasing import demand from Asia and the Middle East. Pigmeat consumption drops by 19%, but most of this decline is compensated with increased exports.

In this scenario, production of butter and cheese drop by 2% and 13% respectively, resulting from a demand drop. For butter, most of the foregone consumption is offset by higher exports and lower imports. However, for cheese, exports make up only for 20% of the foregone cheese production. Milk production decreases by 2%, with lower domestic demand, leading to lower dairy herd. In terms of prices, the most prominent impacts on EU producer prices range from a drop of 32% for butter to down 15% for pigmeat.

Finally, the lower dairy herd and pigmeat production could also stimulate a drop in total agricultural GHG emissions, by 4 Mt CO2eq., down 1.2% compared with the baseline.

The second scenario looks at the impact of China achieving self-sufficiency in meat and dairy by 2031. Currently China is the world’s largest producer of pigmeat and sheep meat, the second largest producer of poultry and the fourth largest producer of beef. Pigmeat is the most consumed followed by poultry, beef and sheep meat. Even though China sources most of its meat domestically, it is still the world’s largest importer of pigmeat and sheep meat, and the second largest for beef and poultry. In terms of projections, meat consumption in China is projected to increase by almost 11 million tonnes over the next 10 years.

The Chinese dairy market is much smaller than the meat market as Chinese consumers are only gradually discovering new dairy products given their historically high lactose intolerance levels, impacting their choice of products. The most consumed and produced is whole milk powder (WMP). Chinese import dependency in dairy products is much higher than for meat. For instance, it relies on imports to cover around one third of its domestic consumption for cheese and WMP. Dairy consumption is projected to increase modestly, by around 200,000 tonnes.

In the scenario, markets most impacted are the ones where China has the largest world market import share. This is the case for whey powder, WMP, sheep meat, beef, pigmeat, skimmed milk powder and butter, which translates into large price decreases on the world market with much lower demand for exports. Lower demand for EU exports of meat and dairy leads to lower producer prices, in particular for pigmeat and whey powder.

The loss of Chinese import demand leads to lower EU exports, and EU pigmeat exports in particular (down by 256,000 tonnes). As a result, EU pigmeat production would fall by 138,000 tonnes and consumption increases by 108,000 tonnes because of lower prices. As for dairy, exports and production also decrease because of the lower import demand in China. Other dairy exporters such as New Zealand are also strongly affected. The additional export supply leads to more competition, lower prices and production, and, higher consumption. As for whey, a by-product of cheese production, the loss of whey exports to China causes the price to fall dramatically, leading to a large increase in consumption of whey powder in the EU food industry.

The EU agricultural outlook report for 2021-31 contains relevant market data, accompanied by an explanation of assumptions, and a description of the macroeconomic environment. The projections and scenarios described in the report will be discussed at the annual EU agricultural conference, taking place online on 9-10 December 2021.

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Report: EU agricultural outlook 2021-31
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Medium-term outlook

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Publication date
9 December 2021
Author
Directorate-General for Agriculture and Rural Development