Consumer behaviour to influence meat and dairy markets
Meat and dairy markets will be influenced by sustainability, societal and health concerns over the coming decade, both in terms of production types and consumption patterns. These are just a few of the projections from the European Union agricultural outlook for 2021-31 report published on 9 December 2021 by the European Commission.
Milk and dairy products
Over the outlook period, EU milk production will provide sustainable solutions to dairy farmers, climate and society. For instance, farmers can benefit from applying sustainable feeding strategies and better herd management, leading to efficiently managed costs and operations. Furthermore, having to comply with higher environmental standards, cows’ replacement rates could decline while pasture-based production systems will grow, providing benefits also for biodiversity and soil health.
EU milk production growth is projected to slow down to 0.5% per year, reaching around 162 million tonnes by 2031. Alternatives to conventional systems, such as organic production, will further grow lowering annual yield growth and prevent even stronger reduction of the EU dairy herd.
Organic milk production is expected to grow, providing economic values with higher prices, environmental benefits as well as better animal welfare. EU organic milk representing 3.5% of EU milk in 2019, could reach 8% in 2031.
Despite the reduced EU growth, the EU is expected to remain the largest dairy trade supplier in 2031, representing 30% of global dairy trade. Growth of the EU’s two biggest competitors will also be moderate, with New Zealand at 0.2% per year and the US at 1%. Developing countries will grow the most during that period.
During the coming decade, value creation will remain a growth factor. Dairy products, especially cheese, could particularly benefit from this, given an already active participation in existing quality schemes. In addition, cheese is expected to benefit most from the additional EU milk produced by 2031, plus 0.7% per year, while generating the highest value.
EU fresh dairy products could benefit from growing exports, which are expected to reach 1.8 million tonnes in 2031. EU consumption will continue its decline at a slower rate, at -0.2% compared to -0.5% in 2021, thanks to an increased interest in differentiated products (e.g. organic). As a result, EU production could remain stable, with a relatively high average of 2019-2021 at 38.5 million tonnes.
Meat
Sustainability, with its environmental, economic and societal objectives, is expected to play an increasingly prominent role in EU meat markets, both for producers and consumers. Modernisation, innovative technologies and changes in farming practices will lead to more efficient and more environmentally-friendly meat production. Still, the investments required to do so remain a challenge. Furthermore, concerns over the environment and climate change will result in consumers paying further attention to the production process and products’ origin. Consumers habits will also be driven by health considerations as well as convenience. Overall, EU meat per capita consumption is expected to drop from 69.8kg in 2018 to 67kg by 2031.
With a total cow herd set to decrease by 7% (down 2.1 million heads), EU gross beef production is expected to fall by 0.6 million tonnes (-8%) over the outlook period. In terms of EU consumption, it will continue its downward trend between 2021 and 2031 and drop from 10.6 kg to 9.7 kg per capita.
Uncertainties, especially those related to the African Swine Fever, remain for the pigmeat sector. China should have fully recovered by 2026, having a massive impact on EU pigmeat exports. In addition, shifts in EU consumer preferences in terms of health, environment and societal concerns should negatively impact EU pigmeat consumption, projected to decrease by 0.5% per year, from 32.5 kg in 2021 to 31 kg per capita in 2031. EU production is also expected to decline by 0.8% per year over the outlook period, to reach 21.5 million tonnes in 2031.
For the poultry sector, EU consumption growth could slow down, from 2% per year in 2011-2021 to 0.6% in 2021-2031, resulting in an increase from 23.5 kg per capita in 2021 to 24.8kg in 2031. This should be driven by a healthier image of poultry compared to other meats and greater convenience in its preparation and the absence of religious constraints in its consumption. EU production is expected to continue to increase by 0.4% per year, reaching 14 million tonnes in 2031.
EU sheep meat production is expected to increase slightly by 0.3% per year in 2021-2031, to 660 000 tonnes in 2031, supported by coupled income support, small world supply and improving producer prices. EU per capita consumption of sheep meat is expected to grow slightly by 2031 and reach 1.4 kg per capita thanks to the diversification of the meat diet and changing consumption patterns.
The EU agricultural outlook report for 2021-31 contains all 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.
Climate change a challenge for olive oil and wine, while demand for fruit and vegetables adapts to health concerns
Raising health awareness will benefit fruit and vegetables consumption, while changing lifestyles and preferences will influence the wine sector. Climate change will remain a challenge for olive oil, but the use of resistant varieties should ensure viability. These are just a few of the projections from the European Union agricultural outlook for 2021-31 report published on 9 December 2021 by the European Commission.
EU olive oil production could reach 2.5 million tonnes by 2031, a 22% increase compared to 2020, with area of olives for oil remaining stable and the use of more resistant varieties, contributing also to higher yields. Importance of EU exports will rise with the production increase, from 35 % in 2020 to 44% in 2031. In addition, EU olive oil exports could benefit from a positive health image and its well-known quality, reaching 1 million tonnes by 2031. As for EU consumption, growth is expected to be driven by non-producing countries, representing 21% of consumption in 2020 and 32% in 2031.
Regarding wine, EU wine production is expected to decline by 0.3% per year, resulting in 148 million hectolitres in 2031. This is due to a decline of yields only partially compensated by the use of new varieties, more adapted to climate change. EU consumption is projected to reach 22 litres per capita in 2031, a decrease of 0.4 litres compared to 2020. However, this reflects a slowdown of the recent declining trend, with -0.2% per year in 2020-31 compared to -1.1% in 2010-20. The wine sector is adapting to changing lifestyles which accelerated due to the Covid-19 pandemic. For instance, sustainability concerns have increased, with a growing demand for organic and natural wines, but also led to new behaviours such as consuming more wine at home. In addition, a new generation of consumers, more conscious of consuming alcohol with moderation, are driving the demand for wines with lower alcohol content and sparkling wines.
By 2031, the production of fresh tomatoes is due to decrease by 0.4% per year, and reach 6.3 million tonnes in 2031. This decline is mainly driven by the strong drop of winter production in Spain and a shift to smaller-sized tomatoes, which have a lower volume but higher added value. Production of tomatoes for processing is due to remain stable, at around 10.4 million tonnes. EU per capita consumption of fresh tomatoes is expected to remain stable, at 15kg in 2031. Similarly, consumption of tomatoes for processing will also be stable at 18 kg per capita in 2031.
EU production of fresh peaches and nectarines is projected to decline by 0.4% per year, reaching 2.9 million tonnes in 2031. This is due to the dedicated area declining. Peaches are losing share of the total fruit basket, leading to a lower consumption of peaches and nectarines projected at 6.4 kg per capita.
Total usable EU apple production is expected to remain stable by 2031, at 11.1 million tonnes. This is the result of a decreasing area under cultivation compensated by increasing yields thanks to the use of new varieties and improved agronomic management. EU consumption is projected at 7.6 million tonnes of apples consumed fresh and 3.6 million tonnes for processing in 2031. Per capita, consumption of fresh apples in expected to increase to 15 kg (up 0.6% per year).
As for oranges, EU production is expected to reach 6.5 million tonnes by 2031, an increase of 0.3% per year. Thanks to the consumption of freshly squeezed orange juices in supermarkets, cafes and restaurants, consumption of fresh oranges is growing. Per capita, consumption will reach 13.3 kg in 2031 (+0.5 kg per year).
The EU agricultural outlook report for 2021-31 contains all 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.
Potential impact of EU fat consumption reduction and of Chinese self-sufficiency in meat and dairy
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.
Sustainability and health concerns to shape agricultural markets
Over the next decade, EU forest area will continue to grow, with the recognition of the role of forests in carbon storage supporting it. Consumers’ concerns over the environment and climate change will result in a higher attention paid to the production process and products’ origin for meat. Organic milk production is expected to rise, providing higher economic value for producers, environmental benefits and contributing to higher animal welfare. Consumption of fresh fruit and vegetables is also projected to increase, benefiting from further health awareness. These are just a few of the projections from the European Union agricultural outlook for 2021-31 report published on 9 December 2021 by the European Commission.
Uncertainties remain. The post-Covid-19 demand recovered, following the easing of confinement measures and vaccination campaigns progressing throughout the EU. However, the sanitary situation is still evolving, with the risk of future infection waves present. Furthermore, at the global level, inflation increased due to financial support measures following the pandemic, and to energy prices and cost of raw materials rising.
Furthermore, as EU countries are yet to submit their CAP strategic plans for the new CAP, policy assumptions for this outlook exercise are that the current CAP, which fully entered into force in 2015, will continue to be implemented even beyond the agreed transition period (post-2022). The new allocation of resources of the 2021-27 EU budget were taken into account. However, the targets and actions of the Farm to fork and Biodiversity strategies are not included in the outlook exercise.
The outlook report also provides projections for agricultural income and labour, and environmental aspects. Overall, farm income is expected to slightly increase. The value of EU agricultural production is projected to grow by 0.7% per year in 2021-31. The intermediate costs’ increase is expected to slow down from 1.8% per year in 2011-21 to 0.7% in 2021-31, even though energy and fertiliser costs are projected to strongly increase by 2.7% per year. Furthermore, the net value added for farms is projected to grow at 1% per year over the outlook period.
In terms of agricultural labour, it is projected to decrease by 1.3% per year over the outlook period, slowing down compared to 2011-21 which was at 1.9%. This decline is mainly due to a concentration of farms and increased mechanisation. Over the decade, a new set of skills will increasingly be required, to produce more with less workers and less environmental impacts.
As for environmental aspects, the current policy framework applies, with projections focusing on nitrogen and phosphorus balances. The average nitrogen balance for the EU is not expected to significantly change over the next decade, while phosphorus balance is due to increase both in total and per hectare. There are some differences at regional level, for some regions the nutrient surplus decrease when in others it increases. Most increases are driven by higher mineral fertiliser inputs, while in a few cases, it is due to an increase in manure from cattle.
The report provides projections for the different EU agricultural markets over the next decade:
- arable crops
- meat and dairy markets
- specialised crops: wine, fruit and vegetable, olive oil.
In addition, this year, the outlook report provides two specific ‘what-if’ scenarios: one on the reduction of EU fat consumption following the recommendations by the World Health Organization (WHO) and its impacts on EU agricultural markets by 2031, and another one on the consequences of China becoming self-sufficient in meat and dairy products by 2031.
The EU agricultural outlook report for 2021-31 contains all 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 during the second day at the annual EU agricultural conference, taking place online on 9-10 December 2021.
Lower demand for feed to impact arable crops
Total agricultural land is due to slightly decline over the outlook period, with forest area exceeding agricultural land by 2031. EU cereal production is expected to decline, driven by a lower feed use. In contrast protein crops production will grow significantly, thanks to their environmental benefits. These are just a few of the projections from the European Union agricultural outlook for 2021-31 report published on 9 December 2021 by the European Commission.
Total utilised agricultural area (UAA) is projected to slightly decline over the outlook period, to 160.5 million hectares in 2031. This reduction is due to lower yields making production on marginal land less attractive, combined with a lack of generational renewal in remote rural areas and competition for land with forest and urban areas. Forest areas are projected to continue their increase and exceed agricultural areas in 2031, reaching 161.4 million hectares, thanks to the role their play in the climate challenge.
Most of the decline in agricultural land will come from crops areas, and cereals in particular. In contrast, conversion from conventional to organic farming is expected to remain strong in 2021-31. Even without additional support and the future Common Agricultural Policy not yet implemented (as assumed for this modelling exercise), organic land could reach 15% of total EU agricultural land in 2031.
The 2.8% decline of EU cereal area, compared to 2021, combined with a decrease in yield, could translate into a reduction of cereal production. Production is expected to be down to 276 million tonnes in 2031 (-2.5% compared to 2021). In terms of consumption, the EU use is projected to decrease by 2.7%, reaching 254.8 million tonnes, driven by a decline in feed use. As for trade, the EU is expected to remain competitive but will face strong competition leading to a reduction in market shares.
Regarding protein crops, the dedicated area is projected to increase by 19% over the outlook period. As these crops continue to attract interest thanks to their agronomic benefits and market prospects, yields are projected to increase by 14% by 2031. Production is expected to grow significantly by 33% to 5.2 million tonnes in 2031. EU consumption will also grow in 2021-31, to reach 5.6 million tonnes in 2031, up 14% compared to 2021.
As for oilseeds, the area is expected to be similar to current levels by 2031, at 10.7 million ha. It will peak in the middle of the outlook period but start to decline due to lower demand for feed and oils. EU production is due to reach its highest in 2027, at 32.1 million tonnes. It is then projected to decline to 31.2 million tonnes by 2031.
The total EU sugar beet area is expected to stabilise at almost 1.5 million ha in 2031. As for EU sugar production, it is due to increase slowly, from an average of 15.5 million tonnes in 2019-21 to 16 million tonnes in 2031. EU consumption is projected to decline by 0.5% per year, to 15.9 million tonnes. This is mainly linked to a consumer shift to healthier diets.
The EU agricultural outlook report for 2021-31 contains all relevant market data, accompanied by an explanation of assumptions, and a description of the macroeconomic environment. The projections and scenarios described in the report are discussed at the annual EU agricultural conference, taking place online on 9-10 December 2021.
O artigo foi publicado originalmente em Comissão Europeia.