EU outlook for 2022-32: output growth in major livestock and agricultural sectors to slow down
The resilience of the European Union's crop and livestock sector has been put to the test over the past two years.
In addition to trade disruptions and higher commodity prices caused by the post-COVID-19 recovery, the Russian invasion of Ukraine has led to even higher input and energy prices. As a result, food inflation soared and trade has been further disrupted. In light of these difficulties, combined with changes in consumption trends, the outlook report presented in December 2022 by the European Commission, "EU agricultural outlook for markets, income and environment, 2022-2032," forecasts a slowdown in output growth in the EU's main crop and livestock sectors, with production of some crops stagnating or even falling slightly, and milk and meat production declining.
Sustainability will play an increasingly prominent role in EU meat markets. Meat production will become more efficient and more environmentally friendly, with an increase in organic and extensive production systems. Despite these developments, meat consumption in the EU is expected to decline (-1.5 kg per capita per year), with beef particularly affected and pork partly replaced by poultry.
On the other hand, the report notes that protein alternatives to meat will represent only a very small market share.
Beef production and consumption will continue to fall
This latest medium-term outlook report from the European Commission points to a continued decline in beef production and consumption in the EU-27 for the period 2022/2032.
In that decade, a production loss of 0.6 million tons is expected, which means a decline of -9% over the next ten years. The suckler herd would only reach 9.9 million head by 2032, with a loss of 636,000 head (-6%) due to low producer profitability, sustainability concerns and new environmental standards.
World beef import demand will increase by 1.3 million tons between 2022 and 2032, while live exports to third countries will continue to fall (-2.8% per year).
The EU will continue to export to high-value markets in neighboring countries (United Kingdom, Switzerland, Norway) and markets such as Japan or Canada.
As for quotations and after the high prices reached in 2022, they are expected to fall again as the supply/demand balance recovers and according to the evolution of production costs, so they could stabilize slightly above €4,000/ton, driven by high international demand.
After COVID-19, with abnormally high consumptions due to population confinement, beef consumption in the EU continued to decline in 2022 in particular due to high prices. Over the next ten years, the downward trend will continue, with per capita consumption falling in 2032 from 10.3 to 9.5 kg (-7.8%).
Pork production to begin to decline
The report also points to a decline in pork production and consumption due to animal health (ASF) pressures and consumer nutritional and environmental concerns.
Production in the EU-27 is expected to fall by 1% per year in 2022/2032, the equivalent of about 2.2 million tons, initiating a clear reversal of trend after the growth recorded in 2021 and the slowdown seen in 2022.
Also exports, with an estimated decline of around -3.2% per year over the next ten years, compared to the growth in foreign sales observed in the decade 2012/2022 (+2.8% per year).
The fall in exports is explained by lower import demand from China, which is making progress in the recovery of its pork production, and by the slowdown in imports from other Asian markets such as Japan, the Philippines and Vietnam. However, the Commission's experts point to a possible growth in demand in alternative markets such as South Korea, Australia, sub-Saharan Africa and European countries.
In terms of consumption, forecasts point to a decline of -0.4% per year, with a cumulative loss of -4% over the ten years, from 32.4 kg per capita in 2022 to 31.1 kg in 2032.
Prices should decrease after the historical increases in 2022, although depending on the level of export demand and the readjustment of production in the EU, which could slow the fall in prices until 2025. EU prices are expected to remain around €1,500/tonne until 2032.
Poultry production to rise after fall in recent years, but consumption to slow down
After the decline in 2022 amid high input prices and outbreaks of highly pathogenic avian influenza (HPAI), EU poultry production is expected to recover during the reporting period (+0.2% y/y), albeit with slower growth than in the last decade (2%), mainly due to environmental constraints and changes in consumption. Unlike previous years, the incidence of HPAI is spread throughout the year rather than being a seasonal event, which will challenge the industry and, more specifically, outdoor production systems in the EU.
Poultry consumption growth in the EU will slow from 1.9% per year in 2012-2022 to 0.2% over the next decade. However, this still translates into an increase in per capita consumption from 23.4 kg to 24.1 kg (+3% over the next decade). That is due to a healthier image of poultry compared to other meats, greater ease of preparation, the absence of religious restrictions on consumption and its relatively cheaper price.
Exports will also recover by 0.8% y/y, thanks to growing demand in sub-Saharan Africa, the Philippines and the United Kingdom. Poultry prices are expected to decline and stabilize around €2,000/ton by 2032, above pre-COVID levels.
Sheep/goat production and consumption will increase slightly.
Contrary to the downward trend of recent years, sheep and goat meat production in the EU is expected to increase slightly by 0.2 % per year until 2032 (to 645,000 tonnes). This is mainly due to a continued increase in the EU-13 (0.7% p.a.). Together with income support, a tight global supply and demand situation and favorable producer prices should support this trend.
Production will remain concentrated in a few EU countries, as slaughtering in Spain, Greece, France, Ireland and Romania accounted for more than two-thirds of total EU production in 2021.
EU per capita consumption is expected to remain relatively stable by 2032 (around 1.3 kg per year), thanks to diversification of meat diets and sustained consumption patterns in the EU population (due to religious tradition and migration). In general, sheep meat consumption is less sensitive to price changes and more affected by seasonal peaks in demand related to religious celebrations.
After two years of low exports due to Brexit and high domestic prices, EU meat exports are expected to recover in 2023-2024 and reach 60,000 tons by 2032 on the back of consolidation and further expansion of trade with partners in the Near and Middle East. UK imports currently account for almost half of EU meat exports and should remain stable at most. There is much uncertainty about the potential impact of the UK-Australia/New Zealand trade agreements on EU exports and UK exports to the EU.
EU imports will recover in the short term and decline slightly to 125,000 tons by 2032. While the EU remains an attractive export destination, Australia and New Zealand will focus more on Asian markets, given their easy access. While Australia should fill its EU tariff rate quotas, New Zealand's production capacity is not expected to be able to serve both Asian and EU markets despite productivity gains.
Prices are expected to follow a downward shift, but reach a higher level than before COVID-19.
To download the European Commission report, please click here.