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Article: EU agri-food sector showing resilience amid COVID-19 disruptions
30 April 2020
This article is taken from IEG Policy platform dated
28/04/20.
The EU's agri-food sector has so far responded "remarkably well"
to the challenges presented by the novel coronavirus, the European
Commission has concluded.
The COVID-19 pandemic is presenting unprecedented challenges for
EU agri-food producers, including in the form of rapidly evolving
demand for food products, logistical disruptions and labour
shortages.
But the sector is responding and adapting to these new
circumstances "with efficiency", the European Commission wrote in
its latest short-term outlook report for EU agricultural markets
published on April 20.
The closure of restaurants, bars and hotels as part of the
confinement measures implemented around the world has redirected
food supplies towards retail for direct purchases by consumers
stuck at home. This is having a "direct impact" on agri-food
producers and presents challenges due to differences in consumption
patterns and packaging, the Commission says.
For instance, staple food such as flour, pasta, canned fruit and
vegetables, and rice have been in higher demand, while higher-value
products such as quality meat cuts, wine and speciality cheeses -
which are usually more consumed outside - are seeing a significant
decrease in consumption.
But thanks to the sustained demand for food, EU agriculture has
also suffered relatively less damage from the lockdown measures
than other parts of the economy, the Commission observed.
However, it said some sectors have been hit more severely than
others, while an economic recession is expected to have further
significant impacts on food demand, in particular for higher-value
products.
Situation by product
In the report, the Commission presents a detailed overview of
the prospects for each agri-food sector:
For grains and oilseeds, abundant stocks and a sizeable
2019/2020 harvest foreseen in the EU and neighbouring countries
should ensure sufficient supplies for the coming months. However,
the anticipated 12-year low in EU rapeseed production and lower
demand for oilseeds - linked to a decline in demand for biofuels
due to plummeting oil prices - could lead to an overall reduced
supply of proteins.
For sugar, very low energy prices and lower demand for gasoline
are pushing ethanol production down and trigger more production of
white sugar. With higher global supply than anticipated and a
slight drop in consumption due to the lockdowns, world sugar prices
have fallen.
The overall availability of olive oil should remain high as
average production is expected and there are significant stocks.
Stockpiling has caused an increase in retail sales and could lead
to some recovery in demand in the main EU producing countries, yet
consumption outside of the EU is likely to decrease.
A lack of seasonal labour could negatively impact the harvests
of some fruits and vegetables, but no major COVID-19 related
disruptions are expected for apples and oranges in the current
marketing year, as the demand for these products has
increased.
On the wine market, the COVID-19 challenges come on top of the
US Airbus tariffs imposed in October last year and are expected to
cause a 14% drop in exports in 2019/20. The closure of restaurants
and bars are leading to a strong reduction in EU wine consumption,
especially for sparkling and high-value wines, of 8% below the
latest five-year average.
For the dairy sector, the pandemic put strong
downward pressure on prices as it coincided with the yearly spring
peak in EU milk collection. This could favour the production of
more storable and less labour-intensive dairy products such as milk
powders over fresh products.
The closure of food services and outdoor markets also
negatively affects some high value-added products such as PDO/PGI
cheeses. Meanwhile, other dairy products could benefit from
increased retail sales.
In the meat market, the switch to home consumption and retail
may particularly influence beef and sheep meat in a negative way.
EU beef producers face lower demand and are unable to sell their
high-value cuts to restaurants, while the sheep and goat sector saw
their seasonal peak in demand during Easter and Ramadan go up into
flames.
Poultry production continues to grow as it benefits from
increased consumer demand as a replacement for more expensive meat,
but the sector will still be impacted by the closure of restaurants
for certain varieties such as pigs and pigeons.
Pigmeat is not expected to be significantly affected by the
pandemic. Production is likely to grow slightly this year with
sustained demand from Asia, due to the impact of African Swine
Fever on the continent and especially in China. EU exports are
expected to grow by another 12%, after already realising a 17%
increase in 2019.
The flower sector suffers a "particularly severe impact" from
the COVID-19 crisis, the Commission notes, as most outlets are
closed, Easter is traditionally one of the three demand peaks in
the year, and air freight has been halted.