HomeMarketsImpact of Covid-19 on the agri-food sector, European Commission and FAO reports

Impact of Covid-19 on the agri-food sector, European Commission and FAO reports

Impact of Covid-19 on the agri-food sector, first reports from the European Commission and FAO. Details to follow.

European Commission, food production and consumption, spring 2020

The EFSA and ECDC's One Health report published by the European Commission photographs the situation of the main food productions from February to April 2020. (1) The situation is not considered comparable to that of the 2010 crisis, due to the greater stock (with not negligible problems) and positive prospects on crops. (2) And it is still too early to assess the effects of the emergency and the resulting economic crisis.

The pandemic it destabilized international markets and was aggravated by the closure of borders, including in Europe. The establishment of green lanes, on the part of the European Commission, has partly facilitated trade in foodstuffs. (3) Without, however, resolving the problem of the shortage and irregularity of work in agriculture, which the various countries have tried to deal with with 'amnesty' measures, such as those introduced in Italy with the so-called revival decree. Following, market data and forecasts.

Food of plant origin, EU market

Cereals. The availability of cereals in the European Union does not seem to be affected by the Covid-19 emergency. Expected production - albeit slightly lower than last year (-2,2%) - will remain above the five-year average (+ 2,2%). Harvest forecasts for corn and barley are slightly down, barley, oats and durum wheat are up (+ 17% for spring wheat). Provided there are no climatic imbalances.
According to the analysis of the European Commission, world cereal production in 2020/2021 will reach a new peak, especially on maize and wheat. Prices should therefore remain stable.

Oil seeds and legumes. The 2019-2020 campaign recorded theimport in the EU of large quantities of seeds and soybeans (14,2 million tons) and rapeseed (6 million tons), to meet internal needs. In the 2020-2021 season, European production of protein crops destined for food & feed, + 4%. Thanks to better yields on soybeans and sunflowers (while rapeseed production will remain below the five-year average) and the extension of broad bean and pea crops for forage (Pisum sativum sativum there. arable, Said Ruby).
The sharp drop in the price of oil has a negative impact on the demand for biofuels. A reduction in the import of palm oil is therefore expected (-8%).

sugar. The abundant 2019/2020 production in Brazil caused the price of sugar to collapse, the consumption of which fell during the lockdown due to the closure of the Ho.Re.Ca. (hotel, restaurant, catering). Some European industries have thus converted a part of their site for the production of alcohol for disinfectant use, the consumption of which has instead increased.

Olive oil. The 2019/2020 olive oil production closed down, -15% compared to the previous year, due to the drastic drop in production in Spain (-35%). Although Italy more than doubled production, after a annus horribilis, and Greece and Portugal also recorded a good recovery (+ 43% and + 30%, respectively). Despite this, availability is still satisfactory given last season's remaining stock. Prices, under strong pressure since last year, only partially stabilized in February 2020, thanks to the aid for private storage launched in November 2019 (especially on virgin olive oil, although below the five-year average of 40% ). (4)
Until February 2020, exports increased in volume and decreased in value (-12% and -22%, Italy and Spain respectively, on the value per unit of exports to the USA). The crisis dictated by Covid-19 negatively affects global demand and the export of European olive oil. Retail sales are currently growing in producing countries (+ 13%) but a decline (-9%) on the five-year average is expected in the rest of the EU.

Wine. The wine sector appears to be one of the most affected by the Covid-19 emergency. The closure of bars and restaurants resulted in a halt in sales of high-end wines and sparkling wines, which was partly offset by an increase in sales of mid-range products on the channel retail. The Commission expects a reduction in consumption in the EU, -8% compared to the five-year average. With a collapse of export, -14%, and a smaller decrease inimport. This will result in a slight increase in stock, already at record levels. (5)

Fruit and Vegetables. Focus on apples and oranges. The demand for fruit of European origin increased during the quarantine thanks to the increase in domestic consumption and the difficulties encountered in importing tropical fruit.

Mele. + 9% the expected increase in apple consumption in the EU. Conversely, sales of processed products are declining, although imports are increasing. The collapse of export, -34% compared to the five-year period, is attributed to a decrease in production, an increase in domestic demand, obstacles in trade (eg India).

oranges. Demand is growing globally, thanks to the widespread perception of citrus fruits as beneficial foods for health. To the point of reabsorbing on the canal retail lost sales on the Ho.Re.Ca. L' export decreases, for the same reasons that concern apples. Imports of the 2019/2020 season, which had recorded a drop (-20%, at the end of February 2020), are expected to partially recover gap initial and remain stable, thanks to good harvest prospects in South Africa (first businesses non-EU trade for fresh oranges) and production, of orange juice or concentrate, from Brazil.

Animal husbandry and food of animal origin, EU market

Dairy. It is declared to be one of the sectors most affected by the crisis, although the aggregate data does not appear entirely negative. Production is estimated to increase, + 0,3% for cheeses, + 0,4% for milk, + 1,2% for butter (which however recorded a loss in value, -7%). Since February there has been a decline in the prices of powdered milk (whole -6%, skimmed -17%), due to lower demand from the Middle East and China (which increased the production of powdered milk). And yet the signs of a restart of exports to Asia point to continued growth in trade.

Meat. Beef. Beef production is expected to decline for 2020 due to declining prices. The crisis has affected above all the cuts of fine meat, whose consumption took place mostly outside the home, and the products intended for fast food and redirected to retail. Imports from South America collapsed (-13%), while European producers try to concentrate their sales on the currently more profitable Asian markets. Covid-19 did not affect exports, although that of live cattle was already weakened by competitive prices in Brazil and Uruguay (as well as by lower Turkish demand).

Poultry. Production and consumption of chicken meats they are destined to increase due to cheap prices. Also in terms of consumption per capita chicken (+ 0,2%, 23,6 kg / year). The closure of restaurants and farmhouses has instead limited the sale of poultry meat with higher added value (e.g. goose, duck, etc.). Import down, export growing. European countries at risk of avian fever - such as Poland, the leading European exporter of poultry to China - have however been banned from importing by the first non-EU buyers (eg China, Vietnam, South Africa and the Philippines).

Pig. The European Commission does not warn of signs of crisis in the swine supply chain. Exports to Asia continue to flourish, + 12% in China due to the collapse of domestic production (caused by the African swine fever epidemic). Spain doubles exports, reaching 28% of total EU exports and the largest number of garments, a short step from Germany still in the lead. European consumption of pork is destined to decline (32,5 kg per capita, -21% compared to 2019), to the advantage of cheaper meats (poultry). On the other hand, the deep crisis of pig farming in Italy escapes from Brussels, which in recent months has experienced a drastic drop in demand and consequent collapse in prices, estimated at around 30%.

Sheep. The production of sheep meat (from goats and sheep) will remain substantially stable in 2020 (to consider the lower production in Romania and in general the presence of smaller flocks). The Covid-19 crisis has generated a negative impact especially for the missed usual celebrations of the religious celebrations of Easter and Ramadan. It will be possible to freeze the surplus of butchered meat for use in the second half of the year but pressure on prices is to be expected. Exports of live animals decreased (due to a contraction in demand from Libya, Jordan and Israel and transport difficulties to Iran), while those of meat increased (Ireland and Spain in the lead, to the Middle East and Hong Kong. trends negative on imports.

FAO, global food price index

The FAO Index of the prices of food products, published at the beginning of May, highlights how the trend of the European markets is in line with the trends global. (6) In April 2020 there was a drop in prices equal to -3,4% compared to March, - 10% less than in January.

Prices of cereals they decreased marginally, as wheat (after the announcements of possible limits on exports from the Russian Federation) and rice (also due to the temporary blocking of exports from Vietnam) increased, unlike corn which instead suffered a sharp depreciation (due to the less use in feed and in the production of biofuels). The lower consumption forecast, in general terms, should lead to an increase in reserves, of maize in particular.

Sugar it followed the collapse in crude oil prices, due to the reduction in demand for sugar cane for the production of ethanol. Production therefore concentrated on processing into sucrose, with an increase in quantities which contributed to the collapse of prices, at an all-time low of the last 13 years.

Vegetable oils - palm, soybean and rapeseed in particular - have suffered a drastic fall, linked to the collapse in demand for biofuels.

Prices of dairy products, just like in the European Union, they recorded a general decline (-3,6%, with a double-digit reduction for butter and powdered milk). This is due to the increase in availability and stocks, against the reduction of restaurant activities in the northern hemisphere.

Meat too recorded a decrease in prices (-2,7%). The partial recovery of the demand for imports from China has made it possible to balance the decline in imports in other countries, although the main producing countries are still paying the consequences of lockdown and obstacles to logistics.

Marina De Nobili and Dario Dongo

Footnotes

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Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.

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Graduated in law in Trento, she follows a master's degree in food law at Roma Tre. She is passionate about food and wine, she is between culture and tradition.

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