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EU will be the slowest-growing agricultural market of the next decade - OECD-FAO report

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Western Europe will be the region of the world with the slowest growth rate in total agricultural and fish production for the next ten years, according to the OECD-FAO Agricultural Outlook 2018-2027.

Despite the feeble growth of only 3% and the limited potential for area expansion, Western Europe (EU, Switzerland and Norway) will remain a major global provider of many agricultural commodities, thanks to high productivity and continued high yields, the 14th OECD-FAO joint report stated.

Today (July 3), the Agricultural Outlook for the next decade was unveiled by OECD Secretary-General Angel Gurría and FAO Director General José Graziano da Silva at a press conference in Paris.

“As the area [in Western Europe] harvested for various crops such as other oilseeds, sugar beet, and roots and tubers is expected to contract over the outlook period, crop production growth will come predominantly through yield improvements, which is notable for a region that already reports some of the highest yields in the world across commodities,” according to the report.

The Outlook finds that global agricultural and fish production is projected to grow by around 20% over the coming decade, but with considerable variation across regions. Strong growth is expected in developing regions with more rapid population growth, including Sub-Saharan Africa, South and East Asia, and the Middle East and North Africa, and will be much lower in developed countries.

Da Silva stressed that there are four trends which will accelerate in the next decade.

First, aquaculture will become increasingly important with more fish consumption globally.

Secondly, the production of staple foods, and in particular cereals, will tend to stagnate or rise very little in conjunction with slowing population growth.

Third, since per capita income in China will remain stable, the demand for meat which has grown exponentially for the past decade will slow down considerably, whereas dairy products will see a formidable growth of around 22% for the period under consideration, according to Da Silva.

The most negative development to be expected, the FAO director general continued, will be the accelerated growth in per capita consumption in sugar and vegetable oil, which will worsen the epidemics of obesity the world has been witnessing in the past years.

“Especially countries or regions which are reliant on food imports will be affected by an increase in the consumption of fat, sugar and salty food,” with the consequent spike in health expenditure for those countries, he said.

Western Europe

The countries of Western Europe hold significant shares in the global production of other coarse grains (barley, oats, rye; 31% of global production) other oilseeds (rapeseed, sunflower; 20%) wheat (20%); milk (21%); and meat (15%), the report states before adding that the coming decade will see declines in these global shares as other countries and regions report faster growth.

The decline will be especially pronounced for biodiesel, where the region’s share of global production will fall from 40% to 34%, as output falls by around 4% over the outlook period, in line with lower demand for diesel.

Last month, the Council, Parliament and the Commission concluded one year and a half of talks by agreeing a new regulatory framework (RED II) including a binding renewable energy target for the EU for 2030 of 32% with an upwards revision clause by 2023.

Under the agreement, the EU will phase out palm oil-based biofuels by 2030 with a freeze of food-based biofuels from 2020, signalling the end of subsidies by member states.

After the abolishment of EU sugar production quotas, the bloc became an exporter of the commodity with a correlated 14% increase in sugar beet area in 2017 compared to the previous year, the report explained.

However, in the coming decade, as EU prices fall in line with global markets, the area dedicated to sugar beet is expected to contract again to pre-2017 levels, while yields will continue to rise. This will result in a 2.5% expansion of sugar output until 2027.

EU sugar production is estimated at 21 million tonnes, compared to 16.8 million tonnes last year, up from the latest forecasts which predicted 20.4 million tonnes.

Simultaneously, the world market is oversupplied by more than 10 million tonnes after two consecutive years of deficit. In addition to the EU, the main countries contributing to this excess supply are India and Thailand.

The Outlook also stressed that Western Europe’s Agricultural deficit peaked in 2007 and has fallen by around a half since then. It will further decrease by a half in the next ten years, the report predicts.

Eastern Europe and Russian Federation

Cereal production in Eastern Europe and Central Asia (a region which includes the Russian Federation, Ukraine, Kazakhstan and Turkey as main agricultural producers) expanded rapidly over the previous decade, due to an overall economic recovery and considerable investments into the modernisation of agriculture, the report clarified.

In the coming decade, agricultural and fish production will expand by 14%. In terms of arable crops, the region will maintain its position as second-largest wheat producer, increasing its share of global production to almost 22% by 2027.

The importance of trade

“While overall exports from countries and regions abundant in land are set to increase, notably in the Americas, many poorer countries with rising populations and limited land resources will be increasingly dependent on food imports to feed their people,” said Gurría. “It will be essential that exporters and importers alike have access to an open and predictable trade policy environment.”

A number of current trade issues involving agricultural commodities (such as the Russian import ban, the dispute around Argentine and Indonesian biodiesel exports to the US, and China’s anti-dumping probe into imports of US sorghum) may have important bilateral effects for specific commodities and permanently change trade flows between countries, as exporters find new markets and importers find new sources of supply.

“We have seen trade tensions escalate and protectionism rising, when you move from the threats to the actions, then there are distortions of trade and a likely change in trade flows which is often irreversible,” according to Gurría.

The OECD Secretary General also called for international cooperation within multilateral institutions to be enhanced, particularly in the World Trade Organisation (WTO).

“International cooperation remains our only hope, and we have to rely on the WTO which was created to solve disputes so that open trade benefits all countries,” he concluded.

“The Green Revolution of the last century largely increased the world's capacity to feed itself but now we need a sustainability revolution,” said Da Silva.

“This includes tackling high-input and resource-intensive farming systems that impose a high cost to the environment. Soil, forests, water, air quality and biodiversity continue to degrade. We need to adopt sustainable and productive food systems that offer healthy and nutritious food, while also preserving the environment and biodiversity,” Da Silva affirmed.

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