Over the next ten years, digitisation will be key for the arable crops sector, supporting yield productivity gains, improved labour conditions as well as higher environmental standards. Milk, dairy and meat sectors will be shaped by the transition towards increased sustainability, with changes expected along the food supply chain. Rising consumer health awareness and convenience will benefit the fruit and vegetables sector, resulting in increased demand. These are just a few of the projections from the European Union agricultural outlook for 2020-30 report published on 16 December 2020 by the European Commission.
In 2020, the agricultural sector faced unprecedented challenges due to the Covid-19 crisis and its consequences. From logistical issues, a shortage of workforce, to radical changes in demand, the sector showed its resilience by adapting to the different challenges, with the support of the European Commission and EU Member States. The crisis has also led to the reinforcement of some pre-existing trends, with an increase in demand for locally produced food, short supply chains and e-commerce sales. Furthermore, the report found that health concerns, origin, environment and climate change are among the key drivers of consumer choices.
For this edition, the EU agricultural outlook report provides different scenarios for the Covid-19 recovery, including a slow recovery and a green recovery. For both scenarios, the supply and demand shocks lead to lower meat and grain prices, while butter, cheese and poultry prices are less affected. In general, the market impacts are mostly driven by the macroeconomic shock, in particular the GDP contraction in 2020.
An uncertainty analysis is also included in this year’s report. Due to the Covid-19 pandemic, the uncertainties around the outlook exercise are particularly present. Covid-19 will likely have long-lasting consequences for agricultural markets, but the scale of the impacts will depend on the economic recovery paths and the specific market.
Moreover, this year’s EU agricultural outlook report includes a scenario where insect farming would be used to reduce food waste, by feeding it to insects. Their larvae would be used as aquaculture feed and the extracted insect oil used in biodiesel production. In the scenario presented, the global insect farm would go from using 15% of food waste in 2020 to 50% in 2030. By 2030, the insect industry is expected to produce 23 million t of protein meal and 2.5% of oil world consumption. After looking at impacts on crops markets, the scenario concludes that insect farming could significantly contribute to the circular economy by reintroducing nutrients from food waste back into the food chain. However, by reducing feed costs and supporting livestock production, it would result in a slight increase in greenhouse gas emissions.
The report also includes projections on agricultural income and labour for 2020-2030. The EU farm income is expected to increase with a growth in production and prices. However, costs should rise at a similar pace, limiting increase in nominal income to 1% per year. The farm workforce is expected to decline at a slower rate, at 1% per year, driven by technological progress in machinery and equipment.
Regarding environmental and climate aspects, the outlook report provides projections on environmental and climate indicators, with a focus on greenhouse gas (GHG) emissions and CO2 removal from the atmosphere. Projections for 2030 show that GHG emissions will remain largely unchanged from current levels, under the current policy framework. The report concludes that if the right farming practices and technologies are put in place, animal and crop emissions can be further mitigated as well as through further carbon sequestration and avoiding carbon losses. The latter is what the Commission is promoting in its CAP reform and Green Deal initiatives.
The report provides projections for the different agricultural markets over the next decade:
- arable crops
- meat and dairy markets
- specialised crops: wine, fruit and vegetable, olive oil.
The EU agricultural outlook report for 2020-30 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 16-17 December 2020.
