BMI View: While planting of the winter wheat crop went well and is reportedly in good condition, the substantial gain in output in 2014/15 informs our forecast for wheat production growth to decline modestly in the 2015/16 season. German pork producers will remain under pressure, owing to the ban on meat imports from Western countries that has been imposed by Russian authorities. On the other hand, sugar production should expand at a stronger pace over the coming years, owing to an increase in growing areas and yields, as well as the potential end to the EU's sugar production quota in 2017.
Milk production growth from 2013/14 to 2018/19: 21.0% to 37.1mn tonnes. Modest growth will be supported by export demand and higher prices, and held back by sluggish domestic consumption and the demise of smaller producers.
Pork consumption contraction to 2019: 0.9% to 4.4mn tonnes. Although we expect lower prices to boost growth in 2014 and 2015, demand for pork has been on a downward trajectory since 2007 and we see no sustained let-up in this trend as consumers turn to healthier options.
Wheat production growth to 2018/19: 3.2% to 25.8mn tonnes. Wheat will gain some ground at the expense of other grains and sugar beet.
2015 real GDP growth: 1.9%, up from 1.6% estimated for 2014, forecast to average 1.5% from 2015 to 2019.
2015 consumer price inflation: 2.1%, up from 1.7% estimated for 2014, forecast to average 1.9% from 2015 to 2019
BMI universe agribusiness market value: up 0.4% to USD34.2bn in 2015. Expected to grow by 1.9% a year on average from 2015 to 2019.
German pork producers will be among those hardest hit after Russia put in place a one-year long embargo on a range of goods, including all food products, from the EU, Norway, Switzerland, Australia, Canada and the US, which commenced in August 2014. In 2013, Russia imported around EUR1bn-worth of German pork products out of a total of EUR1.6bn-worth of German food and other agricultural produce. We have revised down our production forecasts for 2014 and 2015 as prices fell by 4.6% in 2014 compared with 2013 and we see scope for steep discounting as supplies normally destined for Russia accumulate. This will unsurprisingly place downward pressure on the prices German households pay for pork products, leading us to revise up our short-term consumption forecasts.
A very strong wheat harvest is expected for 2014/15 in terms of quantity, with production of 26.3mn tonnes expected, although the agriculture ministry's forecast puts the harvest at 27.9mn tonnes, which would make it the biggest in recent times. However, there are reports of damage to crops as a result of unusually heavy rainfall at the time of harvest. Consignments in the worst-affected areas may be only suitable for animal feed as the crops have begun to sprout. German wheat producers had hoped to be able to step into the space vacated by their French counterparts, particularly Algeria, but it remains to be seen whether a sufficient proportion of German wheat will meet the protein levels required for export as milling wheat.