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Agribusiness in Germany

The dioxin scandal that hit Germany at the start of the year has shaken the confidence of German consumers and those across Europe. We expect to see effects on demand for meat over the coming year, though effects are unlikely to last much longer than that. Despite some early criticism, the government has now taken firm action to restore confidence, though we caution that some of the measures will raise costs for the feed industry, which may filter through to higher feed prices.

Key Views

Heavy rain on the Germany-Poland border during wheat sowing in 2010 may have prevented access to fields, but we are assuming an overall increase in acreage, as high prices are expected to encourage planting. Production in 2010/11 to rise 3.5% to 24.6mn tonnes.

In 2010/11, we are expecting a significant bounce-back in corn production, as plantings and yields rise. Production of 4.88mn tonnes expected, up 19.8% y-o-y.

In 2011, higher feed prices resulting from 2010's poor grains harvest and the global picture of rising prices will trouble dairy farmers, though farmgate prices are rising. Milk production is likely to rise marginally to reach 27.9mn tonnes.

Over our forecast period we expect cheese production to benefit from large milk stocks as producers seek to gain added value from low milk prices. Strong demand in key export markets in the EU and Eastern Europe should contribute to a relatively steep production increase of around 7.2% to 2.21mn tonnes by 2015.

In 2011, falling domestic demand for pork due to the fallout from the dioxin scandal will slow production growth, though not by much, and we forecast another production gain of 2.5% to 5.58mn tonnes.

Consumer confidence in pork has taken a hit following the dioxin scandal at a time when pork prices are rising. In 2011, we are forecasting consumption to fall 4.1% y-o-y to 4.28mn tonnes.

Industry developments

In March, Members of the European Parliament approved a resolution criticising the European Commission over the forthcoming free-trade agreement with Mercosur. The resolution, proposed by Greek MEP Georgios Papastamkos, said the EC should not make concessions that could adversely affect European farmers. EU farm production guaranteed food security and quality, it said. Nevertheless, the EU's chief negotiator Joao Aguiar Machado claimed the resolution did not represent a setback for the talks. 'I'm not minimising it, but it certainly doesn't represent a reduction in the commission's commitment to a deal ,' he said. Machado was speaking as talks with Mercosur resumed in Brussels from March 14-18.

In early January, the German authorities were forced to halt sales of meat and eggs at more than 4,700 farms after dioxins - chemicals known to cause cancer - were found in animal feed for pigs and poultry. The so-called 'dioxin scandal', as it became known, shook confidence in the German feed and livestock industries, leading the government to introduce a raft of new safety measures for the feed industry. A number of countries banned imports of German farm products and we expect the affair to affect demand and productivity in 2011.

by S. C.
30 april 2011, World News > Europe