European Union Cattle Outlook Annual

EU = “EU” in this report refers to EU27+UK. In the next report, the EU Livestock and Products Annual, the Brexit will be taken in account and the “EU” will refer to the EU27 without the UK.

Cattle & Beef – Despite falling beef production, the EU became a net exporter in 2020.
In 2021, the EU cattle herd is forecast to further contract (except for the dairy herd in Ireland and beef herd in Central Europe). The EU dairy herd is shrinking because of the increased efficiency of the sector, while the EU beef herd is shrinking due to structural unprofitability. With the reduction in the cattle herd, beef production is also forecast to fall. Moreover, due to the closed-nature of the market, beef consumption will inevitably follow. In the spring of 2020, slaughter was disrupted due to coronavirus (COVID-19) outbreaks and the associated logistical and slaughter restrictions but recovered during the second half of the year. In 2020, EU beef imports and exports trended in an opposite direction. While imports of, in particular, high quality beef were cut due to the lack of demand, beef exports rose, which led the EU to become a net beef exporter for the first time since 2011. In 2021, beef imports are forecast to recover anticipating a re-opening of the food service sector. Additionally, beef exports are projected to follow their gradual trend of export market expansion.

The EU dairy herd is shrinking based on increased efficiency.
The 2019 cattle and beef balance is adjusted based on updated Eurostat census statistics of December 2019 (+23,000 head). The size of the EU herd has been on the decline since 2017, predominantly because of the increased efficiency of the dairy herd. EU milk deliveries continuously rose, by an average of roughly 1.6 percent per year since 2010. Since 2010, in absolute terms, the dairy cow herd shrunk most significantly in Poland (-404,000 head), France (-284,000 head), and Germany (-260,000 head), while the dairy cow herd in Ireland increased by 449,000 head. The dairy herd also expanded in Italy and the Netherlands but peaked in 2016. For more information see the FAS EU Dairy and Products Annual of 2020.

The EU beef cattle herd is shrinking due to structural unprofitability.
Since 2010, the size of EU beef cow herd has remained relatively stable compared to the dairy cow herd-- down 1.0 percent over the whole period for beef cattle compared to 3.9 percent for dairy cattle. The steady decline of the EU beef herd, however, is not based on improved productivity of the sector. The EU beef cattle herd is shrinking due to structural unprofitability, further exacerbated by high feed prices over the past three years (see graph below). In 2020, the herd expanded in several Central European countries – Poland, Hungary, Bulgaria, the Czech Republic, Slovakia, and the Baltic States – based on financial support, as well as on the Iberian Peninsula – Spain and Portugal – because of export demand for animals. Exports have become one of the main drivers for holding beef cows in the EU, and an increasing share of the herd is exported to Northern African countries and the Middle East. In 2020, however, the EU cattle trade, within the EU and with third countries, declined due to lack of demand because of the COVID-19 pandemic. Exceptions were Spanish cattle exports to Libya and Turkey, Portuguese cattle exports to Israel, and Hungarian cattle exports to Kosovo. Reportedly competitive prices for live cattle for slaughter contributed to the rise in those exports. In 2021, EU cattle exports are forecast to recover as the market demand is anticipated to return to pre-COVID-19 levels.

Cattle slaughter recovered during the second half of 2020.
The COVID-19 crisis in 2020 only had a minor effect on the dairy sector compared to other livestock sectors. During the lockdowns in the spring of 2020, the average EU milk price declined (but did so in line with a seasonal pattern). During the second half of 2020, the price recovered to roughly the same level as reported at the end of 2018 and 2019. A similar trend was reported for the price paid for dairy cows (see graph below). The price paid for beef cattle, however, plummeted in March 2020 because of the global pandemic, and didn’t fully recover. This is because the demand for beef was negatively affected by the prolonged closure of the food service sector. Slaughter of calves and young cattle was most affected, and a portion were slaughtered as adult cattle.

The most significant cuts were reported in the most prominent veal producing countries, namely the Netherlands, France, Spain, Italy, and Belgium. Looking at total slaughter, restrictions on the transport of animals and enforcement of new slaughter protocols disrupted and slowed slaughter during the first five months of 2020 (-4.91%) but recovered in June to average levels. As fodder prices are relatively high, farmers couldn’t hold onto their cattle and sold their animals for slaughter. Recent Eurostat statistics indicate that full-year slaughter was reduced by 1.67 percent, and the herd declined by 1.24 percent. The calf/cow ratio of 80.34 percent and a loss number of 6.68 percent, are somewhat comparable with levels reported in 2018, a year with a dry summer and high feed prices.

The cattle herd is forecast to shrink at a steady pace of nearly one percent.
The developments in the industry this year will depend on the course of the COVID-19 spread and related economic crises. Major cuts to the herd are forecast in almost all EU Member States, but most pronounced in France and Germany. Low cattle prices, coupled with limited structural improvement of the profit margins, are expected to encourage farmers to either stop farming or reduce their breeding herd. As previously noted, exceptions are the dairy herd in Ireland and the beef herd in Central Europe. However, expansion of the beef cow herd in Central Europe -- Poland, Bulgaria, and Hungary -- could possibly outweigh the reductions in Western Europe -- France, Germany, and Ireland. With recent EU policy proposals (e.g., the Green Deal, Farm to Fork, and Biodiversity Strategies), any chance for growth appears unrealistic in the near-term (for more information see the Policy section of this report). Assuming a gradual tamping out of COVID-19 over the course of this year, the 2021 calf/cow ratio is forecast at 80. percent and the loss ratio at 6.2 percent. Under these conditions, the cattle herd is forecast to shrink at a continued pace of nearly one percent. Slaughter is forecast to decline by 0.46 percent, a minor reduction compared to the cuts in 2019 (-2.51%) and 2020 (-1.67%).