Summary
Economic trends in the EU
1. Food and drink industry output index increased
2. Evolution of main agricultural raw material prices
3. Price developments in the food supply chain: producer prices continued to peak above both consumer prices and overall inflation in Q3 of 2012
4. Slight decrease in employment index in the EU food and drink industry
5. Food and drink industry turnover index started to increase again
6. Confirming previous quarters’ trends, imported food prices continued to rise
Trade: Both imports and exports increased in Q3 of 2012 year-on-year
Other Topics
COUNTRY PROFILE: CHINA
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At A Glance - Summary of Q3 highlights

EU food and drink industry performance during Q3 2012against major economic trends in the EU2

OUTPUT   FOODPRODUCER

 


1Except for imports and exports data which represent evolution of the current quarter compared to the same quarter of the previous year, all other changes are represented with respect to the previous quarter of the same year.

2Unless otherwise specified, EU refers to the EU 27 in the text.

Please note that sources are listed at the end of each article. 
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At A Glance
Economic trends in the EU

The data and trends shown in the table below give a general overview of the EU economic environment. This bulletin provides an analysis of the performance of the food and drink sector against this economic background. 


 Table 1: Economic trends in the EU in recent periods

* With respect to previous quarter/month
** With respect to the same period (either quarter or month) in the previous year
Source: Eurostat, December 2012

Returning to the growth observed in the same quarter of last year, the industrial production index in manufacturing in the EU slightly increased (0.5%) in Q3 of 2012. In the same period, private consumption (volumes) also registered an increase compared to the previous quarter, i.e. 0.1%. The yearly comparison shows that the industrial production index decreased markedly in Q3 of 2012 compared to the same quarter of the previous year, i.e. by -2.2%. Private consumption also decreased compared to the change registered in the same quarter of 2011, but to a lesser extent, i.e. 0.2%.

The (all sectors) volume of retail trade decreased by the same amount as the previous quarter (0.2%) in September 2012 (compared to August 2012), while retail trade in food, drinks and tobacco decreased by 0.1%. Among the Member States for which data are available, total retail trade rose in twelve and fell in eight. The highest increases were registered in Denmark (+2.4%), Estonia (+2.0%) and Germany (+1.5%), and the largest decreases in Spain (-7.3%), Portugal (-4.0%) and Slovenia (-2.7%).3

3 Eurostat news release, Euro indicators, 157/2012.

1. Food and drink industry output index increased

After experiencing a decrease for the past two quarters, food and drink industry output (production) in the EU started to increase again in Q3 of 2012 compared to the previous quarter, i.e. by 0.51%. This is in line with the % increase experienced by the manufacturing production index in the same period (see the above section: Economic trends in the EU).


Q3 of 2012 represented a quarter of overall improved performance in terms of production at the Member State level. Exceptions to this trend include Austria, Bulgaria, Hungary and Scandinavian countries (Finland and Sweden) whose production index registered a marked decrease compared to previous quarter, that is -062%, -0.75%, -0.52%, -1.01% and -2.22% whereas Czech Republic (-0.60%) and Spain (-0.46%) remained on the same negative trend as previous quarter. The best performers include: Denmark (+3.40%) whose production index registered a marked increase after having experience negative growth for the past two quarters and Lithuania (+5.01%) which – after having registered negative growth in the past quarter, started again to increase at similar level then Q1 of 2012.




2. Evolution of main agricultural raw material prices

The following shows a mixed picture for raw material prices:

Source: FoodDrinkEurope compilation


Cocoa and coffee

Quarterly developments: After a declining trend since Q2 of 2011, cocoa prices drastically changed their performance and increased on average by 9.3% in Q3 of 2012. A similar positive trend that was also experienced by coffee composite prices which even if they continued to decrease they did so at a much slower pace since they fell by 1.0% in Q3 of 2012 against the 14% drop of previous quarter.

Year-on-year developments: The year-on-year comparison shows that, as it was also in the previous quarter, the New York cocoa market recorded a 17.8% decrease with respect to Q3 of 2011. Similarly, coffee composite prices were also lower than their level in the same quarter of 2011, i.e. by 27.8%.


cocoa NY market price and coffee world price.jpg
Source: International Cocoa Organisation (ICCO) and International Coffee Organisation (ICO), December 2012


SUGAR

Quarterly developments: Contrary to the previous quarter trend (+1.9%) and world prices trend for Q3 of 2012 (+4.6%), EU white sugar price remained rather stable (-0.1%) in Q3 of 2012. In the same quarter, U.S. market price continued to decrease, i.e. by 11.1% compared to Q2 of 2012.

Year-on-year developments: On average, EU market price for white sugar was 26.5% higher in Q3 of 2012 than the same quarter of the previous year whereas the U.S. market price was 17.7% lower than the average in Q3 of 2011. In comparison, the world sugar price was 8.8% lower than the average of the same quarter of 2011.


white sugar prices.png
Source: European Commission – Circa (Regulations (EC) No 562/2005 Article 6(1) and 479/2010 Article 2), United States Department of Agriculture, December 2012


GRAINS

Corn maize prices

Quarterly developments: Similarly to the previous two quarters’ trend but with a much higher pace, EU maize prices continued to increase in Q3 of 2012 (compared to Q2 of 2012), i.e. by 11.6%. U.S. maize prices also increased in the same period, i.e. by 26.6%. This important increase in U.S. prices was due to the drought which occurred in the country and a rising industrial demand domestically.

Year-on-year developments: On average, EU maize prices were 1.3% higher in Q3 of 2012 than the same quarter of the previous year. Similarly but to a much greater extent, U.S. maize prices were 24.1% higher in Q3 of 2012 than in the same quarter of the previous year.

corn maize market prices.jpg

Source: FAO and European Commission (DG Agri), December 2012

Soft wheat prices

Quarterly developments: Similarly to the previous quarterly trend but again with a much higher pace, EU maize prices continued to increase in Q3 of 2012 (compared to Q3 of the same year) i.e. by 11.6%. U.S. maize prices also increased importantly, i.e. by 36.3%.

Year-on-year developments: On average, EU maize prices were 18.1% higher in Q3 of 2012 than the same quarter of the previous year. Similarly, U.S. soft wheat prices were 40.2% higher in Q3 of 2012 than in the same quarter of the previous year.




Source: FAO and European Commission (DG Agri), December 2012


DAIRY

Skimmed Milk Powder (SMP)

Quarterly developments: After having experienced a declining trend in the period Q4 of 2011 to Q2 of 2012, EU SMP prices started to increase again in Q3 of 2012, i.e. by 9.9%. Moreover, for the first time since Q3 of 2010, average EU prices in Q3 of 2012 were higher than world market prices.

Year-on-year developments: The yearly comparison shows that, on average, EU SMP prices were 4.7% higher in Q3 of 2012 than the same period in 2011.

SMP.png
Source: FAO, CLAL consultancy (discontinued after January 2011 to the benefit of the European Commission source), European Commission – Circa (Regulations (EC) No 562/2005 Article 6(1) and 479/2010 Article 2), December 2012

Whole Milk Powder (WMP)

Quarterly developments: Generally higher than World Market prices since Q3 of 2010, EU WMP average prices started to increase again in Q3 of 2012, i.e. by 3.7% from the previous quarter.

Year-on-year developments: The yearly comparison shows that, on average, EU WMP prices were 9.8% lower in Q3 of 2012 than the same quarter of 2011.

WMP.png

Source: FAO, CLAL consultancy (discontinued after January 2011 to the benefit of the European Commission source), European Commission – Circa (Regulations (EC) No 562/2005 Article 6(1) and 479/2010 Article 2), December 2012


OILS AND OIL CROPS

Quarterly developments: In Q3 of 2012, oils and oil crop prices experienced a general increase (with the only exception of Palm oil saw a decrease by 8.7% continuing from the previous trend performance) with some important adjustments in several categories. Among the most important ones, we find a 29.3% and a 17.6% increase of Soybean meal prices and Soybeans, respectively. Moreover, after having decreased significantly during the previous quarter, prices of Soybean oil (-8.4%), Rape oil (-14.8%) and Rapeseeds (7.4%) started to increase again in Q3 of 2012, i.e. by 1.8%, 2.3% and 1.1% respectively.

Year-on-year developments: the yearly comparison shows that in Q3 of 2012 only Soybeans and Soybean meal prices were significantly higher than the same quarter of 2011: by 21.4% and 58.1% respectively. On the contrary Soybean, Palm and Rape oils together with rapeseed were 5.0%, 8.0%, 8.7% and 1.5% lower in Q3 of 2012 than the same period of the previous year.

oils and oilcrop prices.jpg
Source: World Bank and FAO, December 2012





3. Price developments in the food supply chain: producer prices continued to peak above both consumer prices and overall inflation in Q3 of 2012
While both consumer prices (-0.27%) and inflation (-0.04%) indexes growth stalled on average in Q3 of 2012, producer prices continued to rise (by 1.47%).


EU 27.png
Source: Eurostat (Food supply chain monitor), December 2012

4. Slight decrease in employment index in the EU food and drink industry

Continuing the trend of the previous quarter, the labour input index for the food and drink industry continued to decrease slightly (-0.2%) in Q3 of 2012. This was in line with the performance showed by the (total) manufacturing sector whose employment index also decreased by 0.2% in the same period.


When looking at the industry breakdown, the food sector employment index decreased by 0.3%, whereas the beverages industry employment index increased by 0.3% in comparison with the previous quarter.

Labour input index.png
Source: Eurostat (SBS), Nace Rev. 2, seasonally adjusted data, December 2012.
5. Food and drink industry turnover index started to increase again

The food and drink industry’s turnover index increased by 1.6% in Q3 of 2012 from the previous quarter reflecting as a consequence of higher volumes of production and increased costs of raw materials.


EU 27 turnover.png
Source: Eurostat (SBS), seasonally adjusted data, December 2012
6. Confirming previous quarters’ trends, imported food prices continued to rise
Continuing the trend which started in Q1 of 2010, imported food prices continued to increase in Q3 of 2012, up to 2.1% from Q2 of 2012. This has, among other things, to be seen in connection to a continued depreciation of the euro against EU main trading partners.
food and drink import price.png
Source: Eurostat (SBS), December 2012



Exchange rates

In Q3 of 2012, the euro depreciated against most of major non-EU currencies, in an environment of declining volatility. The only exceptions are the Brazilian Real and Swiss Franc against which the euro slightly appreciated, i.e. by 0.76% and 0.17% respectively.

The table below gives details for the euro depreciation against major trading partners.


Table 3: Evolution of quarterly average exchange rates against several foreign countries.


Source: ECB, bilateral exchange rates, December 2012




Trade: Both imports and exports increased in Q3 of 2012 year-on-year

The EU trade balance in food and drink products continued to improve during the Q3 of 2012 compared to the same period of 2011. The export surplus amounted to nearly €6 billion, which marks an increase of €2.4 billion year-on-year.





trade section.png

Trade partner profile
COUNTRY PROFILE: CHINA

China ranks fifth among the most important export markets for the EU food and drink products and is the fourth country in the world as regards food imports to the EU, after Brazil, Argentina and the US. The EU contributes 14% to the Chinese food and drink imports, which gives it the leading position, before Malaysia (13%), the US (13%) and Indonesia (10%).1


The EU food and drink exports to China amounted to €3.5 billionin 2011. This constitutes 3% of the EU overall exports to this Asian giant. The total EU agricultural exports including unprocessed or not edible agricultural products were worth nearly €3.8 billion during the same period.

The EU has traditionally registered a negative trade balance with China. In 2011, it amounted to €600 million for food products and to €2.1 billion for the total agricultural trade as the Chinese exports of food products to the EU were worth €4.1 billion, plus an additional €1.5 billion of agricultural commodities.

However, considering the growing demand in China and a more moderate appetite for food imports in the EU, Europe may well register in 2012 its first trade surplus with China in food and drink products. As illustrated by the chart below, bilateral trade has been growing in both directions over the last decade with a particularly good EU export performance in the last three years.

EU-China trade in food and drink
January 2002-September 2012 monthly data in million euros

exports. imports.png
Source: Eurostat COMEXT, CPA 2008

The main European exporters to the Chinese market are France (35%), the Netherlands (16%), Spain (11%), Germany (10%) and Denmark (10%). Germany is also the single major importer of Chinese products (25%), followed by the Netherlands (15%), UK (13%) and Spain (12%).

Processed products with high added value, such as alcoholic beverages (except wines), chocolate and confectionery, bakery and pasta, food preparations of different kinds and ready to eat products (i.e. so called ‘Non Annex 1 products'3) amount to more than one third of the EU exports to China but only 13% of Chinese products imported to the EU.

Looking into specific product categories, meat products, alcoholic drinks and dairy are the leading EU exports to the Chinese market. The other way round, China provides the EU with a considerable amount of fish, fruit and vegetable products.

EU food and drink exports to China in 2011
graph 1.png
Source: Eurostat COMEXT, CPA 2008


EU food and drink imports from China in 2011

graph 2.png
Source: Eurostat COMEXT, CPA 2008

1 UN COMTRADE, 2011 data

2 Eurostat COMEXT data, if not otherwise indicated

3 Non-Annex I products are some processed agricultural goods not included in the Annex I of the Treaty on the Functioning of the European Union, i.e. excluded from the remit of the Common Agricultural Policy.

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