EC - Short-Term Outlook for EU agricultural markets, Spring 2023

The negative impact of Russia's invasion of Ukraine continues to affect energy, fertiliser and feed prices in the EU agricultural market, leading to uncertainty for farmers. High commodity prices countered high input costs last year, leading to an increase in the EU average farm income. However, food price inflation is negatively impacting EU consumer purchasing power. The current EU macroeconomic forecast is more positive than in autumn 2022, although uncertainties remain about energy supply for next winter and recent financial market tensions. Natural gas prices have declined, easing pressure on the EU fertiliser market, but fertiliser prices remain significantly higher than two years ago. Food inflation may remain high until input costs decrease along the supply chain. The suspension of import duties and quotas on Ukrainian exports has helped alleviate the war-induced economic pressure on Ukrainian agriculture, although there is uncertainty surrounding Ukraine's production and trade capacity in 2023. Extreme weather events, including winter droughts and a worsening water supply, may impact EU agriculture further. This short-term market outlook assumes normal weather conditions.