Strong demand factors expected to hold
While supply side factors are causes for concern, there is a really positive upside on demand.
A return to strong economic growth
According to the EU Autumn Economic Forecast, for 2017: “The euro area economy is on track to grow at its fastest pace in a decade this year, with real GDP growth forecast at 2.2%. This is substantially higher than expected in spring (1.7%).
The EU economy as a whole is also set to beat expectations with robust growth of 2.3% this year (up from 1.9% in spring).
The European Commission expects growth to continue in both the euro area and in the EU at 2.1% in 2018 and at 1.9% in 2019 (Spring Forecast: 2018: 1.8% in the euro area, 1.9% in the EU).”
At global economic level, Goldman Sachs Research economists Jan Hatzius and Jari Stehn say that “For the first time since 2010, the world economy is outperforming most predictions — a trend that will not only be continuing but amplifying in 2018.” Their November global economic forecast predicts 4% global GDP growth for 2018.
Brexit aside, a return to strong economic growth in the EU and globally, and continuing falling unemployment are good news for consumer spend and consumption.
Recovering oil prices
Higher oil prices in recent months have had a positive impact on the purchasing power of many global food importers and dairy customers.
When prices were below US$50/barrel, the point was often made that prices in excess of US$60 would have a positive influence of global dairy purchases.