EU farm markets remain resilient as energy and fertilizer costs rise

Positive outlook faces a fragile economy

EU agricultural markets are expected to remain broadly resilient in 2026 despite geopolitical turmoil, uncertain energy markets and higher production costs, according to the European Commission’s summer outlook reported by Ypaithros. The conflict in the Middle East adds to risks from extreme weather, animal disease and continuing trade tensions, but has not overturned the Commission’s generally positive short-term assessment.

Production is expected to increase in oilseeds, dairy products, pig meat and poultry. Output is forecast to decline in cereals, sugar, olive oil and ruminant livestock. This uneven picture matters for traders: stronger supplies in some protein and livestock markets will coexist with tighter availability and potentially firmer prices in other product groups.

The macroeconomic backdrop remains weak. The Commission expects real EU GDP to expand by 1.1% in 2026 and 1.4% in 2027, while inflation is forecast at 3.1% and 2.4%, respectively. Higher oil and natural gas costs are a major reason. The baseline assumes that energy markets gradually normalize as navigation through the Strait of Hormuz and major maritime routes is restored, although the balance of risks remains negative.

Fertilizer pressure returns

Higher energy and fertilizer expenses linked to the Middle East crisis have reversed the stabilization of agricultural input costs seen in 2025. In the first quarter of 2026, energy costs rose by 5.6% and fertilizer costs by 4.2%. Feed prices were comparatively stable, falling 0.3% from the final quarter of 2025, while crop-protection products declined 0.1% and seed prices increased 0.1%.

Nitrogen fertilizer prices in the EU stood 72% above 2024 levels in April 2026. Despite a subsequent easing, they remained 56% higher than in 2024 in mid-June. Ypaithros reports that weaker demand and improved supply are bringing prices down faster internationally, but Europe remains particularly exposed to geopolitical developments, imported natural gas and supply-chain disruption. The outlook for phosphate fertilizer remains unfavorable, while potash is showing greater stability.

Fertilizer affordability relative to cereal prices returned to 2022 levels in March and April, squeezing producer margins. The timing creates a particular risk for summer crops: farmers may reduce fertilizer application or planted area, especially for maize. That could limit domestic supply and affect purchasing requirements for feed users and grain importers.

Mixed output across crops and livestock

EU cereal production in 2026/27 is forecast at 273.7 million tonnes, close to the five-year average. Oilseed production is expected to rise by 3.1%, while protein-crop output should decline marginally but remain above its average. Sugar production is projected to fall by 13%. Olive oil output will decrease but remain above customary levels.

Milk production is expected to increase as yields improve, supporting greater dairy output. Beef production, by contrast, is forecast to continue declining in 2026/2027 because of herd contraction, keeping prices high. Sheep and goat meat face a similar trend. Pig production and consumption are expected to remain stable, while poultry output should grow further on strong demand and high prices.

The euro-dollar exchange rate is expected to remain around 1.15 through the end of 2026. Food prices are forecast to keep rising as energy costs pass through to agricultural inputs and supply chains, leaving consumer confidence subdued and volatile. For importers and exporters, energy routes, fertilizer prices and the scale of any reduction in maize cultivation will be key indicators of whether the Commission’s resilient baseline can hold.