The agrifood sector has performed well during the recovery
The agrifood sector has continued to perform well since the most critical months of the pandemic. Primary sector production remains at a high level, the food industry is recovering from the slump experienced in 2020 and demand indicators suggest food consumption patterns are gradually getting back to normal, both in and outside the home. Agrifood exports are also booming, a lever of growth that will continue to be vital for the sector’s future.
In the past year and a half, the agrifood sector’s performance has been affected by the impact of the pandemic on the different links in the chain. After the sector rapidly adjusted to the changes in food demand during the toughest moments of COVID-19, the progress made by the vaccination campaign and lifting of restrictions since the end of the third state of emergency on 9 May 2021 have helped the food consumption patterns of Spanish households to gradually get back to normal, with the consequent normalisation of activity in the agrifood sector in general.
Starting with the primary sector, national accounting data show that its gross value added (GVA) barely fell in H1 2021 compared with the average for 2020 (–0.4%), despite posting very strong growth (5.3%) in 2020, a situation which is counter-cyclical in relation to the GDP of the economy as a whole (–10.8%). Compared with 2019’s figures, the increase is still considerable (+4.9%) and its contribution to the economy as a whole is still slightly larger than before the pandemic (3.0% of GVA in H1 2021 compared with 3.5% in 2020 and 2.9% in 2019).
after recording exceptional growth during the most critical quarters of the pandemic.
Trends in the agrifood industry have been much more cyclical, although the extent of the drop in Q2 2020 and the intensity of the subsequent recovery differ between its two branches (food and beverages). In 2020, the decrease in the turnover of processed food was much more moderate than that of beverage manufacturing (–2.0% compared with –16.2%), due to the latter’s greater dependence on the hospitality channel (hotels, restaurants and cafés), which have been particularly hard hit by the crisis. Nevertheless, it recovered notably in H1 2021 and had regained its pre-crisis levels by June, as can be seen in the following chart.
GVA of the primary sector
reaching its pre-crisis level in terms of turnover. However, the recovery is still incomplete in the labour market.
Labour market trends in the agrifood industry are also looking good: the number of effective registered workers (i.e. excluding furloughed workers) exceeded the pre-crisis level in July. In fact, the food branch employed 2.1% more workers in August than in February 2020 (+1.1% compared with August 2019). In beverage manufacturing, however, the number of effective workers in August was still 2.6% below the figure for February 2019 (–6.7% compared with August 2019). Likewise, the percentage of registered workers that had been furloughed barely accounted for 0.9% of the total in the food industry in July 2021 (around 3,500 workers), while in beverage manufacturing this percentage rises to 1.8% (around 850 workers).
In 2020, the pandemic radically altered the food consumption patterns of Spanish families. Firstly, there was a substantial rise in food and beverage consumption at home in terms of its share of the shopping basket (up 3 pp to 17.9%).1 Secondly, spending outside the home (in restaurants and cafés) fell by an exceptional 40%. As a result, the relative weight of expenditure on hospitality accounted for just 23% of all food expenditure (compared with 35% in 2019).
To analyse the trend for these expenditure items in 2021 so far, we have used internal data from CaixaBank POS card payments, which allows us to differentiate between Spanish cards and those issued abroad in order to estimate the impact of international tourism on the hospitality channel.
- 1. Data from the 2020 Household Budget Survey (Encuesta de Presupuestos Familiares) of the National Statistics Institute.
while expenditure in restaurants has surpassed its 2019 levels. Nevertheless, the slump in foreign demand continues to affect products for the hospitality channel.
Spending via Spanish cards in supermarkets and large food stores increased by a significant 34% in 2020, as shown in the following chart. So far this upward trend has continued in 2021 (+40% between January and August 2021 compared with the same period in 2019), indicating that the health situation has yet to get back to normal, a context that continues to support the purchase of food for home consumption.2 On the other hand, there has been a strong recovery in spending via Spanish cards in restaurants in 2021 (up by 26% in the cumulative figure for January to August compared with the same period in 2019), especially during the two summer months (46% compared with July and August 2019). This is the result of the lifting of restrictions, the boom in domestic tourism to the detriment of international travel and the release of some of the pent-up demand and savings accumulated by households over the months of the most severe restrictions.3
However, foreign card spending in restaurants has been hit hard and its recovery is still incomplete. Nevertheless, notable improvement could be seen in this area in the summer (–9% compared with July and August 2019, versus –60% in H1 2021 compared with the same period in 2019). The advanced state of vaccination in most of the main countries for tourists visiting Spain allows us to be optimistic about international tourism’s prospects for recovery in the coming quarters so that, in 2022, the tourism industry could regain a level of activity similar to that of 2016 (15% lower than in 2019).
- 2. These figures are also affected by cards replacing cash payments, an issue discussed in detail in the article «The substitution of cash by cards as a means of payment during the pandemic», available at https://www.caixabankresearch.com/en/economics-markets/activity-growth/substitution-cash-cards-means-payment-during-pandemic?993=
- 3. For more details, see the article «Pent-up demand: one of the main drivers of the economic recovery», available at https://www.caixabankresearch.com/en/economics-markets/activity-growth/pent-demand-one-main-drivers-economic-recovery
Food - Spanish cards
Restaurants - Spanish cards
Restaurants - foreign cards
Spain is a major exporter of agrifood products, ranking fourth in the EU and seventh in the world.4 During the pandemic, growth in agrifood exports speeded up, increasing by 4.0% in the whole of 2020 and by 10.4% year-on-year in H1 2021. As a result, the agrifood sector now accounts for 19.5% of Spain’s exports of goods, 2 points more than in 2019. Agrifood imports, on the other hand, fell in 2020 and, despite rising in H1 2021, the external surplus of agrifood goods reached an all-time high in June: 1.7% of GDP (compared with 1.6% in 2020 and 1.1% in 2019).
- 4. According to the World Trade Organization’s 2019 ranking of food exporting countries (latest year available).
and have generated a trade surplus of 1.7% of GDP. In 2020, pork exports to China grew by an extraordinary 136%.
A highly significant part of this increase in Spanish exports is due to extraordinary growth in pork exports to China (+136% in 2020). This item accounts for about 2.9 points of the 4.0% growth in total agrifood exports in 2020, owing to a sharp increase in international demand due to African swine fever affecting much of China’s production. The rest of agrifood exports also posted growth but at a more modest rate (+1.1% in 2020). In H1 2021, the increase in pork exports to China remained very high (+60% in H1 2021 compared with the same period in 2020) but their contribution to growth has moderated: 2.1 points of the 10.4% rise recorded. We explore the reasons for this upturn in the article «The Spanish pork sector is thriving» in this Sector Report.
Agrifood exports by product group
In addition to pork, other products also stand out for their excellent performance both in 2020 and so far in 2021, such as prepared animal fodder, some fruits and vegetables (apricots, cucumbers, cabbages, etc.) and bakery products. All of these products are in the dark green area of the chart below. Other products, such as citrus fruits and canned fish, recorded notable growth in 2020 (due to increased demand for easy-to-preserve foods) and remain positive in 2021, although their growth rate has slowed. On the other hand, exports of wine,5 olive oil and other vegetables (such as lettuce) fell in 2020 but are recovering strongly in 2021 (light green area). Finally, there is a small group of products (such as fresh and frozen fish) whose exports decreased in 2020 and are still declining, albeit more moderately (products in the red area of the chart). In this case, the deterioration in the trade balance of fresh and frozen fish is not due to the effects of the pandemic but to prior structural factors.
- 5. We analyse the wine sector in detail in the article «The Spanish wine industry: a symbol of tradition and global standard» in this Sector Report.
Change in H1 2021 (compared with H1 2019)
Looking ahead, exports will continue to be a growth lever for the sector. It is therefore essential to continue promoting the sustainability of food production processes, especially in the primary sector, in order to mitigate the environmental impact of this activity, an aspect we analyse in more detail in the article «How the agrifood sector is becoming more sustainable» in this Sector Report.