1. Prospects for EU-25 agricultural markets and income 2006-2013

2. Prospects for agricultural markets and income 2006-2013, July 2006 2 Structure of the presentation Introduction –Analytical approach Methodology Main assumptions Main results: –Projections for cereals, oilseeds, meat, eggs and dairy –Income projections

3. Prospects for agricultural markets and income 2006-2013, July 2006 3 Methodological approach Type of models: DG AGRI market projections carried out using two recursive dynamic partial equilibrium models and a regional model Results: model output consists of supply balance sheets for main commodities, market prices and income Detailed results for: –Old Member States (EU-15) –New Member States (EU-N10) –EU-25 For main commodities/variables

4. Prospects for agricultural markets and income 2006-2013, July 2006 4 Methodological approach Main assumptions: –Uruguay Round Agreement on Agriculture maintained constant –Favourable, though moderate world agricultural market outlook –Return to modest economic and population growth –$/ exchange rate to reach 1.15 by 2013 –By 2013 direct payments are assumed to be 90% decoupled (milk 100 %, arable crops 93 %, beef 78 %, sheep 73 %)

5. Prospects for agricultural markets and income 2006-2013, July 2006 5 Assumptions for $/ exchange rate and GDP growth

6. Prospects for agricultural markets 2006-2013 Cereal and oilseed sectors

7. Prospects for agricultural markets and income 2006-2013, July 2006 7 Crops medium term perspective appears moderately positive for crop markets in line with: –CAP reform and decoupling; –improving domestic use (emerging biofuel industry and feed); –favourable world market conditions and –the expected return to improved exchange rate conditions –high medium-term risk of regional imbalances due to difficulties of integration into the single market.

8. Prospects for agricultural markets and income 2006-2013, July 2006 8 Slightly expanding cereal markets…. Development of cereal markets in the EU, 1995-2013 (mio t)

9. Prospects for agricultural markets and income 2006-2013, July 2006 9 … higher levels of set aside… Development of set aside in the European Union (mio ha)

10. Prospects for agricultural markets and income 2006-2013, July 2006 10 … with moderate levels of stocks …. Development of stocks and cereal exports in the EU, 1995-2013 (mio t)

11. Prospects for agricultural markets and income 2006-2013, July 2006 11 … but with significant regional maize stocks … Composition of public stocks in the EU (mio t), 1995-2013

12. Prospects for agricultural markets and income 2006-2013, July 2006 12..in land locked new Member States. Development of cereal markets in Hungary 1995-2013 (mio t)

13. Prospects for agricultural markets and income 2006-2013, July 2006 13 Prospects remain conditional on exchange rate environment: asymmetric risks Cereal stocks in the EU under different exchange rate assumptions (mio t)

14. Prospects for agricultural markets and income 2006-2013, July 2006 14 Good overall perspectives on soft wheat markets – with regional appearance of public stocks….. Development of soft wheat markets in the EU (mio t), 1995-2013

15. Prospects for agricultural markets and income 2006-2013, July 2006 15 …further stabilisation of barley production and regional competitiveness in feed use in the short term, Development of barley markets in the EU (mio t), 1995-2013

16. Prospects for agricultural markets and income 2006-2013, July 2006 16 …growing competitiveness of maize use after 2008 but segmentation of markets due to high transport costs… Development of maize markets in the EU (mio t), 1995-2013

17. Prospects for agricultural markets and income 2006-2013, July 2006 17 …. balanced rye markets……. Development of rye markets in the EU (mio t), 1995-2013

18. Prospects for agricultural markets and income 2006-2013, July 2006 18 … favourable prices should raise incentives to produce durum wheat. Development of durum wheat markets in the EU (mio t), 1995-2012

19. Prospects for agricultural markets and income 2006-2013, July 2006 19 Positive perspectives on oilseed markets increase of area, mainly rapeseed; energy oilseeds production would increase under current policies but demand would outpace production; the biodiesel market is the main market driver; rapeseed and rapeseed oil imports foreseen to increase. EU is an increasing net importer of oilseeds and vegetable oils.

20. Prospects for agricultural markets 2006-2013 Meat sector

21. Prospects for agricultural markets and income 2006-2013, July 2006 21 Meat EU to remain a beef net importer throughout the projection period due to: –Declining cattle herd from dairy sector –Impact of decoupling of direct payments –Impact of market disruptions of 2001 BSE crisis Pig meat production expected to keep its slight growth thanks to: –Solid demand both in the EU15 and in the new Member States –Expected profitability with good pig meat prices and relatively low feed prices Poultry meat demand and production to remain strong Limited recovery in sheep/goat meat production after 2001 FMD results in high market prices

22. Prospects for agricultural markets and income 2006-2013, July 2006 22 EU to remain net importer of beef meat over the medium term EU production, consumption, trade and intervention stocks (mio t c.w.e.)

23. Prospects for agricultural markets and income 2006-2013, July 2006 23 Growth rates for pig meat production and consumption are expected to be lower than in the 90s EU production, consumption and trade (mio t c.w.e.)

24. Prospects for agricultural markets and income 2006-2013, July 2006 24 EU poultry production to keep its growth over the medium term in line with growing consumption EU production, consumption and trade (mio t c.w.e.)

25. Prospects for agricultural markets and income 2006-2013, July 2006 25 EU sheep/goat sector not to fully recover from the 2001 Foot and Mouth Disease EU production, consumption and trade (mio t c.w.e.)

26. Prospects for agricultural markets and income 2006-2013, July 2006 26 Total EU meat consumption to resume its long term level EU per capita consumption (kg/head, in carcass weight equivalent)

27. Prospects for agricultural markets 2005-2013 Milk and dairy sector

28. Prospects for agricultural markets and income 2006-2013, July 2006 28 Milk and dairy products Medium term perspective appear positive for EU dairy markets thanks to the: –Increase in domestic demand for cheese and other value-added dairy products –Decrease in production of residual bulk products like butter and SMP facing lower support and market prices Increasing use of milk for the production of cheeses and other high value-added dairy products for the domestic market limits availabilities for exports

29. Prospects for agricultural markets and income 2006-2013, July 2006 29 Milk quotas to constrain EU milk production while growing milk yields reduce dairy cow herd EU milk production, deliveries to dairies, dairy cows

30. Prospects for agricultural markets and income 2006-2013, July 2006 30 EU cheese market keeps its steady growth over the medium term EU production, consumption and trade (mio t)

31. Prospects for agricultural markets and income 2006-2013, July 2006 31 EU butter balance to improve over the medium term after some short-term difficulties EU production, consumption, trade and intervention stocks (mio t)

32. Prospects for agricultural markets and income 2006-2013, July 2006 32 EU Skimmed Milk Powder market to shrink over the medium term leaving less availability for exports EU production, consumption, trade and intervention stocks (mio t)

33. The development of agricultural income Prospects for agricultural markets and income 2004-2013

34. Prospects for agricultural markets and income 2006-2013, July 2006 34 A moderately positive outlook for real farm income in the old Member States with high income gains in the new Member States