Prospects for EU-27 agricultural markets and income

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

Prospects for agricultural markets and income , July 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) –Member States acceded May 1st 2004 (EU-10) –Member States acceded Jan. 1st 2007 (EU-2) –EU-27 For main commodities (cereals, oilseeds, sugar, meat, eggs and dairy)/variables

Prospects for agricultural markets and income , July Methodological approach Main assumptions: –Uruguay Round Agreement on Agriculture maintained constant –Favourable, though positive world agricultural market outlook –Return to modest economic growth –$/ exchange rate to reach 1.15 by 2014 –By 2014 direct payments are assumed to be 91% decoupled (milk 100 %, arable crops 96 %, beef 79 %, sheep 82 %)

Prospects for agricultural markets and income , July Assumptions for $/ exchange rate and GDP growth

Prospects for agricultural markets Cereal, oilseed and sugar sectors

Prospects for agricultural markets and income , July Crops medium term perspective appears positive for cereal markets in line with: –CAP reform, decoupling and phasing out of maize intervention; –two consecutive low harvest in the EU in 2006 and 2007 causing a significant decline in stocks; –improving domestic use (emerging biofuel industry and feed); –favourable world market conditions and –the expected return to improved exchange rate conditions –removing regional imbalances of maize markets –medium-term risks of regional imbalances for barley (Germany) and soft wheat (new Member States).

Prospects for agricultural markets and income , July Slightly expanding cereal markets and emerging bioethanol markets…. Development of cereal markets in the EU, (mio t)

Prospects for agricultural markets and income , July … lead to a return to modest levels of stocks on EU cereal markets …. Development of stocks and cereal exports in the EU, (mio t)

Prospects for agricultural markets and income , July … and change in the composition of public stocks … Composition of public stocks in the EU (mio t),

Prospects for agricultural markets and income , July … with more evenly spread public stocks across regions. Regional distribution of public stocks in the EU (mio t),

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

Prospects for agricultural markets and income , July …further stabilisation of barley production and loss of regional competitiveness in feed use, Development of barley markets in the EU (mio t),

Prospects for agricultural markets and income , July …growing competitiveness of maize use after 2007 assures fluidity of maize markets in the EU… Development of maize markets in the EU (mio t),

Prospects for agricultural markets and income , July very positive prospects on rye markets with firm prices over the medium term……. Development of rye markets in the EU (mio t),

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

Prospects for agricultural markets and income , July Cereal prices should stay firm over the medium term. Development in cereal prices in the EU (EUR/t),

Prospects for agricultural markets and income , July Positive perspectives on oilseed markets increase of yield and area (0.4 mio ha mainly rapeseed) increase production (+8.4 mio t) to 34.6 mio t in 2014 (vs. domestic demand of 67 mio t); energy oilseeds production would increase under current policies but demand would outpace production; rapeseed and rapeseed oil imports foreseen to increase; EU remains major net importer of oilseeds and vegetable oils.

Prospects for agricultural markets and income , July Sugar markets: Large gains in competitiveness to be reached over the medium term…… Development of sugar markets in the EU (mio t),

Prospects for agricultural markets and income , July …..with downside and upside risks. Downside risk factors dominate the short to medium term….. –slow uptake of restructuring and –high levels of stocks, despite temporary withdrawal of quota in 2007 –weigh heavily on the supply side post 2010; …while upside risks determine the medium to long term: –good conditions on world markets with relatively high prices and –expanding markets in the EU in particular by bioethanol as well as the increasing share of sugar in the total sweetener market through –gains in competitiveness of supply.

Prospects for agricultural markets Meat sector

Prospects for agricultural markets and income , July Meat Beef production to continue falling below consumption throughout the projection period due to: –Declining cattle herd from dairy sector –Impact of decoupling of direct payments Pig meat production expected to keep its slight growth thanks to: –Solid demand both in the EU-15 and in the EU-12 –Exports to decline slightly due to greater competition from low cost exporters, imports to remain at low level Poultry meat demand to grow faster than production, leading to gradually declining exports EU sheep/goat meat production to continue its declining trend

Prospects for agricultural markets and income , July EU to remain net importer of beef EU production, consumption, trade and intervention stocks (mio t c.w.e.)

Prospects for agricultural markets and income , July 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.)

Prospects for agricultural markets and income , July EU poultry consumption to grow at a faster rate than production over the medium term EU production, consumption and trade (mio t c.w.e.)

Prospects for agricultural markets and income , July The decline in EU sheep and goat production is to continue over the forecast period EU production, consumption and trade (mio t c.w.e.)

Prospects for agricultural markets Milk and dairy sector

Prospects for agricultural markets and income , July 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 Increasing use of milk for the production of cheeses and other high value-added dairy products for the domestic market limits availabilities for exports

Prospects for agricultural markets and income , July EU milk production constrained by quota with declining dairy herd size EU milk production, deliveries to dairies, dairy cows

Prospects for agricultural markets and income , July EU cheese market keeps its steady growth over the medium term (+10%, driven by EU-12) EU production, consumption and trade (mio t)

Prospects for agricultural markets and income , July Balance of EU butter market to improve with production and consumption to decline by 6 % and 1% EU production, consumption, trade and intervention stocks (mio t)

Prospects for agricultural markets and income , July A stable demand should benefit to EU SMP markets and constrain export levels EU production, consumption, trade and intervention stocks (mio t)

The development of agricultural income Prospects for agricultural markets and income

Prospects for agricultural markets and income , July Favourable medium-term perspectives for farm income, most notably in the EU-12