1. Prospects for EU-27 agricultural markets and income 2006-2013

2. Prospects for agricultural markets and income 2006-2013, January 2007 2 Structure of the presentation Introduction –Analytical approach Methodology Main assumptions Main results: –Projections for cereals, oilseeds, sugar, meat, eggs and dairy products –Income projections

3. Prospects for agricultural markets and income 2006-2013, January 2007 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) –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

4. Prospects for agricultural markets and income 2006-2013, January 2007 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 91% decoupled (milk 100 %, arable crops 96 %, beef 79 %, sheep 82 %)

5. Prospects for agricultural markets and income 2006-2013, January 2007 5 Assumptions for $/ exchange rate and GDP growth

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

7. Prospects for agricultural markets and income 2006-2013, January 2007 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 of maize due to difficulties of integration into the single market and limited competitiveness of pork and poultry production.

8. Prospects for agricultural markets and income 2006-2013, January 2007 8 Slightly expanding cereal markets and emerging bioethanol markets…. Development of cereal markets in the EU, 1995-2013 (mio t)

9. Prospects for agricultural markets and income 2006-2013, January 2007 9 … lead to a modest growth in overall EU cereal stocks …. Development of stocks and cereal exports in the EU, 1995-2013 (mio t)

10. Prospects for agricultural markets and income 2006-2013, January 2007 10 … and change in the composition of public stocks … Composition of public stocks in the EU (mio t), 1995-2013

11. Prospects for agricultural markets and income 2006-2013, January 2007 11 … indicating a sharp separation of economic conditions on cereal markets in EU regions Regional distribution of public stocks in the EU (mio t), 1995-2013

12. Prospects for agricultural markets and income 2006-2013, January 2007 12 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

13. Prospects for agricultural markets and income 2006-2013, January 2007 13 …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

14. Prospects for agricultural markets and income 2006-2013, January 2007 14 …growing competitiveness of maize use after 2008 but segmentation of markets due to high transport costs and high risk of regional public stocks… Development of maize markets in the EU (mio t), 1995-2013

15. Prospects for agricultural markets and income 2006-2013, January 2007 15.. very positive prospects on rye markets with firm prices over the medium term……. Development of rye markets in the EU (mio t), 1995-2013

16. Prospects for agricultural markets and income 2006-2013, January 2007 16 … favourable prices should raise incentives to produce durum wheat. Development of durum wheat markets in the EU (mio t), 1995-2013

17. Prospects for agricultural markets and income 2006-2013, January 2007 17 Positive perspectives on oilseed markets increase of yield and area (0.6 mio ha mainly rapeseed) increase production (+7.4 mio t) to 32 mio t in 2013 (vs. domestic demand of 64 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.

18. Prospects for agricultural markets and income 2006-2013, January 2007 18 Sugar markets: Large gains in competitiveness to be reached over the medium term…… Development of sugar markets in the EU (mio t), 2002-2013

19. Prospects for agricultural markets and income 2006-2013, January 2007 19 …..with downside and upside risks. Downside risk factors dominate the short to medium term….. –slow uptake of restructuring and –very high levels of stocks –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.

20. Prospects for agricultural markets 2006-2013 Meat sector

21. Prospects for agricultural markets and income 2006-2013, January 2007 21 Meat Beef production to continue falling (-6%) below consumption throughout the projection period due to: –Declining cattle herd from dairy sector –Impact of decoupling of direct payments –Impact of market disruptions of sanitary crises Pig meat production expected to keep its slight growth thanks to: –Solid demand both in the EU-15 (+4%) and in the EU-12 (+2.5%) –Exports to decline slightly due to greater competition from low cost exporters, imports to remain at low level Poultry meat demand and production to remain strong (+7%) EU sheep/goat meat production to continue its declining trend, albeit at a moderate pace

22. Prospects for agricultural markets and income 2006-2013, January 2007 22 EU to remain net importer of beef EU production, consumption, trade and intervention stocks (mio t c.w.e.)

23. Prospects for agricultural markets and income 2006-2013, January 2007 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, January 2007 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, January 2007 25 A slight decline in EU sheep and goat production is to be counter-balanced by growing imports EU production, consumption and trade (mio t c.w.e.)

26. Prospects for agricultural markets 2006-2013 Milk and dairy sector

27. Prospects for agricultural markets and income 2006-2013, January 2007 27 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

28. Prospects for agricultural markets and income 2006-2013, January 2007 28 EU milk production constrained by quota with declining dairy herd size EU milk production, deliveries to dairies, dairy cows

29. Prospects for agricultural markets and income 2006-2013, January 2007 29 EU cheese market keeps its steady growth over the medium term (+8%, driven by EU-12) EU production, consumption and trade (mio t)

30. Prospects for agricultural markets and income 2006-2013, January 2007 30 Balance of EU butter market to improve with production and consumption to decline by 4 % and 2% EU production, consumption, trade and intervention stocks (mio t)

31. Prospects for agricultural markets and income 2006-2013, January 2007 31 A stable demand should benefit to EU SMP markets and constrain export levels EU production, consumption, trade and intervention stocks (mio t)

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

33. Prospects for agricultural markets and income 2006-2013, January 2007 33 Favourable medium-term perspectives for farm income notably in the EU-12