Prospects for EU-25 agricultural markets and income 2005-2012 Update December 2005

1
Prospects for EU-25 agriculturalmarkets and
income2005-2012 Update December 2005
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Structure of the presentation

• Introduction
• Analytical approach
• Methodology
• Main assumptions
• Main results
• Projections for cereals, oilseeds, meat, eggs and
  dairy
• Income projections

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Methodological approach

• Type of models DG AGRI market projections
  carried out using two recursive dynamic partial
  equilibrium models
• 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

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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 2012
• By 2012 direct payments are assumed to be 90
  decoupled (milk 100 , arable crops 93 , beef
  78 , sheep 73 )

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Assumptions for / exchange rate and GDP growth
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Prospects for agricultural markets
2005-2012Cereal and oilseed sectors
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Crops

• medium term perspective appear moderately
  positive for crop markets in line with
• CAP reform and decoupling
• the return to higher set-aside levels in 2005/06
  
• favourable world market conditions and
• the expected return to improved exchange rate
  conditions
• short to medium term risk of regional imbalances
  due to lack of integration into the single
  market.

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Slightly expanding cereal markets.
Development of cereal markets in the EU,
1995-2012 (mio t)
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balanced by higher levels of set aside
Development of set aside in the European Union
(mio ha)
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with moderate levels of stocks .
Development of stocks and cereal exports in the
EU, 1995-2012 (mio t)
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and declining levels of maize and soft wheat
stocks over the short to medium term ..
Composition of public stocks in the EU (mio t),
1995-2012
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Prospects remain conditional on exchangerate
environment asymmetric risks
Cereal stocks in the EU under different exchange
rate assumptions (mio t)
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Good overall perspectives on soft wheat markets
with regional appearance of public stocks..
Development of soft wheat markets in the EU (mio
t), 1995-2012
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further loss of competitiveness of barley and
accumulating public stocks in the short to medium
term,
Development of barley markets in the EU (mio t),
1995-2012
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growing competitiveness of maize use after 2008
but short term segmentation of markets due to
high transport costs
Development of maize markets in the EU (mio t),
1995-2012
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. short-term pressure on rye markets.
Development of rye markets in the EU (mio t),
1995-2012
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good prices should raise incentives to produce
durum wheat.
Development of durum wheat markets in the EU (mio
t), 1995-2012
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Moderate perspectives on oilseed markets

• increase of area, mainly rapeseed
• 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.

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Prospects for agricultural markets
2005-2012Meat sector
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Meat

• Beef production lower than consumption in 2003
  for the first time in 20 years and expected to
  remain so 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

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EU to remain net importer of beef meat over the
medium term
EU production, consumption, trade and
intervention stocks (mio t c.w.e.)
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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.)
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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.)
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EU sheep/goat sector not to fully recover from
the 2001Foot and Mouth Disease
EU production, consumption and trade (mio t
c.w.e.)
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Total EU meat consumption to resume its long term
growth
EU per capita consumption (kg/head, in carcass
weight equivalent)
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Prospects for agricultural markets
2005-2012Milk and dairy sector
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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

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Milk quotas to constrain EU milk production while
growing milk yields reduce dairy cow herd
EU milk production, deliveries to dairies, dairy
cows
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EU cheese market keeps its steady growth over the
medium term
EU production, consumption and trade (mio t)
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EU butter balance to improve over the medium term
EU production, consumption, trade and
intervention stocks (mio t)
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EU Skimmed Milk Powder (SMP) market to shrink
over the medium term leaving less SMP available
for exports
EU production, consumption, trade and
intervention stocks (mio t)
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Prospects for agricultural markets and income
2004-2012

• The development of agricultural income

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A moderately positive outlook for real farm
income in the old Member States.
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with high income gains in the new Member States