Prospects for EU-25 agricultural markets and income 2005-2012.

Prospects for EU-25 agricultural

markets and income

2005-2012

Prospects for agricultural markets and income 2005-2012, July 2005 2

Structure of the presentation

Introduction– Analytical approach

• Methodology• Main assumptions

Main results:– Projections for cereals, oilseeds, meat, eggs and

dairy– Income projections


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


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 %)


Assumptions for $/€ exchange rate and GDP growth

0.4

0.6

0.8

1

1.2

1.4

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

0

1.5

3

4.5

6

7.5

GDP growth

$/euro exchange rateDecember 2004

GDP growth$/euro exchange rate

July 2005

Prospects for agricultural markets 2005-2012

Cereal and oilseed sectors


Crops medium term perspective appear moderately

positive for crop markets thanks to the – 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.


Slightly expanding cereal markets….Development of cereal markets in the EU, 1995-2012 (mio t)

0

50

100

150

200

250

300

350

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

production

non-feed use

feed use

exportsimports

EU-15 EU-25


…balanced by higher levels of set aside…Development of set aside in the European Union (mio ha)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

mio

ha

total set aside

obligatory set aside old MS

obligatory set aside new MS

voluntary set aside


… with moderate levels of stocks from 2009….

Development of stocks and cereal exports in the EU, 1995-2012 (mio t)

0

10

20

30

40

50

60

70

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

private stocks

public stocks

exports

EU-15 EU-25


…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

0

2

4

6

8

10

12

14

16

18

20

22

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

wheat barley rye maize

EU-15 EU-25


Prospects remain conditional on exchange

rate environment: asymmetric risks Cereal stocks in the EU under different exchange rate assumptions (mio t)

0

10

20

30

40

50

60

70

80

90

100

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

total cereal stocks

total cereal stocks (1.4 US $/€)

total cereal stocks (1.0 US $/€)


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

0

20

40

60

80

100

120

140

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

EU-15 EU-25

production

non-feed use

feed use exportsimports

public stocks


…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

0

10

20

30

40

50

60

70

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

feed use

non-feed use

production

exports

imports

public stocks

EU-15 EU-25


…growing competitiveness of maize in feed use but segmentation of markets with transport costs

Development of maize markets in the EU (mio t), 1995-2012

0

10

20

30

40

50

60

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

production

feed use

non-feed use

importsexports and imports

EU-15 EU-25


…. short-term pressure on rye markets…….

Development of rye markets in the EU (mio t), 1995-2012

0

2

4

6

8

10

12

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

production

non-feed use

feed use

public stocks

exportsimports

EU-15 EU-25


Medium-term perspectives on durum wheat market

Development of durum wheat markets in the EU (mio t), 1995-2012

0

2

4

6

8

10

12

14

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

production

domestic use

imports

Exports

EU-15 EU-25


Moderate perspectives on oilseed markets

stable area development; energy oilseeds production remains stable

with status quo policies; developments depend on the

implementation of the biofuel directive in the Member States in particular related to additional resources;

EU remains major net importer of oilseeds.


Meat sector


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


EU to remain net importer of beef meat over the medium termEU production, consumption, trade and intervention stocks (mio t c.w.e.)

0

1

2

3

4

5

6

7

8

9

10

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Pro

du

cti

on

, C

on

su

mp

tio

n

0.0

0.5

1.0

1.5

2.0

2.5

Tra

de

, S

toc

ks

Production

Exports

ImportsEnding stocks

EU-15 EU-25EU-12

Consumption


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.)

0

5

10

15

20

25

30

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Pro

du

cti

on

, C

on

su

mp

tio

n

0

1

2

3

4

5

6

Tra

de

Production

Consumption

Exports Imports

EU-15 EU-25EU-12


EU poultry production to keep its growth over the medium term in line with growing consumption


0

3

6

9

12

15

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Pro

du

cti

on

, C

on

su

mp

tio

n

0

1

2

3

4

5

Tra

de

ProductionConsumption

Exports

Imports

EU-15 EU-25EU-12


EU sheep/goat sector not to fully recover from the 2001Foot and Mouth Disease


0.0

0.5

1.0

1.5

2.0

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Pro

du

cti

on

, C

on

su

mp

tio

n

0.0

0.5

1.0

Tra

de

Production

Consumption

Imports

EU-15 EU-25EU-12

Exports


Total EU meat consumption to resume its long term growth

EU per capita consumption (kg/head, in carcass weight equivalent)

0

10

20

30

40

50

60

70

80

90

100

1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Beef Pork Poultry Sheep Total

EU-15 EU-25


Milk and dairy sector


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


Milk quotas to constrain EU milk production while growing milk yields reduce dairy cow herd

EU milk production, deliveries to dairies, dairy cows

0

20

40

60

80

100

120

140

160

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Mil

k p

rod

uc

tio

n a

nd

de

liv

eri

es

(m

io t

)

0

5

10

15

20

25

30

35

40

Nu

mb

er

of

da

iry

co

ws

(m

io h

ea

ds

)

Milk Production

Dairy cow herd

Milk Deliveries

EU-12 EU-15 EU-25


EU cheese market keeps its steady growth over the medium termEU production, consumption and trade (mio t)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Pro

du

cti

on

, C

on

su

mp

tio

n

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Tra

de

Consumption

Production

Exports

Imports

EU-15 EU-25EU-12


EU butter balance to improve over the medium termEU production, consumption, trade and intervention stocks (mio t)

0.0

0.5

1.0

1.5

2.0

2.5

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Pro

du

cti

on

, C

on

su

mp

tio

n

0.0

0.2

0.4

0.6

0.8

1.0

Tra

de

, S

toc

ks

Consumption

Production

Stocks

Exports

Imports

EU-15 EU-25EU-12


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)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Pro

du

cti

on

, C

on

su

mp

tio

n

0.0

0.2

0.4

0.6

0.8

Tra

de

, S

toc

ks

Consumption

Production

Imports

Exports

Stocks

EU-15 EU-25EU-12

The development of agricultural income

Prospects for agricultural markets and income 2004-2012


A moderately positive outlook for real farm income in the old Member States….

-9%

-6%

-3%

0%

3%

6%

9%

12%

15%

18%

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Annual growth

70

80

90

100

110

120

130

140

150

160

Annual growth Cumulative growth


… with high income gains in the new Member States

2003 2004 2006 2007 2008 2009 2010 2011 2012

Factor income in nominal terms

EU-25 95.8 100 99.8 99.4 100.0 100.7 101.4 101.8 102.5 EU-15 98.2 100 99.1 98.4 98.5 98.9 99.1 99.5 100.1 EU-N10 64.3 100 109.7 113.2 119.5 123.9 130.5 131.3 132.7

Labour input

EU-25 101.5 100 94.1 91.4 88.7 86.1 83.5 81.1 78.7 EU-15 101.7 100 95.5 93.3 91.1 89.0 87.0 85.0 83.0 EU-N10 101.2 100 92.2 88.5 84.9 81.5 78.3 75.1 72.1

Agricultural income in real terms per labour unit

EU-25 94.4 100 102.2 102.9 104.6 106.4 108.2 109.8 111.7 EU-15 96.6 100 100.1 99.9 100.5 101.4 102.0 102.8 104.0 EU-N10 63.5 100 113.2 118.7 127.2 133.9 143.3 146.5 150.4

Prospects for EU-25 agricultural markets and income 2005-2012.

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