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

Prospects for EU-25 agricultural

markets and income

2006-2013

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


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-25For 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 2013– By 2013 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 2005

GDP growth$/euro exchange rate

July 2006

Prospects for agricultural markets 2006-2013

Cereal and oilseed sectors


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.


Slightly expanding cereal markets….Development of cereal markets in the EU, 1995-2013 (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 2013

production

non-feed use

feed use

exportsimports

EU-15 EU-25


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

0

1

2

3

4

5

6

7

8

9

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

mio

ha

obligatory set aside old MS

obligatory set aside new MS

voluntary set aside

EU-15 EU-25


… with moderate levels of stocks ….Development of stocks and cereal exports in the EU, 1995-2013 (mio t)

0

10

20

30

40

50

60

70

80

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

private stocks

public stocks

exports

EU-15 EU-25


…but with significant regional maize stocks …

Composition of public stocks in the EU (mio t), 1995-2013

-2

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 2013

wheat barley rye maize

EU-15 EU-25


..in land locked new Member States.Development of cereal markets in Hungary 1995-2013 (mio t)

0

2

4

6

8

10

12

14

16

18

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

0

2

4

6

8

10

12

14

16

18

Exports

EU-25

Intervention stocks

private stocks

production

feed use

non-feed use


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 2013

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), 1995-2013

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 2013

EU-15 EU-25

production

non-feed use

feed useexports

imports

public stocks


…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

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 2013

feed use

non-feed use

production

exportspublic stocks

EU-15 EU-25


…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

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 2013

production

feed use

non-feed use

importsexports and imports

EU-15 EU-25

public stocks


…. balanced rye markets…….

Development of rye markets in the EU (mio t), 1995-2013

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 2013

production

non-feed use

feed use

public stocks

exportsimports

EU-15 EU-25


… favourable prices should raise incentives to produce durum wheat.

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 2013

production

domestic use

imports

Exports

EU-15 EU-25


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.


Meat sector


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


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 2013

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 2013

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 2013

Pro

du

cti

on

, C

on

su

mp

tio

n

0

1

2

3

4

5

Tra

de

Production

Consumption

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 2013

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 level

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

0

10

20

30

40

50

60

70

80

90

100

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Beef and Veal Pork Poultry Sheep/Goat Total


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 2013

Mil

k p

rod

ucti

on

an

d d

eli

veri

es (

mio

t)

0

5

10

15

20

25

30

35

40

Nu

mb

er

of

dair

y c

ow

s (

mio

head

s)

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 2013

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 term after some short-term difficulties

EU 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 2013

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

tocks

Consumption

Production

Stocks

Exports

Imports

EU-15 EU-25EU-12


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)

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 2013

Pro

du

cti

on

, C

on

su

mp

tio

n

0.0

0.2

0.4

0.6

0.8

Tra

de

, S

tocks

Consumption

Production

Imports

Exports

Stocks

EU-15 EU-25EU-12

The development of agricultural income

Prospects for agricultural markets and income 2004-2013


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

2004 2005 2007 2008 2009 2010 2011 2012 2013

Factor income in nominal terms

EU-25 105 100.0 108.3 106.4 107.9 108.2 108.6 107.6 108.9 EU-15 107 100.0 108.1 105.9 107.2 107.0 107.3 106.0 107.3 EU-N10 93 100.0 110.1 111.3 115.1 120.6 122.2 123.1 124.9

Labour input

EU-25 102 100.0 94.3 91.6 88.9 86.3 83.9 81.5 79.1 EU-15 102 100.0 95.5 93.3 91.1 89.0 87.0 85.0 83.0 EU-N10 103 100.0 92.2 88.5 84.9 81.5 78.3 75.1 72.1

Agricultural income in real terms per labour unit

EU-25 103 100.0 110.7 109.9 112.5 114.0 115.5 115.5 118.0 EU-15 104 100.0 109.3 107.6 109.3 109.6 110.4 109.6 111.4 EU-N10 91 100.0 113.9 117.0 122.9 131.0 134.7 138.1 142.5

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

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