Prospects for agricultural markets and income 2004-2011 for EU-25

Prospects for agricultural marketsand income 2004-2011 for EU-25

Prospects for agricultural markets and income 2004-2011, December 2004 2

Structure of the presentation

Introduction– Analytical approach

• Methodology• Main assumptions

Main results:– Medium-term prospects for the EU-25

• Projections for cereals, oilseeds, meat, eggs and dairy• Income projections

– Impact of enlargement


Methodological approach Type of models: DG AGRI market projections carried out

using – a recursive dynamic partial equilibrium model and – a comparative static model (ESIM)

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 over the medium-term– By 2011 direct payments are assumed to be 90%

decoupled (milk 100 %, arable crops 93 %, beef 78 %, sheep 73 %)

Prospects for agricultural markets and income 2004-2011:

Cereal and oilseed market


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….

0

50

100

150

200

250

300

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

Production

Non-feed use

Feed use

ExportsImports

EU-25EU-15

Development of cereal markets in the EU, 1995-2011 (mio t)


…balanced by higher levels of set aside…

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

Obligatory set aside old MS

Obligatory set aside new MS

Voluntary set aside

EU-15 EU-25

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


…with moderate levels of stocks over the medium term….

0

10

20

30

40

50

60

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

Private stocks

Public stocks

Exports

EU-15 EU-25

Development of stocks and cereal exports in the EU, 1995-2011 (mio t)


…and accumulating public stocks of barley and moderate levels of soft wheat stocks.

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

Wheat Barley Rye Maize

EU-15 EU-25

Composition of public stocks in the EU (mio t), 1995-2011


Prospects remain conditional on exchange rate environment.

Development in cereal stocks in the EU under different exchange rate assumptions (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

Total cereal stocks

Total cereal stocks (1.4 USD/EUR)




Good perspectives on soft wheat markets – with regional appearance of public stocks…..

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

EU-15

Production

Non-feed use

Feed use ExportsImports

Public stocks

EU-25

Development of soft wheat markets in the EU (mio t), 1995-2011


…are contrasted by the further loss of competitiveness of barley and accumulating public stocks…

Development of barley markets in the EU (mio t), 1995-2011

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

Feed use

Non-feed use

Production

ExportsPublic stocks

EU-15 EU-25


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

Development of maize markets in the EU (mio t), 1995-2011

0

10

20

30

40

50

60

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

Production

Feed use

Non-feed use

ImportsExports

EU-15 EU-25


….short term pressure on rye markets…….

0

2

4

6

8

10

12

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

Production

Non-feed use

Feed use

Public stocks

Exports

EU-15 EU-25

Development of rye markets in the EU (mio t), 1995-2011


…and 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

Pigmeat 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 pigmeat 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-term

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

Trad

e,

Sto

cks

Production

Exports

ImportsEnding stocks

EU-15 EU-25EU-12

Consumption

EU production, consumption, trade and intervention stocks (mio t c.w.e.)


Pig meat remains preferred by EU consumers (50% of total meat consumption) ensuring a slight production growth

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

Trad

e

Production

Consumption

Exports Imports

EU-15 EU-25EU-12

EU production, consumption and trade (mio t c.w.e.)


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

Trad

e

ProductionConsumption

Exports

Imports

EU-15 EU-25EU-12



EU sheep/goat sector not to fully recover from the 2001 Foot 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 resumeits long term growth

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

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


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

ro

du

cti

on

an

d d

eli

verie

s (

mio

t)

0

5

10

15

20

25

30

35

40

Nu

mb

er o

f d

air

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 term but exports face limited availability

EU 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

tocks

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



A moderately positive market outlook, the CAP Reform and enlargement lead to stabilising real incomes 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

Annual growth

70

80

90

100

110

120

130

140

150

160

Annual growth Cumulative growth


…and secures the high income gains in the new Member States.

2003 2005 2006 2007 2008 2009 2010 2011

Factor income in nominal terms

EU-25 100 106,7 106,6 106,1 105,6 105,9 106,1 106,9 EU-15 100 103,1 102,5 101,9 101,0 100,9 100,7 101,4 EU-N10 100 179,7 187,2 189,2 198,0 205,1 215,0 216,0

Labour input

EU-25 100 95,6 92,8 90,1 87,5 84,9 82,5 80,1 EU-15 100 96,0 93,8 91,7 89,6 87,5 85,5 83,5 EU-N10 100 94,8 91,0 87,4 83,9 80,5 77,3 74,2

Agricultural income in

real terms per labour unit

EU-25 100 107,0 108,0 108,7 109,4 110,9 112,3 114,2 EU-15 100 103,2 103,2 103,2 102,8 103,3 103,6 104,9 EU-N10 100 173,6 183,2 187,3 198,9 209,1 222,7 226,4

The impact of enlargement



Impact of enlargement I:

New Member States add about 38 mio ha or 30% to the agricultural area of the EU;

agricultural production of the EU increases by about 10% to 20%;

agricultural work force increases by 52% and agricultural value added by 6%. Economic growth is significantly higher than in the

old Member States.


The impact of enlargement II:

positive market and income outlook for agriculture in the EU-10 in the medium term as compared to

• lower income, slightly lower market prices and higher volatility of prices under non-accession;

high transport costs in some regions constrain development of cereal export markets in the EU and in third countries;

the use of the agricultural potential will only gradually increase.


The process of trade integration…..

started with the conclusion of the Europe Agreements at the beginning of the 1990s and accelerated with the double zero and double profit process and

has avoided destabilising market developments after enlargement.

Agricultural markets are expected to benefit from the complete lift of trade barriers, in particular trade between the new Member States.

Agricultural trade should further increase between old and new Member States.


…has been successful.

EU-N10: Share of product export to EU-25

Beef

Pork Milk

Poultry

SMP

ButterCereals

Cheese

0

20

40

60

80

100

0 10Product (average 1999/2003)

EU-N

10 in

divi

dual

pro

duct

exp

ort

to w

orld

=100

EU-N10: Share of product import from EU-25

Pork

PoultryCereals

Butter

SMP

Milk

Beef

Cheese

0

20

40

60

80

100

0 10Product (average 1999/2003)

EU-N

10 in

divi

dual

pro

duct

impo

rt fro

m w

orld

=100

Integration of the EU-N10 in the EU-25 market (selected products)


Membership has a positive effect on cereal markets.....

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

Exports Imports

Production

Domestic use

Development of cereal markets in the EU-N10 with and without enlargement (mio t)

(dashed lines = non-accession)


…and further opportunities to trade integration exist.

Trade integration of cereal markets in the new Member States

EU-N10: Share of cereals export to EU-25

Estonia

Latvia

Lithuania

PolandCyprus

MaltaHungary

Slovenia

Slovakia

Czech Republic

0

20

40

60

80

100

0 10Member State (average 1999/2003)

Indi

vidu

al E

U-N

10 c

erea

ls

expo

rt to

wor

ld=1

00

EU-N10: Share of cereals import from EU-25

Latvia

Lithuania

Malta

SlovakiaSlovenia

Poland

Cyprus

Estonia

HungaryCzech Republic

0

20

40

60

80

100

0 10Member State (average 1999/2003)

Indi

vidu

al E

U-N

10 c

erea

ls

impo

rt fro

m w

orld

=100


A continuous positive outlook for soft wheat shows increasing external competitiveness….

0

5

10

15

20

25

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

Production

Domestic use

Exports

Imports

Development of soft wheat markets in the EU-N10 with and without enlargement (mio t) (dashed lines = non-accession)


… and internal competitiveness as feed cereal, e.g. in Poland,…

0

2

4

6

8

10

12

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

Production

Domestic use

ExportsImports

Development of the soft wheat market in Poland with and without accession (mio t) (dashed lines = non-accession)


…while high transport and marketing costs dampen further market expansion in Hungary.

0

1

2

3

4

5

6

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

Production

Domestic use

ExportsImports

Development of the soft wheat market in Hungary with and without accession (mio t) (dashed lines = non-accession)


Barley loses competitiveness ….

0

2

4

6

8

10

12

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

Domestic use

Production

Exports Imports

Development of barley markets in the EU-N10 with and without accession (mio t) (dashed lines = non-accession)


… relative to other feed cereals, e.g. in Poland,….

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

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

Domestic use

Production

Imports

Development of the barley market in Poland with and without accession (mio t) (dashed lines = non-accession)


…while the comparative advantage of production remains in, e.g. Slovakia.Development of the barley market in Slovakia with and without accession (mio t) (dashed lines = non-accession)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

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

Domestic use

Production

Exports

Imports


Maize sees expanding markets in the new Member States…..

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

Production

Domestic use

Imports

Exports

Development of maize markets in the EU-N10 with and without accession (mio t) (dashed lines = non-accession)


…while Hungary’s maize faces high transport costs….

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

Production

Domestic use

Exports

Development of the maize market in Hungary with and without accession (mio t) (dashed lines = non-accession)


…but finds increasing regional markets.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

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

Production

Domestic use

ImportsExports

Development of the maize market in the Czech Republic with and without accession (mio t) (dashed lines = non-accession)


The situation on rye markets remains stable and gives limited incentives to increase trade on the single market.

0

1

2

3

4

5

6

7

8

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

Production

Domestic use

Exports

Imports

Development of rye markets in the EU-N10 with and without accession (mio t) (dashed lines = non-accession)


Changing consumer preferences stabilise beef markets….

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

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

Production

Domestic use

Exports

Imports

Development of beef markets in the EU-N10 with and without accession (mio t) (dashed lines = non-accession)


….and good export opportunities on the single market remain important, e.g. for Poland…..

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

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

Production

Imports

Exports Domestic use

Development of the beef market in Poland with and without accession (mio t) (dashed lines = non-accession)


…and lead to further stabilisationin, e.g., the Czech Republic.

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0.20

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

Production

Domestic use

Exports

Imports

Development of the beef market in the Czech Republic with and without accession (mio t) (dashed lines = non-accession)


Strong investments and increasing competitiveness meet expanding consumption of pork meat….

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

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

Production

Domestic use

Imports

Exports

Development of pork markets in the EU-N10 with and without accession (mio t) (dashed lines = non-accession)


…combined with low feed costs in Poland.

0

0.5

1

1.5

2

2.5

3

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

Production

Domestic use

Exports

Imports

Development of the pork market in Poland with and without accession (mio t) (dashed lines = non-accession)


Poultry markets remain expansive….

0

0.5

1

1.5

2

2.5

3

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

Production

Domestic use

Imports

Exports

Development of the poultry market in Poland with and without accession (mio t) (dashed lines = non-accession)


…with strong prices, favourable production conditions and proximity to large markets like.

0

0.2

0.4

0.6

0.8

1

1.2

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

Imports

Exports

Domestic use

Production

Development of the poultry market in Poland with and without accession (mio t) (dashed lines = non-accession)


Milk production remains stable in the new Member States but subsistence milk production remains important.

0

5

10

15

20

25

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

Total production

Market production

Development of milk production in the EU-N10 with and without accession (mio t) (dashed lines = non-accession)


Membership leads to very favourable future developments of agricultural income.

0

50

100

150

200

250

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

Non-accession

Accession

Development in the agricultural income of the ten new Member States under the non-accession and the accession scenarios (2003=100)

Documents

Prospects for agricultural markets and income 2004-2011 for EU-25