Prospects for EU-27 agricultural markets and income 2007-2014

Prospects for EU-27 agricultural

markets and income

2007-2014

Prospects for agricultural markets and income 2007-2014, July 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


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-27For main commodities (cereals, oilseeds, sugar, meat, eggs

and dairy)/variables


Methodological approach

Main assumptions: – Uruguay Round Agreement on Agriculture

maintained constant – Favourable, though positive world agricultural

market outlook– Return to modest economic growth – $/€ exchange rate to reach 1.15 by 2014– By 2014 direct payments are assumed to be

91% decoupled (milk 100 %, arable crops 96 %, beef 79 %, sheep 82 %)


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 2014

0

1.5

3

4.5

6

7.5

GDP growth

$/euro exchange rate

GDP growth$/euro exchange rate

Prospects for agricultural markets 2007-2014

Cereal, oilseed and sugar sectors


Crops medium term perspective appears positive for cereal markets

in line with: – CAP reform, decoupling and phasing out of maize

intervention;– two consecutive low harvest in the EU in 2006 and 2007

causing a significant decline in stocks; – improving domestic use (emerging biofuel industry and

feed); – favourable world market conditions and– the expected return to improved exchange rate conditions– removing regional imbalances of maize markets – medium-term risks of regional imbalances for barley

(Germany) and soft wheat (new Member States).


Slightly expanding cereal markets and emerging bioethanol markets….

Development of cereal markets in the EU, 1995-2014 (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 2014

production

non-feed use

feed use exports

imports

EU-15 EU-25 EU-27bioethanol


… lead to a return to modest levels of stocks on EU cereal markets ….

Development of stocks and cereal exports in the EU, 1995-2014 (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 2014

private stocks

public stocks

exports

EU-15 EU-25 EU-27


…and change in the composition of public stocks …

Composition of public stocks in the EU (mio t), 1995-2014

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 2014

wheat barley rye maize

EU-15 EU-25 EU-27


… with more evenly spread public stocks across regions. Regional distribution of public stocks in the EU (mio t), 1995-2014

0

5

10

15

20

25

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EU-15 EU-25 EU-27

EU-15 EU-10 EU-2


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

Development of soft wheat markets in the EU (mio t), 1995-2014

0

20

40

60

80

100

120

140

160

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EU-15 EU-25

production

non-feed use

feed use exportsimports

public stocks

EU-27


…further stabilisation of barley production and loss of regional competitiveness in feed use,

Development of barley markets in the EU (mio t), 1995-2014

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 2014

feed use

non-feed use

production

exportspublic stocks

EU-15 EU-25 EU-27


…growing competitiveness of maize use after 2007 assures fluidity of maize markets in the EU…

Development of maize markets in the EU (mio t), 1995-2014

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 2014

production

feed use

non-feed use

imports

exports

EU-15 EU-25

public stocks

EU-27


.. very positive prospects on rye markets with firm prices over the medium term…….

Development of rye markets in the EU (mio t), 1995-2014

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 2014

production

non-feed use

feed use

public stocks

exportsimports

EU-15 EU-25 EU-27


… favourable prices should raise incentives to produce durum wheat.

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

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 2014

production

domestic use

imports

Exports

EU-15 EU-25 EU-27


Cereal prices should stay firm over the medium term.

80

90

100

110

120

130

140

150

160

170

180

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EU

R/t

maize EU-15

maize HU

feed barley

soft wheat

rye

Development in cereal prices in the EU (EUR/t), 1991-2014


Positive perspectives on oilseed markets increase of yield and area (0.4 mio ha mainly

rapeseed) increase production (+8.4 mio t) to34.6 mio t in 2014 (vs. domestic demand of 67 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.


Sugar markets: Large gains in competitiveness to be reached over the medium term……

Development of sugar markets in the EU (mio t), 2002-2014

0

5

10

15

20

25

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EU-15 EU-25

production

Food and industrial use

exports imports

total stocks

EU-27bioethanol

intervention stocks


…..with downside and upside risks.

Downside risk factors dominate the short to medium term…..– slow uptake of restructuring and– high levels of stocks, despite temporary withdrawal of quota in

2007– 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.


Meat sector


Meat Beef production to continue falling below consumption throughout

the projection period due to:– Declining cattle herd from dairy sector– Impact of decoupling of direct payments

Pig meat production expected to keep its slight growth thanks to:– Solid demand both in the EU-15 and in the EU-12– Exports to decline slightly due to greater competition from low cost

exporters, imports to remain at low level

Poultry meat demand to grow faster than production, leading to gradually declining exports

EU sheep/goat meat production to continue its declining trend


EU to remain net importer of beefEU production, consumption, trade and intervention stocks (mio t c.w.e.)

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

0.5

1.0

1.5

2.0

2.5

Tra

de

, S

tock

sProduction

Exports ImportsEnding stocks

EU-15 EU-25EU-12

Consumption

EU-27


Growth rates for pig meat production and consumption are expected to be lower than in the 90sEU production, consumption and trade (mio t c.w.e.)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Pro

du

cti

on

, C

on

su

mp

tio

n

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Tra

de

Production

Consumption

Exports

Imports

EU-15 EU-25EU-12 EU-27


EU poultry consumption to grow at a faster rate than production over the medium termEU production, consumption and trade (mio t c.w.e.)

0.0

3.0

6.0

9.0

12.0

15.0

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Pro

du

cti

on

, C

on

su

mp

tio

n

0.0

1.0

2.0

3.0

4.0

5.0

Tra

de

Production

Consumption

Exports

Imports

EU-15 EU-27EU-12 EU-25


The decline in EU sheep and goat production is to continue over the forecast periodEU production, consumption and trade (mio t c.w.e.)

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-27EU-12

Exports

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

Increasing use of milk for the production of cheeses and other high value-added dairy products for the domestic market limits availabilities for exports


EU milk production constrained by quota with declining dairy herd size

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

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 c

ow

s (

mio

he

ad

s)

Milk Production

Dairy cow herd

Milk Deliveries

EU-12 EU-15 EU-27EU-25

EU-15

EU-N10

EU-N2

EU-12


EU cheese market keeps its steady growth over the medium term (+10%, driven by EU-12)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

11.0

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

2.2

Tra

de

Consumption

Production

Exports

Imports

EU-15 EU-25EU-12 EU-27


Balance of EU butter market to improve with production and consumption to decline by 6 % and 1%

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

tock

s

Consumption

Production

Stocks

ExportsImports

EU-15 EU-25EU-12 EU-27


A stable demand should benefit to EU SMP markets and constrain export levels

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

tock

s

Consumption

Production

Imports

Exports

Stocks

EU-15 EU-25EU-12 EU-27

The development of agricultural income

Prospects for agricultural markets and income 2007-2014


Favourable medium-term perspectives for farm income, most notably in the EU-12

2005 2006 2008 2009 2010 2011 2012 2013 2014

Factor income in nominal terms

EU-27 96.0 100.0 102.2 103.4 103.4 104.5 105.9 107.6 109.7 EU-15 96.9 100.0 100.0 100.8 100.5 101.6 103.1 104.7 106.8 EU-10 93.2 100.0 113.6 117.2 120.3 119.8 118.2 118.4 119.8 EU-2 87.1 100.0 118.2 121.4 121.4 124.7 130.7 135.9 138.2

Labour input

EU-27 102.7 100.0 93.5 90.4 87.4 84.6 81.8 79.2 76.6 EU-15 101.9 100.0 95.5 93.3 91.1 89.0 87.0 85.0 83.0 EU-10 102.8 100.0 93.1 89.9 86.7 83.7 80.8 77.9 75.2 EU-2 103.9 100.0 90.3 85.7 81.5 77.4 73.5 69.8 66.3

Agricultural income in real terms per labour unit

EU-27 95.4 100.0 104.6 107.2 108.6 111.1 114.1 117.3 121.0 EU-15 96.9 100.0 100.5 101.7 101.8 103.3 105.3 107.3 109.9 EU-10 92.9 100.0 114.5 118.8 122.6 122.8 121.9 122.7 124.9 EU-2 86.1 100.0 124.6 131.8 135.8 143.2 154.1 164.6 171.8

Documents

Prospects for EU-27 agricultural markets and income 2007-2014