One Decade of EU Membership: Lessons Learned and the Road Ahead

for the Agro-Food Sector in Central and Eastern European Economies

AKI 60th Anniversary Conference

Budapest, 7 October 2014

The future of the agro-food

sector in CEE economies

The ten years behind

us: a success story

for the agricultural

sector of the accession

countries...

• accelerated modernisation

and substantial

restructuring of the sector

• spectacular, three-fold

growth in agricultural

exports and increasing

trade surplus

• improved competitiveness

and a doubling of income

of agricultural holdings

• CZ 11% p.a.

• HU 22% p.a.

• PL 10% p.a.

• SK 12% p.a.

... with considerable contribution from the

access to support and opportunities arising

from the CAP and EU membership

With different priorities and

outcomes across MSs• Distribution of EAFRD

funds within Axis 1 (2007-

2013)

• CZ: 38% modernisation,

25% infrastructure,

14% adding value

• HU: 68% modernisation,

14% adding value

• PL: 31% early retirement,

30% modernisation,

12% adding value

• SK: 52% modernisation,

24% adding value,

13% infrastructure

• Restructuring outcomes(2003-2010)

# of

holdings

Age of

farmers

Training

levels of

managers

CZ -50% EU-N10

AVG

37% have

full

training

HU -25% 57%

above 55

yrs

85% lack

basic/full

training

PL -31% 40%

under 44

yrs

25% have

full

training

SK -66% Older than

EU-N10

AVG

76% lack

basic/full

training

The ten years ahead

of us: what our market

projections tell us

• income growth to continue

• but the gap in absolute

income levels narrow slowly,

resulting in a modest rate of

catching-up to EU-15

levels

Agricultural factor income in the EU,

2004-2023 (average 2003-2007 = 100)

• further improvements in

net-trade positions for most

commodities

-20

-10

00

10

20

30

40

50

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

EU-N13 EU-28

Cere

als

NT

('0

00 t

)

-1 500

-1 000

-500

00

500

1 000

1 500

2 000

2 500

3 000

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

EU-N13 EU-28

Meats

NT

('0

00 t

)

• more moderate outlook for dairy

sector

-400

-200

00

200

400

600

800

1 000

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

EU-N13 EU-28 AC-10 (2003f)

60

70

80

90

100

110

120

130

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

Delivery ratio (%) EU-N13 EU-15

Cheese N

T (

'000 t

)M

ilk d

eliv

erie

s (

2004 =

100)

00

20

40

60

80

100

120

2004200620082010201220142016201820202022

EU-15 EU-N13

• further restructuring

expected linked to continued

economic growth

• the increase in real

agricultural income per

labour unit mainly due to the

continuous decrease in the

workforce employed in

agriculture!

The ten years ahead

of us: what our market

projections tell usAgricultural labour input in the EU,

2004-2023 (average 2003-2007 = 100)

• Strong assumptions

behind the baseline

• Uncertainties and risks

necessitate alternative

scenarios

• Risk assessment crucial

for policy making

The ten years ahead

of us: what you see is

not what you’ll get

Macro variables are hard to predict

and we know that in the next 10

years there will be weather events…

e.g. : fluctuations around the

projected farm gate milk price are to

be expected because of weather and

other uncertainties.

EU milk producer price* developments and

uncertainties (EUR/t)

When shaping policies:

• the "usual" uncertainties need to be

considered, and in particular:

– global economy,

– China demand, incl. feed vs. meat import,

– EU economy (income, unemployment),

– trade liberalisation,

• implementation of new CAP as a risk?

• the known risks need to be addressed:

– geopolitical (RUS embargo LT implications?),

– food insecurity,

– sustainability,

– food chain issues,

– freeze in CAP spending

• through sound analysis and an integrated

and coherent policy approach

The path of CAP expenditure 1980-2020 (in current prices)

What role for the CAP? Post-2013 reform challenges remain relevant:

13

•Economic challenges

– Food security

– Slowdown in productivity growth

– Price/income volatility

– Economic crisis

•Environmental challenges

– GHG emissions

– Soil depletion

– Water/air quality

– Habitats and biodiversity

•Territorial challenges

– Vitality of rural areas

– Diversity of EU agriculture

Challenges

Environmental

Economic

Territorial

But with a different focus?

• Mission letter to Mr Hogan:– Importance of CAP:

• "crucial to" food security and jobs and growth

agendas;

• "contributes to" sustainable development of EU

agriculture and ensuring well/being of rural areas

– AGRI contributes to VPs for

• Jobs, Growth, Investment and Competitiveness

• Energy Union

• Hearing of Mr Hogan: simplification as top

priority?

To conclude

• Opportunities for CEEs:

– increasing global demand for high quality

products

– CAP provides even greater flexibility for

individual MS to determine the benefits to be

made from EU membership

• Challenges need to be assessed

thoroughly

• Strong need for valuable research and

integrated approaches

I wish the institute and its

colleagues lots of success for

the years to come!

Thank you for you attention!

• Sources used:

– EU-10 and the CAP – 10 years of success,

DG AGRI, April 2014

– Prospects for Agricultural Markets and Income

in the EU 2013-2023, DG AGRI, December

2013

– Commodity Market Development in Europe –

Outlook, JRC, 2014

What CAP instruments to meet the reform objectives?

18

• New ‘green’ payment in Pillar I

• Enhanced and more efficient

cross compliance

• Two environmental priorities for

rural development and minimum

spending

• Research, innovation and

knowledge transfer and an

improved Farm Advisory System

• Improved economic tools to

address market developments

• Crises management: safeguard

clause, crisis reserve / risk

management toolkit

• Improved position of farmers in

the food supply chain (PO, APO,

IBO)

• Research, innovation and

knowledge transfer and an

improved Farm Advisory System

• Redesign of direct payment

architecture with better targeting

• Common strategic framework for

EU funds – partnership contract

• Redistribution of direct payments

across and within Member States

• Redistribution of rural

development envelopes

Improvedsustainability

Enhancedcompetitiveness

Greatereffectiveness

Greater integration of PI and PII instruments

Greater flexibility in implementation to meet

specific needs/conditions