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CER(06)18X1. Prospects for EU-25 agricultural markets and income 2005-2012 Update December 2005. Structure of the presentation. Introduction Analytical approach Methodology Main assumptions Main results: Projections for cereals, oilseeds, meat, eggs and dairy Income projections. - PowerPoint PPT Presentation
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Prospects for EU-25 agriculturalmarkets and income
2005-2012
Update December 2005
CER(06)18X1
Prospects for agricultural markets and income 2005-2012, December 2005 2
Structure of the presentation
Introduction– Analytical approach
• Methodology• Main assumptions
Main results:– Projections for cereals, oilseeds, meat, eggs and
dairy– Income projections
Prospects for agricultural markets and income 2005-2012, December 2005 3
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
Prospects for agricultural markets and income 2005-2012, December 2005 4
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 %)
Prospects for agricultural markets and income 2005-2012, December 2005 5
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 - EU15
$/euro exchange rateDecember 2004
GDP growth$/euro exchange rate
December 2005
Prospects for agricultural markets 2005-2012
Cereal and oilseed sectors
Prospects for agricultural markets and income 2005-2012, December 2005 7
Crops medium term perspective appear moderately
positive for crop markets in line with: – 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– short to medium term risk of regional imbalances
due to lack of integration into the single market.
Prospects for agricultural markets and income 2005-2012, December 2005 8
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
Prospects for agricultural markets and income 2005-2012, December 2005 9
…balanced by 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
mio
ha
obligatory set aside old MS
obligatory set aside new MS
voluntary set aside
EU-15 EU-25
Prospects for agricultural markets and income 2005-2012, December 2005 10
… with moderate levels of stocks ….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
Prospects for agricultural markets and income 2005-2012, December 2005 11
…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 for agricultural markets and income 2005-2012, December 2005 12
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 $/€)
Prospects for agricultural markets and income 2005-2012, December 2005 13
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
Prospects for agricultural markets and income 2005-2012, December 2005 14
…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
Prospects for agricultural markets and income 2005-2012, December 2005 15
…growing competitiveness of maize use after 2008 but short term segmentation of markets due to high 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
public stocks
Prospects for agricultural markets and income 2005-2012, December 2005 16
…. 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
Prospects for agricultural markets and income 2005-2012, December 2005 17
…good 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
production
domestic use
imports
Exports
EU-15 EU-25
Prospects for agricultural markets and income 2005-2012, December 2005 18
Moderate perspectives on oilseed markets
increase of area, mainly rapeseed; 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.
Prospects for agricultural markets 2005-2012
Meat sector
Prospects for agricultural markets and income 2005-2012, December 2005 20
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
Prospects for agricultural markets and income 2005-2012, December 2005 21
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
Prospects for agricultural markets and income 2005-2012, December 2005 22
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
Prospects for agricultural markets and income 2005-2012, December 2005 23
EU poultry production to keep its growth over the medium term in line with growing consumption
EU production, consumption and trade (mio t c.w.e.)
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
Prospects for agricultural markets and income 2005-2012, December 2005 24
EU sheep/goat sector not to fully recover from the 2001Foot and Mouth Disease
EU 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
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
Prospects for agricultural markets and income 2005-2012, December 2005 25
Total EU meat consumption to resume its long term growth
EU per capita consumption (kg/head, in carcass weight equivalent)
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Beef and Veal Pork Poultry Sheep/Goat Total
Prospects for agricultural markets 2005-2012
Milk and dairy sector
Prospects for agricultural markets and income 2005-2012, December 2005 27
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
Prospects for agricultural markets and income 2005-2012, December 2005 28
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
Prospects for agricultural markets and income 2005-2012, December 2005 29
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
Prospects for agricultural markets and income 2005-2012, December 2005 30
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
Prospects for agricultural markets and income 2005-2012, December 2005 31
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
Prospects for agricultural markets and income 2005-2012, December 2005 33
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
170
Annual growth Cumulative growth
Prospects for agricultural markets and income 2005-2012, December 2005 34
… 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 93.5 100 102.7 100.9 104.0 101.9 104.7 104.5 104.7 EU-15 96.6 100 101.6 99.8 101.5 99.6 101.9 102.0 102.2 EU-N10 56.4 100 115.9 114.2 134.2 129.2 137.6 133.9 134.2
Labour input
EU-25 102.9 100 94.9 92.2 89.5 86.9 84.4 82.0 79.6 EU-15 101.2 100 95.6 93.4 91.3 89.2 87.1 85.1 83.2 EU-N10 106.0 100 93.6 89.9 86.3 82.8 79.5 76.4 73.3
Agricultural income in real terms per labour unit
EU-25 90.8 100 104.3 103.5 107.7 106.6 110.6 111.5 112.8 EU-15 95.4 100 102.5 101.2 103.3 101.9 104.7 105.3 106.0 EU-N10 53.2 100 117.9 118.0 141.2 138.0 149.3 147.6 150.3