Economic analysis and market forecasts

Prospects for agricultural markets and income 2007-2014

This publication provides a picture of the likely medium-term developments of agricultural markets,
based on a certain number of assumptions and on the statistical information available at the end of
June 2007. The report covers the market and income prospects for the period 2007-2014 within
the EU for the following products: cereals, oilseeds, sugar, meat, eggs, milk and the main dairy
products. The changes in legislation proposed or adopted since November 2006, e.g. on maize
intervention, have been taken into account. However, the projections do not take into account the
potential outcome of the multilateral trade negotiations within the framework of the Doha
Development Round. Therefore, the Uruguay Round Agreement on Agriculture and other existing
trade commitments are assumed to remain unchanged and to be met over the period 2007-2014.

The medium-term projections depict an outlook for the EU cereal markets that would appear
positive for EU cereals thanks to the expansion of domestic consumption (growth in emerging
bioethanol and biomass demand) and cereal exports. The bioethanol market is expected to become
a less marginal outlet than today for European agriculture from 2010 onwards. The phasing-out of
maize intervention would substantially reduce the risk of structural surpluses in Hungary, Slovakia,
Bulgaria and Romania even under conditions of higher than average maize harvests. Public stocks
of maize would largely disappear in Hungary in 2007 mainly supported by the expected low maize
harvest in Romania. The availability of maize at competitive prices in northern and central
European markets would lead however to a certain crowding-out of barley and partly also of wheat
from animal feed with consequences on public stocks. The sugar markets are characterised by a
phase of transition until 2009 during which the reform of the sugar CMO will be implemented.
Despite a temporary withdrawal of quota for the 2007 harvest, the main medium-term downward
risks are the slow take-up of restructuring as well as the high level of stocks both of which could
weigh heavily on the sugar industry post 2009.

The poultry and pig meat sector should also exhibit relatively favourable medium-term
perspectives, however with a slower growth than in the last decade. Beef production, on the other
hand is expected to fall as a consequence of the CAP reform and the declining dairy herd, leading
to the widening of the trade deficit. Overall meat consumption is projected to increase from an
estimated 84 kg/head in 2006 to around 86.7 kg/head by the year 2014. The EU-27 will continue
to be a net exporter of pork meat, while increasing competition from low-cost producing countries
would lead to the EU becoming a net importer of poultry meat at the end of the forecast period.
The recently observed decline in EU milk production at a time of favourable market environment
characterised by high internal and world prices has a profound impact on the current medium-term
perspectives for milk supply and dairy commodity markets. As a result the medium-term outlook
for EU milk production has been revised downwards compared to the previous reports. EU-27 milk
production is projected to expand at a modest rate over the short term in line with the increase in
production quotas granted to eleven member states of the EU-15. However, over the medium term
milk production would decline gradually, driven by a steady decrease in subsistence production in
the EU-12. The market balance for the major dairy products is expected to improve further over
the medium term, with increasing cheese production and consumption, but lower availabilities of
butter and SMP.

The medium-term income projections display a rather favourable outlook as the EU-27 agricultural
income would grow by 21 % between 2006 and 2014 in real terms and per labour unit (9.9 % in
the EU-15, 24.9 % in the EU-10 and 71.8 % in EU-2). Even though the overall outlook for EU
agricultural markets and income over the next seven years appears relatively favourable, it clearly
remains subject to some important uncertainties. The latter relate in particular to the
outcome of the Doha Development Round of trade negotiations and to the risks linked to animal
disease such as Avian Influenza, which could have far reaching implications for the future pattern
of EU agricultural markets.

Published in July 2007

Full text [pdf]

Summary [pdf]

Tables:

Grains and sugar [pdf][xls]

Meat and eggs [pdf][xls]

Dairy [pdf][xls]

Income [pdf][xls]

Presentation [pdf][ppt]

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