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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 December 2007. The report covers the market and income prospects for the period 2007-2014 within the EU for the following products: cereals, oilseeds, meat, eggs, milk and the main dairy products. The changes in legislation proposed or adopted since January 2008, e.g. the latest European Council decision to increase milk quotas by 2% from the 2008 marketing year, have not been taken into account. Furthermore, 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 markets for cereals have shown exceptional developments over the last few months, with prices at record levels as a result of a combination of structural drivers (e.g. a steady rise in global food demand, the emergence of the biofuel market, the significant slow down in cereal yield growth in the EU) and more short-term factors such as adverse climatic conditions and the restrictive export policy of some key world market suppliers. This very tight market situation should maintain cereal prices at high levels in the early part of the projection period until market stocks in the EU replenish. The medium-term projections depict a positive outlook for the EU cereal markets thanks to the impact of the CAP reform (including the phasing-out of maize intervention), the moderate prospects for yield growth and the emerging bioethanol market. World and EU cereal prices are projected to remain sustained at higher levels than seen in the last decade, though at much lower levels than those recently observed. Market perspectives for the EU oilseed sector are foreseen to be supported by the increasing demand for biodiesel in the EU and the favourable perspectives projected for world markets. However, the EU will continue to remain a large net importer of oilseeds and vegetable oils.
The medium-term perspectives for animal products are relatively positive for poultry, pig meat and the dairy markets, while beef production is expected to continue to decline in line with the structural reduction of the dairy herd and the impact of decoupling. Total per capita meat consumption showed a fast recovery following the 2006 market disruption due to Avian Influenza and is projected to increase further over the medium term by more than 3% by 2014.
EU milk production delivered to dairies is foreseen to expand over the medium term at a modest rate in line with the increase in production quotas granted to eleven member states of the EU-15 and driven by a steady decrease in subsistence production in the EU-12. The EU cheese sector is expected to expand further over the medium term supported by a continued strong increase in the EU-12 markets. EU butter and SMP production is foreseen to fall by 2014, with declining exports and empty intervention stocks.
The medium-term income projections display a rather favourable outlook as the EU-27 agricultural income would grow by 18 % between 2006 and 2014 in real terms and per labour unit (7 % in the EU-15, 21 % in the EU-10 and 88 % in EU-2).
However, if the overall outlook for EU agricultural markets and income over the next seven years appears globally favourable, it clearly remains subject to some important uncertainties. The latter relate most notably to the outcome of the current Doha Development Round of trade negotiations, the macro-economic environment, the policies on renewable energy, the path of technological change, future climatic conditions and the risks linked to adventitious presence of unauthorised GMOs due to asynchronous approval procedures which could have far reaching implications for the future pattern of EU agricultural markets.
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Publication date: 04-04-2008