Economic analysis and market forecasts
Prospects for
agricultural markets and income 2008-2015
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This publication provides an outlook for agricultural commodities (cereals,
oilseeds, meat and dairy products) in the EU-27 over the 2008-2015
period, based on specific assumptions on agricultural and trade
policies and the macro-economic environment. They do not consider
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
2008-2015. The report is based on the information available at the
end of January 2009. |
The macroeconomic environment is projected to be shaped over the
short term by the consequences of the financial and economic
crisis, which is expected to put severe pressure on the real
economy that has entered into the deepest crisis for more than
60 years. While GDP growth is assumed to recover gradually over
the medium-term, the economic outlook is subject to a number of
uncertainties that could significantly alter the current
commodity market projections.
Impact of the economic and financial crisis
The economic and financial crisis is expected to weigh
heavily over the short-term perspectives of most agricultural
sectors in the EU and at global level, even though the
agricultural sector is generally more resilient to economic
crises than other sectors. Whereas food demand will be directly
negatively affected in the higher value-added sectors, the
economic crisis would also be felt indirectly in other parts of
the agricultural economy: in the arable crop sector through feed
demand, in the energy crop sector in the wake of lower oil
prices, as well as in the upstream and downstream industries.
The short-term perspectives in the dairy sector appear to
be particularly difficult, as the pronounced decline in the
prices of dairy products over 2008 would induce a substantial
fall in the producer price of milk in 2009. Milk prices would
remain at depressed levels over the short term leading to a
slight contraction in EU milk production and a further increase
in the aggregate EU milk quota underutilisation. Market measures
would be necessary to support bulk commodity markets leading to
accumulating intervention stocks of butter and skimmed milk
powder as well as the renewed use of export refunds.
Medium-term outlook
The medium-term outlook for agricultural commodity markets
display a gradual recovery supported by structural
factors like
- the growth in global food demand,
- the development of the biofuel sector and the
- long-term decline in food crop productivity growth.
Cereals and oilseeds
World and EU cereals prices are projected to recover over the
medium term to somewhat higher levels than seen in the last
decade but subject to greater fluctuations. Medium-term
perspectives for the EU oilseed sector are foreseen to be
supported by the increasing demand for biodiesel in the EU and
the outlook for world markets (driven by the rising demand for
oilseed meal and vegetable oil).
Meat
The medium-term prospects for the EU meat sector appear
moderately positive with increased production and consumption of
poultry and pig meat, while production of beef and sheep/goat
meat are projected to decline further. As demand growth would
outpace the increase in total meat production, the net exporting
position of the EU would show continued weakening.
Milk
Prospects for EU milk production display a gradual growth
during the 'milk quota phasing-out period' following the
Health
Check decisions, but remain below the aggregate EU quota level
throughout the outlook period. Therefore the abolition of milk
quotas in 2015 is not projected to have a significant impact on
the aggregate EU milk production and milk price as compared to
2014. Projections for bulk commodity markets depict a steady
decline in production due to increasing output of value added
dairy commodities and depressed price levels throughout the
'intervention de-stocking period'.
Income
Despite the significant short-term setback in the wake of the
economic recession, the medium-term prospects for EU
agricultural income remain positive with the aggregate income in
real terms and per labour unit exceeding the very favourable
2007 year by 7.5% in 2015. While agricultural income in the
EU-15 would show a very moderate development, it is foreseen to
display a more pronounced picture in the EU-12 supported by the
continuous increase in CAP payments.
Uncertainties
The outlook for EU agricultural markets remains subject to
important uncertainties related to
- future economic, market and policy developments,
- the path of technological change and
- future climatic conditions
that could significantly alter the projections presented in
the current publication.
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