Prospects for agricultural markets and income in the EU

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1 Prospects for agricultural markets and income in the EU February 2013

2 Assumptions and caveats Arable crops prospects Meats prospects Milk and dairy prospects Agricultural income Final remarks Introduction

3 Assumptions and caveats (1) Normal weather conditions; Steady demand and yield trends; No disruptions caused by factors like animal disease outbreaks or food safety issues; No changes in CAP legislation; No potential outcome of on-going bilateral/multilateral trade negotiations;

4 Assumptions and caveats (2) Steady decrease in annual population growth; EU inflation target 2% /$ exchange rate: the Euro is expected to remain at the level of the last four years and reach an exchange rate of 1.35 USD/EUR in 2022; The medium term projections indicate a rather stable nominal oil price of between 85 and 110 USD/barrel; Although Croatia is joining the EU in July 2013, it is not covered in the medium term outlook.

5 Relatively tight market conditions, thus price rallies could occur in the event of production shortfalls; Low stock and prices; EU still a net exporter of cereals but domestic demand is growing faster than production. Arable crops

6 Higher feed costs + economic downturn push demand towards cheaper meat options EU share in world meat exports to decline Meats

7 After a fall in 2012/13, pigmeat production is projected to resume its growth Overall EU pig meat consumption is expected to increase by 4.3% but EU per capita consumption would decrease by 1.6% between 2011 and Pigmeat

8 Poultrymeat Over the outlook period, poultry meat would be the only meat with increased levels of production (+4.4% compared to 2011) EU exports are expected to remain strong (+3.2% in 2022 against 2011) due to growing world demand

9 Beef meat net production to decline by 3% between 2011 and EU beef meat imports would grow by 25% between 2011 and 2022, while exports would decline. The EU will maintain its position as a net importer of beef meat. Beef meat

10 EU sheep and goat production to continue its decrease, at a pace of 1.6% per year on average, due to a reduction in the flock size. Over the projection period, sheep meat imports would decline by 5% compared to 2011 Sheep and goat meat

11 EU milk production is projected to increase by 5% in This increase is supported by improvements in average yields per dairy cow and the decline of production for onfarm use. Milk and Dairy products

12 Income prospects Assumption that direct payment (DP) and rural development (RD) money unchanged from the period; Leaked figures of the new budget show for the UK a 10% reduction for the (DP) envelope and a 22% reduction for RD! the EU-27 agricultural income per annual working unit in real terms would be 23.3% higher in 2022 compared to the five year average of ; In the EU-15 (including the UK!), agricultural income in 2022 is expected to be around 8% higher than in the base period. In the EU- N12 (new Member States), agricultural income is projected to be 47% higher than the reference period by 2022.

13 Final remarks Macroeconomic, commodity and policy uncertainties: unpredictable impacts on the EU market; Status quo assumptions: the reality is less optimistic (CAP budget) Information at EU level only (differentiation old vs new MS); Projections not forecasts! Agricultural commodity prices to stay firm; EU commodity markets to remain balanced; EU agricultural income to grow (mainly due to continuing decline in labour input).