Medium-term prospects and impact assessment of the CAP reform EU - 15 & EU - 25 2003 - 2010 1...

Medium-term prospects andMedium-term prospects and

impact assessment of theimpact assessment of the

CAP reformCAP reform

EU - 15 & EU - 25EU - 15 & EU - 25

2003 - 20102003 - 2010

1European Commission - Agriculture Directorate-General

• Analytical approach

Structure of the presentation

Introduction

• Medium-term prospects and impact of the CAP reform for agricultural markets and income for EU-15 (non- enlargement scenario)

• Medium-term prospects and impact of the CAP reform for agricultural markets and income for EU-25

Main results

Conclusion • Summary of key findings


Methodological approach

• DG AGRI impact analysis carried out using a set of recursive dynamic partial equilibrium models (similar models used for market projections) for EU-15 and a comparative static model (ESIM) for EU-25

• Model output: balance sheet for main commodities, market prices, farm income

• Main results presented in absolute terms and in deviation from Agenda 2000

Type of models

3

Results

European Commission - Agriculture Directorate-General

Methodological approach

• Uruguay Round Agreement on Agriculture maintained constant

• Favourable, though moderate world agricultural market outlook

• Modest EU economic and population growth

• $/euro Exchange rate stable at 1.1 over the medium-term

• Payments assumed to be decoupled for 2/3 in the animal sector and 90% in the crop sector

Main assumptions


Modest economic growth and a relative strong euro

0,40

0,60

0,80

1,00

1,20

1,40

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0,0

1,5

3,0

4,5

6,0

7,5

GDP growth

$/euro exchange rate

December 2003

June 2003

GDP growth$/euro exchange rate


Moderate, though favourable world market prospects 1/2

60

80

100

120

140

160

180

200

220

81/82 83/84 85/86 87/88 89/90 91/92 93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10

Wheat HRW

Maize

Wheat SRW

6

Cereal prices, fob gulf, $/t


Moderate, though favourable world market prospects 2/2

1100

1300

1500

1700

1900

2100

2300

2500

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Cheese

Butter

SMP

7

Dairy prices, fob Northern Europe, $/t


CAP reform : more pronounced increase in land set-aside and slight further decline in EU-15 arable crops area

19,7%

-10,2%

-5,5%

0,4%

-5,5%

-1,0%-0,9%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Cereals Oilseeds Voluntaryset-aside

Rice Silage Commonwheat

Durumwheat

AREA

Changes in arable crop allocation in 2010 ( in % deviation from Agenda 2000 )


CAP reform : slight decline in EU-15 arable crop area

3

4

5

6

7

8

9

10

11

2002 2003 2004 2005 2006 2007 2008 2009 2010

31

32

33

34

35

36

37

38

39

Cereals

Food oilseeds

Total set-aside

CerealsSet-aside & oilseeds Agenda 2000 CAP reformArable crop allocation, 2002 - 2010 (mio ha)


Broadly balanced EU-15 cereal market over the medium-term

0

40

80

120

160

200

240

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Production

Non-feed use

Feed use

Production and consumption, 1980 - 2010 (mio t)


CAP reform : limited build up in cereal stocks

0

2

4

6

8

10

2002 2003 2004 2005 2006 2007 2008 2009 2010

Agenda 2000 CAP ReformPublic stocks

Total public stocks, 2002 - 2010 (mio t)


Coarse grains surplus to remain stable over the medium-term

0

5

10

15

20

25

30

35

40

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Coarse grain exports

Ending stocks

Rye Barley "Other cereals"Maize

Total coarse grain production surplus, 1995 - 2010 (mio t)


CAP reform : rapid improvement for EU-15 rice market

Production, consumption and total stocks, 1990 - 2010 (mio t)

13

0

500

1,000

1,500

2,000

2,500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0

1,000

2,000

3,000

4,000

5,000

CAP reform

Agenda 2000

Production

Consumption

Total stocks

Consumption and production Stocks


CAP reform leads to reduction in EU-15 beef production potential

0,0%0,5%

0,9% 1,0%

-0,3%

-1,1%

-4,2%

-6,7% -6,8%-6,0%

-2,5%

-2,2% -2,2%-2,1%-1,8%-1,2%

-9%

-6%

-3%

0%

3%

6%

2003 2004 2005 2006 2007 2008 2009 2010

Suckler cow Dairy cow Total cows

Changes in cow number, 2003 – 2010( in % deviation from Agenda 2000)


EU-15 beef demand to exceed production over the medium-term

0

1

2

3

4

5

6

7

8

9

10

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Pro

du

cti

on

, C

on

su

mp

tio

n

0,0

0,3

0,5

0,8

1,0

1,3

1,5

1,8

2,0

2,3

2,5

Tra

de

, S

toc

ks

Production

Consumption

Exports

ImportsEnding stocks

EU-15 Production, Consumption, Trade and Stocks


CAP reform allows for a strong improvement in EU-15 beef market balance and price rise

-0,2%

-1,2%

-2,1%

-0,1%

2,4%

4,8%

6,0%

0,0% 0,3%0,6%

0,1%

-0,7%

-1,9%-1,4%

-4%

-2%

0%

2%

4%

6%

8%

10%

2004 2005 2006 2007 2008 2009 2010

Production

Prices

Changes in beef production and prices, 2004 – 2010 (%)


Impact of CAP reform dependent from the degree of decoupling

-0,8%

2,8%

-0,4%

0,6%

-1,9%

6,0%

-0,6%

-9,5%

-3,0%

8,9%

-0,9%

-15,7%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Beef Cereals

Production Prices Production Stocks

Minimum decoupling

Central assumption

Maximum decoupling

Changes in production and prices/stocks for beef and cereals,

in 2010 ( in % deviation from Agenda 2000)


CAP reform : favourable impact on EU-15 pork and poultry sectors

0,50%

2,30%

0,60%

0,40%

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

Pork Poultry

Production

Prices

Pork and poultry production & price changes, 2010 ( in % deviation from Agenda 2000 )


EU-15 pig meat sector to continue to expand over the medium-term

0

2

4

6

8

10

12

14

16

18

20

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Pro

du

cti

on

, C

on

su

mp

tio

n

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

Imp

ort

s,

Ex

po

rts

Production

Consumption

Exports

Imports

EU-15 Production, Consumption and Trade


EU-15 poultry production to recover after avian flu in the Netherlands

0

2

4

6

8

10

12

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Pro

du

cti

on

, C

on

su

mp

tio

n

0,0

0,5

1,0

1,5

2,0

2,5

3,0

Imp

ort

s,

Ex

po

rts

Production

Consumption

Exports

Imports



CAP reform: Summary of policy changes in the EU-15 dairy sector

0

50

100

150

200

250

300

3501

99

9/2

00

0

20

00

/20

01

20

01

/20

02

20

02

/20

03

20

03

/20

04

20

04

/20

05

20

05

/20

06

20

06

/20

07

20

07

/20

08

20

08

/20

09

20

09

/20

10

20

10

/20

11

Bu

tter

an

d S

MP

in

terv

en

tio

n p

rices (

€/1

00 k

g)

115

117

119

121

123

125

127

129

Milk q

uo

tas (

mio

t)

Butter Intervention Price

SMP Intervention Price

Agenda 2000 CAP Reform

Milk Quotas


CAP reform: lower prices for EU-15 dairy markets

-16%

-12%

-8%

-4%

0%

4%

8%

2004 2005 2006 2007 2008 2009 2010

CheeseButter SMPMilk

Price changes for milk and dairy products, 2010 ( in % deviation from Agenda 2000 )


EU-15 butter balance to improve over the medium-term

0

500

1000

1500

2000

2500

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Pro

du

cti

on

, C

on

su

mp

tio

n

0

100

200

300

400

500

600

700

800

900

1000

Tra

de

, S

toc

ks

Consumption

Production

Exports

Imports

Ending Stocks



EU-15 cheese market keeps its steady growth over the medium term

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Pro

du

cti

on

, C

on

su

mp

tio

n

0

200

400

600

800

1000

1200

1400

1600

1800

Tra

de

, S

toc

ks

Consumption

Production

Exports

Imports



EU-15 SMP market to shrink over the medium term

0

200

400

600

800

1000

1200

1400

1600

1800

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Pro

du

cti

on

, C

on

su

mp

tio

n

0

100

200

300

400

500

600

700

800

900

1000

Tra

de

, S

toc

ks

Consumption

Production

Exports

Imports

Ending Stocks



CAP reform found to have a modest impact on EU-15 income

-1,6%

-0,5%

0,8%

-1,3%

-0,6%

-1,2%

-1,7%

-3%

-2%

-1%

0%

1%

2%

3%

2004 2005 2006 2007 2008 2009 2010

Income in real terms and per labour unit( in % deviation from Agenda 2000 )


27

Prospects for EU-25: Situation of agriculture in the EU-10

Restructuring of agriculture in the EU-10 facilitated by EU funds:

– economic growth will contribute to create alternative income

outside agriculture;

– more investment in agriculture due to

• improving market and income situation (single market, decoupled direct payments)

• improving rural infrastructure and banking systems • specific instruments facilitating restructuring in rural development programmes available.


28

Driving factors of agricultural markets EU-25

• EU-10: High income growth leads to growing markets for meat, fruits and vegetables as well as fresh milk products and cheese in the EU-10.

• EU-15: High consumer income, limited expansion of quantities, strong demand for quality and niche products.

• World markets developments will become an increasingly decisive factor for market outlook.

• Restructuring of agriculture and the food industries in order to address better the demand.


29

Accession leads to a modest increase in cereal production in the new Member States

0

50

100

150

200

250

300

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

mio

. t

Current Member StatesNew Member States

EU-25 consumption

Cereal production and use in the EU-25 (mio. t)


EU-25 cereal marketing surplus to stabilise at some 26 mio t over the medium term

-10

-5

0

5

10

15

20

25

30

35

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Current Member States

New member States

30

Cereal marketing surplus ( in mio t)


CAP reform to reduce cereal marketing surplus by 2 - 3 mio t

0

6

12

18

24

30

36

2004 2005 2006 2007 2008 2009 2010

Agenda 2000

CAP Reform

31

Cereal marketing surplus ( in mio t)


32

The new Member States find additional markets for rye inthe current Member States

0

2

4

6

8

10

12

14

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

mio

. t

Rye production and use in the EU-25 (mio.t)

Production New Member States Production Current Member States

use EU-25

use EU-15


CAP reform : solving rye specific structural imbalance for EU - 25

-1,5

-1,0

-0,5

0,0

0,5

1,0

1,5

2,0

2,5

Agenda 2000 CAP reform

2002 2010 2010


New Member States

EU 25

33

Rye Annual Marketable surplus in 2010 (mio t)


34

EU-25 meat markets gain dynamics with accession

70

80

90

100

110

2002 2004 2005 2006 2007 2008 2009 2010

(kg

/ca

pit

a)

New Member States

Cur. Member StatesPer capita meat and egg consumption in the EU-25


CAP reform : improving the beef market balance for EU-25

2.100

2.200

2.300

2.400

2.500

2.600

2.700

Agenda 2000 CAP Reform

2002 2010 2010

6,5

7,0

7,5

8,0

8,5

9,0

9,5

mio. t

Production (EU-25)

EUR/t

EUR/t

Beef prices and production (EUR/t and mio t)


CAP reform and enlargement: leading to new trade flows in the poultry sector

-1,0

-0,5

0,0

0,5

1,0

1,5


2002 2010 2010


New Member States

EU 25

Poultry Annual Marketable surplus in 2010 (mio t)


… as well as in the pork sector but in the opposite direction

-0,5

0,0

0,5

1,0

1,5

2,0

2,5


2002 2010 2010


New Member States

EU 25

Pork Annual Marketable surplus in 2010 (mio t)


CAP reform - reducing risk of imbalance for EU-25 butter andskimmed milk powder markets …

0,0

0,5

1,0

1,5

2,0

2,5

Agenda 2000 CAP reform Agenda 2000 CAP reform

Butter

Skimmed milk powder


New member States

Butter and skimmed milk powder production (mio t)


CAP reform.. while favouring the development of the EU-25 cheese sector

-4

-2

0

2

4

6

8

10

Pro

du

cti

on

, C

on

su

mp

tio

n (

Mio

t)

-0,4

-0,2

0,0

0,2

0,4

0,6

0,8

1,0

Ma

rke

tab

le S

urp

lus

(M

io t

)

Production Consumption

Marketable surplus

Agenda 2000

CAPReform

Agenda 2000

CAPReform

Agenda 2000

CAPReform


New member States

Cheese market variables (mio t)


CAP reform would secure income gains for new Member States

EU-25

40

60

80

100

120

140

160


New Member States 2002 = 100

40

Income in 2010, real terms (2002 = 100)


41

Positive effects of the CAP Reform on agriculture in the new Member States

• Decoupling of direct payments for crops: – will generate less inflow of additional area such as

potatoes. – The single farm payment will cause little differences

as compared to the simplified area payment scheme.

• Decoupling of beef payments reduce incentives to

increase beef herd in presence of weak consumption.

• The milk reform will increase the market orientation of milk processing.

– Production and hygiene standards will still be an issue


• Improvement in the balance of agricultural markets through the reduction in EU production without jeopardising EU production potential

– in particular for sectors previously influenced by high level of support and coupled instruments (beef, sheep)

– the balance of agricultural markets in an enlarged EU would improve significantly

• Significant improvement in the structural balance of the rice and rye sectors

• Agricultural income little affected as the fall in production volume is globally compensated for by price rises and increased payments

Conclusions – CAP reform

Greater flexibility& market

orientation

Solvingspecific sector

problemsGuaranteeing

income stability


Medium-term prospects and impact assessment of the CAP reform EU - 15 & EU - 25 2003 - 2010 1...

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