medium-term prospects and impact assessment of the cap reform eu - 15 & eu - 25 2003 - 2010 1...
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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
2European Commission - Agriculture Directorate-General
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
4European Commission - Agriculture Directorate-General
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
5European Commission - Agriculture Directorate-General
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
European Commission - Agriculture Directorate-General
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
European Commission - Agriculture Directorate-General
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 )
8European Commission - Agriculture Directorate-General
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)
9European Commission - Agriculture Directorate-General
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)
10European Commission - Agriculture Directorate-General
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)
11European Commission - Agriculture Directorate-General
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)
12European Commission - Agriculture Directorate-General
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
European Commission - Agriculture Directorate-General
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)
14European Commission - Agriculture Directorate-General
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
15European Commission - Agriculture Directorate-General
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 (%)
16European Commission - Agriculture Directorate-General
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)
17European Commission - Agriculture Directorate-General
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 )
18European Commission - Agriculture Directorate-General
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
19European Commission - Agriculture Directorate-General
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
EU-15 Production, Consumption and Trade
20European Commission - Agriculture Directorate-General
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
21European Commission - Agriculture Directorate-General
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 )
22European Commission - Agriculture Directorate-General
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 Production, Consumption, Trade and Stocks
23European Commission - Agriculture Directorate-General
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 Production, Consumption and Trade
24European Commission - Agriculture Directorate-General
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
EU-15 Production, Consumption, Trade and Stocks
25European Commission - Agriculture Directorate-General
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 )
26European Commission - Agriculture Directorate-General
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.
European Commission - Agriculture Directorate-General
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.
European Commission - Agriculture Directorate-General
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)
European Commission - Agriculture Directorate-General
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)
European Commission - Agriculture Directorate-General
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)
European Commission - Agriculture Directorate-General
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
European Commission - Agriculture Directorate-General
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
Current Member States
New Member States
EU 25
33
Rye Annual Marketable surplus in 2010 (mio t)
European Commission - Agriculture Directorate-General
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
European Commission - Agriculture Directorate-General
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)
35European Commission - Agriculture Directorate-General
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
Agenda 2000 CAP reform
2002 2010 2010
Current Member States
New Member States
EU 25
Poultry Annual Marketable surplus in 2010 (mio t)
36European Commission - Agriculture Directorate-General
… 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
Agenda 2000 CAP reform
2002 2010 2010
Current Member States
New Member States
EU 25
Pork Annual Marketable surplus in 2010 (mio t)
37European Commission - Agriculture Directorate-General
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
Current Member States
New member States
Butter and skimmed milk powder production (mio t)
38European Commission - Agriculture Directorate-General
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
Current Member States
New member States
Cheese market variables (mio t)
39European Commission - Agriculture Directorate-General
CAP reform would secure income gains for new Member States
EU-25
40
60
80
100
120
140
160
Agenda 2000 CAP reform
New Member States 2002 = 100
40
Income in 2010, real terms (2002 = 100)
European Commission - Agriculture Directorate-General
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
European Commission - Agriculture Directorate-General
• 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
42European Commission - Agriculture Directorate-General