Medium-term prospects and
impact assessment of the
CAP reform
EU - 15 & EU - 25
2003 - 2010
European Commission - Agriculture Directorate-General
1
Structure of the presentation
Introduction
Main results
• Analytical approach
• Medium-term prospects and impact of the CAP reform
for agricultural markets and income for EU-15 (nonenlargement scenario)
• Medium-term prospects and impact of the CAP reform
for agricultural markets and income for EU-25
Conclusion
• Summary of key findings
European Commission - Agriculture Directorate-General
2
Methodological approach
Type of models
• 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
Results
• Main results presented in absolute terms and in
deviation from Agenda 2000
European Commission - Agriculture Directorate-General
3
Methodological approach
Main
assumptions
• 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 mediumterm
• Payments assumed to be decoupled for 2/3 in the animal
sector and 90% in the crop sector
European Commission - Agriculture Directorate-General
4
Modest economic growth and a relative strong euro
$/euro exchange rate
GDP growth
1,40
7,5
December 2003
June 2003
$/euro exchange rate
1,20
6,0
1,00
4,5
GDP growth
0,80
3,0
0,60
1,5
0,40
0,0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
European Commission - Agriculture Directorate-General
2006
2007
2008
2009
2010
5
Moderate, though favourable world market prospects 1/2
Cereal prices, fob gulf, $/t
220
200
Wheat HRW
180
160
140
120
Wheat SRW
100
Maize
80
60
81/82
83/84
85/86
87/88
89/90
91/92
93/94
95/96
97/98
99/00
European Commission - Agriculture Directorate-General
01/02
03/04
05/06
07/08
09/10
6
Moderate, though favourable world market prospects 2/2
Dairy prices, fob Northern Europe, $/t
2500
2300
Cheese
2100
1900
1700
SMP
1500
1300
Butter
1100
1991
1993
1995
1997
1999
2001
2003
European Commission - Agriculture Directorate-General
2005
2007
2009
7
CAP reform : more pronounced increase in land set-aside and
slight further decline in EU-15 arable crops area
Changes in arable crop allocation in 2010 ( in % deviation from Agenda 2000 )
25%
AREA
19,7%
20%
15%
10%
5%
0,4%
0%
-0,9%
-1,0%
-5%
-5,5%
-5,5%
-10%
-10,2%
-15%
Cereals
Oilseeds
Voluntary
set-aside
Rice
Silage
European Commission - Agriculture Directorate-General
Common
wheat
Durum
wheat
8
CAP reform : slight decline in EU-15 arable crop area
Arable crop allocation, 2002 - 2010 (mio ha)
Agenda 2000
Set-aside & oilseeds
CAP reform
Cereals
11
39
10
38
Cereals
9
37
8
36
Total set-aside
7
35
6
34
5
33
4
32
Food oilseeds
3
31
2002
2003
2004
2005
2006
2007
European Commission - Agriculture Directorate-General
2008
2009
2010
9
Broadly balanced EU-15 cereal market over the medium-term
Production and consumption, 1980 - 2010 (mio t)
240
Production
200
160
Non-feed use
120
80
Feed use
40
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
European Commission - Agriculture Directorate-General
2002
2004
2006
2008
2010
10
CAP reform : limited build up in cereal stocks
Total public stocks, 2002 - 2010 (mio t)
Agenda 2000
Public stocks
CAP Reform
10
8
6
4
2
0
2002
2003
2004
2005
2006
2007
European Commission - Agriculture Directorate-General
2008
2009
2010
11
Coarse grains surplus to remain stable over the medium-term
Total coarse grain production surplus, 1995 - 2010 (mio t)
40
35
30
Ending stocks
Coarse grain
exports
25
20
15
10
5
0
1995
1996
1997
1998
Rye
1999
2000
2001
Barley
2002
2003
Maize
2004
2005
2006
2007
2008
2009
2010
"Other cereals"
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12
CAP reform : rapid improvement for EU-15 rice market
Consumption and production
Production, consumption and total stocks, 1990 - 2010 (mio t)
Stocks
2,500
5,000
CAP reform
Agenda 2000
Consumption
2,000
4,000
1,500
3,000
Production
1,000
2,000
Total stocks
500
1,000
0
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
European Commission - Agriculture Directorate-General
13
CAP reform leads to reduction in EU-15 beef production potential
Changes in cow number, 2003 – 2010
( in % deviation from Agenda 2000)
6%
Suckler cow
Dairy cow
Total cows
3%
1,0%
0,9%
0,5%
0,0%
0%
-0,3%
-1,1%
-1,2%
-1,8%
-3%
-2,1%
-2,2%
-2,2%
-2,5%
-4,2%
-6%
-6,0%
-6,7%
-6,8%
2009
2010
-9%
2003
2004
2005
2006
2007
European Commission - Agriculture Directorate-General
2008
14
EU-15 beef demand to exceed production over the medium-term
10
EU-15 Production, Consumption, Trade and Stocks
2,5
9
2,3
8
2,0
7
1,8
Consumption
6
1,5
5
1,3
Exports
4
3
1,0
Ending stocks
0,8
Imports
2
0,5
1
0,3
0
0,0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
European Commission - Agriculture Directorate-General
15
Trade, Stocks
Production, Consumption
Production
CAP reform allows for a strong improvement in EU-15 beef market
balance and price rise
Changes in beef production and prices, 2004 – 2010 (%)
10%
Production
Prices
8%
6,0%
6%
4,8%
4%
2,4%
2%
0,0%
0,3%
0,6%
0,1%
0%
-0,1%
-0,2%
-0,7%
-1,2%
-2%
-1,4%
-2,1%
-1,9%
-4%
2004
2005
2006
2007
2008
European Commission - Agriculture Directorate-General
2009
2010
16
Impact of CAP reform dependent from the degree of decoupling
Changes in production and prices/stocks for beef and cereals,
in 2010 ( in % deviation from Agenda 2000)
15%
Minimum decoupling
Beef
Cereals
10%
Central assumption
8,9%
Maximum decoupling
6,0%
5%
2,8%
0,6%
0%
-0,4%
-0,8%
-0,6%
-0,9%
-1,9%
-5%
-3,0%
-10%
-9,5%
-15%
Production
Prices
Production
Stocks
-15,7%
-20%
European Commission - Agriculture Directorate-General
17
CAP reform : favourable impact on EU-15 pork and poultry sectors
3,0%
Pork and poultry production & price changes, 2010
( in % deviation from Agenda 2000 )
Production
Prices
2,5%
2,30%
2,0%
1,5%
1,0%
0,60%
0,50%
0,5%
0,40%
0,0%
Pork
European Commission - Agriculture Directorate-General
Poultry
18
EU-15 pig meat sector to continue to expand over the medium-term
EU-15 Production, Consumption and Trade
20
18
5,0
4,5
Production
16
4,0
3,5
12
3,0
10
2,5
8
2,0
Exports
6
1,5
4
1,0
2
0,5
Imports
0
0,0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
European Commission - Agriculture Directorate-General
19
Imports, Exports
Production, Consumption
Consumption
14
EU-15 poultry production to recover after avian flu in the Netherlands
12
EU-15 Production, Consumption and Trade
3,0
10
2,5
8
2,0
Consumption
6
1,5
Exports
4
1,0
2
0,5
Imports
0
0,0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
European Commission - Agriculture Directorate-General
20
Imports, Exports
Production, Consumption
Production
CAP reform: Summary of policy changes in the EU-15 dairy sector
Agenda 2000
CAP Reform
350
129
Butter Intervention Price
127
250
200
123
150
121
Milk Quotas
100
119
European Commission - Agriculture Directorate-General
2010/2011
2009/2010
2008/2009
2007/2008
2006/2007
2005/2006
2004/2005
2003/2004
115
2002/2003
0
2001/2002
117
2000/2001
50
21
Milk quotas (mio t)
125
SMP Intervention Price
1999/2000
Butter and SMP intervention prices (€/100 kg)
300
CAP reform: lower prices for EU-15 dairy markets
Price changes for milk and dairy products, 2010
( in % deviation from Agenda 2000 )
8%
Milk
Butter
SMP
Cheese
4%
0%
-4%
-8%
-12%
-16%
2004
2005
2006
2007
2008
European Commission - Agriculture Directorate-General
2009
2010
22
EU-15 butter balance to improve over the medium-term
EU-15 Production, Consumption, Trade and Stocks
2500
1000
900
Production
800
700
Consumption
1500
600
500
1000
400
Exports
Ending Stocks
500
300
200
Imports
100
0
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
European Commission - Agriculture Directorate-General
23
Trade, Stocks
Production, Consumption
2000
EU-15 cheese market keeps its steady growth over the medium term
9000
EU-15 Production, Consumption and Trade
1800
8000
1600
7000
1400
6000
1200
Consumption
5000
1000
4000
800
Exports
3000
600
2000
400
1000
Imports
0
200
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
European Commission - Agriculture Directorate-General
24
Trade, Stocks
Production, Consumption
Production
EU-15 SMP market to shrink over the medium term
EU-15 Production, Consumption, Trade and Stocks
1800
1000
1600
900
800
1400
700
1200
600
1000
500
Consumption
800
400
Exports
600
Ending Stocks
400
300
200
Imports
200
100
0
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
European Commission - Agriculture Directorate-General
25
Trade, Stocks
Production, Consumption
Production
CAP reform found to have a modest impact on EU-15 income
3%
Income in real terms and per labour unit
( in % deviation from Agenda 2000 )
2%
1%
0,8%
0%
-0,6%
-1%
-0,5%
-1,2%
-1,3%
-1,6%
-2%
-1,7%
-3%
2004
2005
2006
2007
2008
European Commission - Agriculture Directorate-General
2009
2010
26
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.
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27
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
28
Accession leads to a modest increase in cereal production in the
new Member States
Cereal production and use in the EU-25 (mio. t)
300
250
mio. t
200
150
EU-25 consumption
100
50
0
1999
2000
2001
2002
2003
2004
2005
2006
New Member States
European Commission - Agriculture Directorate-General
2007
2008
2009
2010
Current Member States
29
EU-25 cereal marketing surplus to stabilise at some 26 mio t
over the medium term
35
New member States
Cereal marketing surplus ( in mio t)
30
Current Member States
25
20
15
10
5
0
-5
-10
2000
2001
2002
2003
2004
2005
2006
European Commission - Agriculture Directorate-General
2007
2008
2009
2010
30
CAP reform to reduce cereal marketing surplus by 2 - 3 mio t
36
Agenda 2000
Cereal marketing surplus ( in mio t)
CAP Reform
30
24
18
12
6
0
2004
2005
2006
2007
2008
European Commission - Agriculture Directorate-General
2009
2010
31
The new Member States find additional markets for rye in
the current Member States
14
Rye production and use in the EU-25 (mio.t)
use EU-25
12
mio. t
10
8
use EU-15
6
4
2
0
1999
2000
2001
2002
2003
Production New Member States
2004
2005
2006
2007
2008
2009
2010
Production Current Member States
European Commission - Agriculture Directorate-General
32
CAP reform : solving rye specific structural imbalance for EU - 25
2,5
Rye Annual Marketable surplus in 2010 (mio t)
2,0
New Member States
Current Member
States
EU 25
1,5
1,0
0,5
0,0
-0,5
-1,0
-1,5
2002
Agenda 2000
CAP reform
2010
2010
European Commission - Agriculture Directorate-General
33
EU-25 meat markets gain dynamics with accession
110
Per capita meat and egg consumption in the EU-25
Cur. Member States
New Member States
(kg/capita)
100
90
80
70
2002
2004
2005
2006
2007
European Commission - Agriculture Directorate-General
2008
2009
2010
34
CAP reform : improving the beef market balance for EU-25
Beef prices and production (EUR/t and mio t)
EUR/t
mio. t
9,5
2.700
Production (EU-25)
EUR/t
2.600
9,0
2.500
8,5
2.400
8,0
2.300
7,5
2.200
7,0
2.100
6,5
2002
Agenda 2000
CAP Reform
2010
2010
European Commission - Agriculture Directorate-General
35
CAP reform and enlargement: leading to new trade flows in the
poultry sector
Poultry Annual Marketable surplus in 2010 (mio t)
1,5
New Member States
Current Member States
EU 25
1,0
0,5
0,0
-0,5
-1,0
2002
Agenda 2000
CAP reform
2010
2010
European Commission - Agriculture Directorate-General
36
… as well as in the pork sector but in the opposite direction
Pork Annual Marketable surplus in 2010 (mio t)
2,5
New Member States
Current Member
States
EU 25
2,0
1,5
1,0
0,5
0,0
-0,5
2002
Agenda 2000
CAP reform
2010
2010
European Commission - Agriculture Directorate-General
37
CAP reform - reducing risk of imbalance for EU-25 butter and
skimmed milk powder markets …
Butter and skimmed milk powder production (mio t)
2,5
New member States
Butter
Current Member States
2,0
1,5
Skimmed milk powder
1,0
0,5
0,0
Agenda 2000
CAP reform
Agenda 2000
European Commission - Agriculture Directorate-General
CAP reform
38
CAP reform.. while favouring the development of the EU-25 cheese sector
Cheese market variables (mio t)
10
1,0
New member States
8
0,8
6
0,6
Marketable surplus
4
0,4
2
0,2
0
0,0
Agenda
2000
CAP
Reform
Agenda
2000
CAP
Reform
-2
-0,2
Production
Consumption
-4
European Commission - Agriculture Directorate-General
Agenda
2000
CAP
Reform
-0,4
39
Marketable Surplus (Mio t)
Production, Consumption (Mio t)
Current Member States
CAP reform would secure income gains for new Member States
2002 = 100
EU-25
New Member States
160
Income in 2010, real terms (2002 = 100)
140
120
100
80
60
40
Agenda 2000
European Commission - Agriculture Directorate-General
CAP reform
40
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
41
Conclusions – CAP reform
Greater flexibility
& market
orientation
•
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
Solving
specific sector
problems
Guaranteeing
income stability
•
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
European Commission - Agriculture Directorate-General
42