The medium-term outlook

and

The CAP towards 2020

MS notifications

Sophie Hélaine, DG AGRI

DG Agriculture and Rural Development

European Commission

Outline

1. Medium-term outlook

2. Member States decisions for CAP implementation

2

Summary

• Arable crops and biofuels

• Cereal prices below 2012 record prices but above historical averages

• Less biofuel demand than previously anticipated

• Abolition of the sugar quotas leading to EU sugar prices at world level

• Meat

• Good export prospects for pig meat and poultry, driven by world demand

• A small increase in meat production thanks to poultry

• Meat consumption oriented downwards, except for poultry

• Dairy

• The dairy sector remains the 'white gold' despite the current market difficulties

• An increase in the EU milk production driven by the steady increasing world demand and further increases in domestic use

• Most of the additional milk to be channelled in cheese, whey powder and SMP

3

Oil price, a very uncertain assumption

50

70

90

110

130

150

170

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Bre

nt,

USD

/barr

el

OECD-FAO Baseline 2013 EC outlook 2014 EC outlook

IHS, Jan. 2015 World Bank*, Jan 2015 2015 USDA

* Based on the development of the average Brent, WTI and Dubai oil price

4

EU cereal producer prices above historical averages

over the medium term

80

100

120

140

160

180

200

220

240

260

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

EU

R/t

Wheat Maize

Barley Intervention price

120

140

160

180

200

220

240

260

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

EU

R/t

10th percentile

90th percentile

WB-scenario

IHS-scenario

Baseline

Uncertainties surrounding EU maize price developments

Note: Uncertainty analysis prepared by JRC-IPTS, based on partial stochastic analysis

5

Real income per AWU

6

90

95

100

105

110

115

120

2012-2

014

2016

2018

2020

2022

2024

Index (

2012-2

014=

100

Baseline

WB-scenario

IHS-scenario

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

2014

2016

2018

2020

2022

2024

Mio

EU

R

Baseline IHS-scenario

WB-scenario

Energy and Fertilizer costs

The CAP towards 2020 MS notifications

New design of direct payments

8

Cro

ss c

om

plian

ce

Str

eam

lined

Basic Payment Scheme (C)

• Voluntary redistributive payment (+max.65% on max. 30 ha or AFS; max 30% DP envelope)

• Definition of 'active farmer'

• New BPS entitlements in 2015 • SAPS extended until 2020 (EU-10) • Internal convergence / derogation

with external convergence model

«Green» Payment (C)

• Crop diversification • Permanent grassland • Ecological focus area

• 30% of the DP envelope • Thresholds & exemptions • Equivalence

Young Farmer Scheme (C)

• Up to 2% of DP envelope • < 40 years commencing activity

• +25% (/payment entitlements) • For 5 years

OR

Small Farmer

Scheme (V)

• Simplification of claims and controls

• Lump sum payment to be determined by MS under conditions [500 to 1250 €]

• Entrance in 2015

Coupled support* (V)

• Wide range of sectors • Up to 8% (or to 13% depending on

past level) of DP envelope, +2% for protein crops

Natural constraint support (V)

• For areas with natural constraints – or part of them

• Up to 5% of the DP envelope

Capping voluntary for the MS Degressivity of 5% over 150 000 €

V = voluntary scheme C = compulsory scheme

* In some MS (BG, EL, ES, PT) the crop specific payment for cotton is compulsory; obligation derives from 1979 Act of Accession of EL

9

Main elements of the notifications due

by 1 August 2014

10

Disclaimer

The synthesis presented in the following slides reflects the content of Member States' notifications available to the Commission services on 23.01.2015. This presentation is made available

without prejudice to any finding in respect of their compliance with the regulatory framework

11

Procedure

• The Commission does not approve/disapprove the notifications and Member States remain the only responsible of the decisions they have taken in implementing the reform with two exceptions:

• VCS if more than 13 (+2)% • Greening equivalence

• DG AGRI services assessed completeness and consistency of

notifications received by 1 August 2014

• Numerous bilateral contacts were taken to request additional information and highlight possible risks of non compliance

12

Flexibility between pillars: all decisions

From DP to RD in % of national ceilings (max percentage 15%)

DP to RD MEUR 6.382,6 Financial year 2015 2016 2017 2018 2019 2020

Claim year 2014 2015 2016 2017 2018 2019

FR 3.0% 3.3% 3.3% 3.3% 3.3% 3.3%

LV 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%

UK 10.8% 10.8% 10.8% 10.8% 10.8% 10.8%

BE 2.3% 3.5% 3.5% 4.6% 4.6%

CZ 3.4% 3.4% 3.4% 1.3% 1.3%

DK 5.0% 6.0% 7.0% 7.0% 7.0%

DE 4.5% 4.5% 4.5% 4.5% 4.5%

EE 6.1% 14.3% 15.0% 15.0% 15.0%

EL 5.0% 5.0% 5.0% 5.0% 5.0%

NL 4.0% 4.1% 4.2% 4.2% 4.3%

RO 1.8% 2.3% 2.2% 0.0% 0.0%

From RD to DP in % of national ceilings (max percentage 15% or 25% for some MS)

RD to DP MEUR 3.358,2 Financial year 2015 2016 2017 2018 2019 2020

Claim year 2014 2015 2016 2017 2018 2019

HR 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%

MT 0.0% 0.8% 1.6% 2.4% 3.1% 3.8%

PL 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%

SK 21.3% 21.3% 21.3% 21.3% 21.3% 21.3%

HU 15.0% 15.0% 15.0% 15.0% 15.0%

Net result of all transfers (possible review in 2017 for the years 2018 and 2019) = total transfer from pillar I to pillar II of EUR 3 billion over 6 years

Delegated act modifying the DP and RD financial annexes published on 23.12.2014 (Regulation 1378/2014)

13

Direct payments: summary of main decisions

BE-W

BG CZ DK DE EE IE EL ES FR HR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK

SAPS √ √ √ √ √ √ √ √ √ √ 10

Regionalised BPS (basic payment scheme)

√ √ √ √ √ √ 6

Redistributive payment √ √ √ √ √ √ √ √ 8

No capping √ √ √ √ √ √ 6

Area with natural constraints (ANC)

√ 1

Voluntary Coupled support (VCS)

√ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ 27

Small farmers scheme (SFS)

√ √ √ √ √ √ √ √ √ √ √ √ √ √ √ 15

14

Reduction of payments' mechanism (1)

Amounts above

Reduction %

BE/

FL

BE/

W

BG

CZ

DK

DE

EE

IE

EL

ES

FR

HR

IT

CY

LV

LT

LU

HU

MT

NL

AT

PL

PT

RO

SI

SK

FI

SE

UK

/E

UK

/N

I

UK

/S

C

UK

/W

150 000 5% √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

150 000 15% √

150 000 50% √

150 000 100% √ √ √ √ √ √

176 000 100% √

200 000 30% √

250 000 55% √

300 000 100% √ √

500 000 100% √

600 000 100% √

Subtraction of salaries √ √ √ √ √ √ √ √ √

15

Direct payments: summary of main decisions

Share of DP envelope left for BPS at EU-28 level in 2015 = 55%

16

Basic Payment Scheme (BPS)

• 6 MS have decided to regionalise the BPS: DE, EL, ES, FR, FI, UK (except NI)

• 7 MS will reach a form of national/regional flat rate: DE, FR-Corsica, MT and UK-EN in 2015; NL, AT, FI, UK-SC & WA by 2019. SE will reach it in 2020

• Amongst the MS that have opted for a partial convergence to the flat rate, 8 opted for the possibility to limit decrease in the value of payment entitlements above average to 30% of their initial unit value (EL, ES, FR-except Corsica, HR, IT, PT, SI BE)

BPS - Regions MS implementing regionalisation:

DE: Länder until 2018

FR: Corsica / Hexagon

BE: Flanders / Wallonia

UK-Scotland:

1- Arable land and perm. grassland (86.87% of the envelop) – 220 EUR/ha

3- Rough grazing in LFA where Stocking Density <= 0.2 LU/ha (4.23%) – 10 EUR/ha

2- The rest (8.9%) – 35 EUR/ha

UK-England and UK-Wales

1- Moorland

2- Severely Disadvantaged Area

3- Lowland & Disadvantaged Area

Greece

1-Grazing Areas (pasture land and grasslands)

2- Arable land

3- Permanent crops (trees and vineyards)

Finland

AB (Northern)

C (Southern)

Spain

50 regions grouped by land type and productivity levels

18

Voluntary coupled support (VCS)

• VCS = 10% of total DP envelope for EU 28 in 2015

• 9 MS with less than 8% (CY, DK, EE, EL, IE, LU, NL, AT, UK)

• 11 MS will use the maximum percentage of 13% with 9 of them also using all or part of the additional 2% available in case a corresponding percentage is dedicated to supporting the protein crops sector

• 3 MS need approval from the Commission to allocate more than 13 (+2)% to the VCS: BE, FI, PT (2nd quarter 2015)

IE NL LU UK AT DK EE EL CY IT ES RO SK SE LV BG CZ FR HR LT HU PL SI BE FI PT MT

0.2% 0.5% 0.5% 1.7% 2.1% 2.8% 4.2% 7.4% 7.9% 11% 12% 12% 13% 13% 14% 15% 15% 15% 15% 15% 15% 15% 15% 17% 20% 21% 57%

19

VCS: sectors supported

Greening Ecological Focus Areas – sent by 1 August 2014 (I)

20

Main figures on EFA

• Number of activated EFA types

Between 2 and 4 EFA: 6 MS (AT, FI, LT, NL, SI, ES)

Between 5 and 9 EFA: 9 MS (CY, DK, EE, EL, LV, MT, PT, SV, UK)

Over 10 EFA: 13 MS (BE, BG, HR, CZ, FR, DE, HU, IE, IT, LU, PL, RO, SK)

• Category of EFA type

Nitrogen fixing crops: 27 MS

Land lying fallow: 26 MS

Landscape features (at least one): 23 MS

Short rotation coppice: 21 MS

Catch crops: 20 MS

Buffer strips: 19 MS

Afforested areas: 13 MS

Agroforestry: 12 MS

Strips along forest edges with production: 8MS; without production: 11 MS

Terraces: 8 MS

(UK and BE sent notifications on regional basis; in this PPT UK/BE are counted if at least one region activated a given element)

Greening Ecological Focus Areas – sent by 1 October 2014 (III)

Short Rotation Coppice (SRC):

Between 2 to 11 species per MS

Most popular: willow (20 MS), poplar (16 MS), alder (14 MS), birch (10 MS) and ash (11 MS)

Catch crops (CC)

Different approaches to the setting of the required list of crop mixtures; often long list of crop species

Period of sowing usually between July & September

Some MS developed criteria for the establishment of mixtures (max % for the main species) and on the minimum duration of CC on the field.

Nitrogen Fixing Crops (NFC)

Between 4 and 19 crops/MS

Most popular: faba bean (all MS), pea (26 MS), alfalfa (25 MS), lupin (23 MS) and clover (23 MS).

Biodiversity criteria (selection of NFC): some MS provided detailed while others generic ones

Geographic criteria: a number of MS decided to allow NFC on the whole territory in light of the Nitrates directive. Some MS did not specify this.

21

More info available at:

Medium-term outlook http://ec.europa.eu/agriculture/markets-and-prices/medium-term-outlook/index_en.htm

Short-term outlook (EU balances) and production figures by MS http://ec.europa.eu/agriculture/markets-and-prices/short-term-outlook/index_en.htm

CAP implementation by MS http://ec.europa.eu/agriculture/direct-support/direct-payments/index_en.htm

22

The CAP towards 2020

Implementation of the new system of direct payments

Annexes

DG Agriculture and Rural Development

European Commission

24

The reform introduced a new system of direct payments …

Ensuring the long-term viability of farms

• Providing a basic layer of fixed income support

• Making them less vulnerable to fluctuations in prices and income

Enhancing the sustainable management of natural resources

• Reflecting the important role of agriculture in the joint delivery of

private and public goods

• Supporting agricultural practices beneficial for the environment and climate

Contributing to territorial development

• Allowing for structural and production diversity

• Supporting agriculture in specific areas with significant spillover effects on food supply chain and rural economies

… while enhancing their efficiency

25

More equitable distribution

Improved targeting

Active farmer Young farmers Green payment Specific support to territories, sectors and

size

Convergence of payments among MS Convergence of payments among farmers Redistributive payment

Greener direct payments

Mandatory practices beneficial for environment and climate

30% of direct payment budget Streamlined cross-compliance

26

The 'green payment' in the overall greening architecture

Agricultural area (eligible for direct payments)

Cross compliance

Green direct payments

Rural development

Cu

mu

lati

ve

en

vir

on

men

tal

ben

efi

ts

Regulatory (Statutory

Management Requirements and Good Agricultural

Environmental Conditions)

Mandatory with financial

support (decoupled “green”

payment per hectare)

Voluntary with compensation

for cost incurred and income forgone

Implementation mechanism

27

The green direct payment

• Maintaining permanent grassland

ban on ploughing in designated areas

national/regional ratio with 5% flexibility

• Crop diversification

at least 2 crops when the arable land of a holding exceeds 10 hectares

at least 3 crops when the arable land of a holding exceeds 30 hectares

the main crop may cover at most 75% of arable land, and the two main crops a maximum of 95% of the arable area

• Maintaining an “ecological focus area” of at least 5% of the arable area of the holding

only applicable for farms with more than 15 hectares arable land.

figure may rise to 7% after a Commission report in 2017 & a legislative proposal

EFAs may include: field margins, buffer strips, fallow land, landscape features, afforested area, terraces, areas with catch crops, green cover and nitrogen fixing crops, short rotation coppices, agro-forestry, strips of land along forest edges

Equivalence: MS can decide that, instead of applying these three practices, a farmer

can undertake practices which are considered equivalent (e.g. crop rotation instead of crop diversification).

30% of the direct payment envelope for applying three basic practices :

• Their main policy choices including the financial allocations

• For BPS, redistributive payment, ANC, VCS, SFS and greening, further detailed requirements specifying the content and the justifications of the decisions

• Their decisions on reduction of payments, minimum requirements for receiving direct payments and the active farmer clause

• Delayed decision regarding the flexibility between pillars [for those that had not yet transferred funds between pillars for 2014]

• [Additional information on EFA and environmentally sensitive permanent grassland by 1 October and 15 Dec respectively; information on definitions, young farmer payment, use of national/regional reserve(s) and transfer of BPS entitlements by 31 January 2015]

By 1 August 2014,

Member States had

to notify the Commission

of:

28

Direct payments: MS decisions 1.08.2014

29

• Net result = total transfer from pillar I to pillar II of EUR 3 billion over 6 years (possible review in 2017 for the years 2018 and 2019)

Flexibility between pillars

• 9 MS to cap (100% reduction) the amounts of basic payments at max amounts ranging from KEUR 150 to KEUR 600

• 15 MS to only apply the minimum reduction of 5% on amounts above KEUR 150

• 9 MS will subtract the salaries actually paid by farmers before applying the reduction of payments' mechanism

Reduction of payments

• Share of DP envelope for basic payment at EU-28 level estimated at 55%

• The 10 MS currently applying the SAPS will maintain it until 2020

• 6 MS to regionalise the BPS (EL, ES, FI, DE, UK, FR)

Basic Payment

•All MS but DE to implement VCS

•MS' plans for VCS = 10% of total DP envelope for EU 28 in 2015

•9 MS with less than 8% (IE, NL, LU, UK, AT, DK, EE, EL, CY)

•11 MS with the maximum percentage of 13% with 9 of them also using all or part of the additional 2% available in case of support to the protein crops sector

•3 MS (BE, FI, PT) to allocate more than 13 (+2)% to the VCS (subject to approval by Commission)

Voluntary Coupled support

•8 MS to implement the redistributive payment (6 of them will not apply the reduction of payments)

•Only 1 MS (DK) to implement the 1st pillar payment for ANC

•15 MS to implement the SFS but only 2 in the form of a lump-sum equal for all farmers (LV, PT)

Other voluntary schemes

Direct payments: summary of main decisions

SAPS Article 21 to 26 of Reg. 1307/2003

Envelop share: from 38% (LT) to 67% (EE)

Same amount per ha in the whole MS.

All ha eligible.

Estimated* payment per ha.

2015 2016 2017 2018 2019 BG 100 100 100 100 101 CZ 131 131 131 134 134 EE 81 81 88 96 103 CY 244 241 238 235 233 LV 60 69 77 86 95 LT 58 61 65 68 72 HU 147 147 147 147 147 PL 110 110 111 111 112 RO 91 88 89 92 92 SK 131 132 133 134 135

* Estimated by Sophie Hélaine

Access to BPS: farmers receiving DP in 2013 + new eligible farmers More precisely: farmers who were producing these products can receive entitlements in 2015

Seed potatoes

Ireland

Greece

Croatia

Italy

Netherlands

Austria

Belgium Flanders

Belgium Wallonia

United Kingdom Wales

United Kingdom Scotland

Vineyards Germany

Greece

Croatia

Italy

Malta

Netherlands

Austria

Slovenia

Belgium Flanders

Belgium Wallonia

United Kingdom Wales

United Kingdom Scotland

Ware potatoes

Ireland

Greece

Croatia

Italy

Malta

Netherlands

Austria

Belgium Flanders

Belgium Wallonia

United Kingdom Wales

United Kingdom Scotland

Vegetables Ireland

Greece

Croatia

Italy

Malta

Netherlands

Austria

Belgium Flanders

Belgium Wallonia

United Kingdom Wales

United Kingdom Scotland

Fruits Ireland

Greece

Croatia

Italy

Malta

Netherlands

Austria

Belgium Flanders

Belgium Wallonia

United Kingdom Wales

United Kingdom Scotland

E.g. in France farmers who had vineyards in 2014 can't receive entitlements for this area

In countries applying already a regional model, F&V and potato area were already eligible, that's why DE not listed e.g.

To be looked at: limitations in number of payment entitlements allocated, applied in certain MS

Ornamental plants Croatia

Italy

Netherlands

Austria

Belgium Flanders

Belgium Wallonia

United Kingdom Wales

United Kingdom Scotland

32

Reduction of payments' mechanism (2)

• 9 MS will cap (100% reduction) the amounts of basic payments at max amounts ranging from KEUR 150 to KEUR 600

• 15 MS will only apply the minimum reduction of 5% on amounts of

basic payments above KEUR 150 • 9 MS will subtract the salaries actually paid by farmers before

applying the reduction of payments' mechanism • Product of the reduction of payments' mechanism as estimated by

MS for the 5 years 2015-2019 = MEUR 558 (around MEUR 112/year)

Redistributive payment Article 41 of Reg. 1307/2003

Number of ha % top up BPS Estimated

payment per

ha (2015)

Belgium Wallonia 30 44% 115

Bulgaria 30 36% 77

Germany 30 (1-30) 18% 50

16 (31-46) 11% 30

France 52 9% 25

Croatia 20 10% 34

Lithuania 30 30% 50

Poland 0-3 0% 0

3,01-30 17% 41

Romania 0-5 0.81% 5

5-30 4.37% 45Provisional estimate notified by MS

34

VCS: sectors supported

Sectors mostly supported:

Beef and veal: 24 MS, 42% of total VCS envelope for 2015

Milk and dairy products: 19 MS, 20% of VCS envelope

Sheep and goatmeat: 22 MS, 12% of VCS envelope

Protein crops: 16 MS, 10% of VCS envelope

Fruit and vegetables: 19 MS, 5% of VCS envelope

Sugar beet: 10 MS, 4% of VCS envelope

Regional targeting in the UK (beef and veal and sheep), IT (olive oil, protein crops, grain legumes, durum wheat and soya) and PL (hops)

No support for cane and chicory, short rotation coppice, dried fodder

35

Active farmer clause

• 8 MS added activities/businesses to the negative list: BG, DE, EE, IT, MT, NL, RO, UK-Sc

• 6 MS have extended the active farmer clause to all claimants

above the threshold : BG, EL, ES, IT, MT, NL (cf Article 9(3) of R.1307/2013)

• Most MS set the exemption threshold at EUR 5 000, except

BE-Fl (0), NL (1), LU (100), FR (200), MT (250), LT (500), BE-Wa (350), AT, ES and IT-except mountains (1 250), SK (2 000), BG (3 000)

36

Greening: main choices overview – sent by 1 August 2014

MS Equivalent practices

Permanent grassland Ratio level

(National OR Regional)

Activation of EFA regional / collective approach

Activation of EFA forest exemption

AT Only RDP national No No

BE-FL No regional

No No

BE-WA No No No

BG No national No No

HR No national No No

CY No national No No

CZ No national No No

DK No national No No

EE No national No Yes

FI No national No Yes

FR Only Certification Schemes regional No No

DE No regional No No

EL No national No No

HU No national No No

IR Only RDP national No No

IT No national No No

LV No national No Yes

LI No national No No

LU No national No No

MT No N/A No No

NL Only Certification Schemes national Only collective No

PL Only RDP national Only collective No

PT No national No No

RO No national No No

SK No national No No

SI No national No No

ES No national No No

SE No national No Yes

UK-E No

regional

No No

UK-NI No No No

No No UK-SC No

UK-W No No No

MS opting for equivalence 5 Ratio at national level 23 MS applying collective 2 MS applying forest exemption

4

Equivalence through RDP 3 Ratio at regional level 4 MS applying regional 0

Equivalence through certification schemes

2 Ratio at sub-regional level 0

Without perm. grassland 1

Greening Equivalent practices – sent by 1 August 2014

37

Main figures • 5 MS notified equivalence

2 MS Certification schemes (NL, FR)

3 MS RDP commitments (AT, IE, PL)

• Crop diversification main greening practice

• EFA chosen by 2 MS

• Permanent grassland chosen by 1 MS

• Assessment on-going (due end February)

Member State Equivalent practice Detail

France Certification Schemes 1 national CS Crop diversification

Netherlands Certification Schemes 3 national CS Different practices

Austria RDP 1 practice Crop diversification - EFA

Ireland RDP 1 practice Crop diversification

Poland RDP 1 practice Crop diversification

Greening Environmentally Sensitive Permanent Grassland (ESPG)

Sent by 15 December 2014

• MS adopted different approaches to the designation of ESPG in Natura 2000 areas:

8 MS designated all grassland in Natura 2000

5 MS between 50% and 100%

6 MS less than half of the grassland

For some MS data provided remains to be checked

• 4 MS will designate ESPG outside Natura 2000 areas

38

39

MS choices on landscape features

MS which chose at least 1 LF: 23

Trees in groups: 17 MS

Field margins: 16 MS

Trees in line : 16 MS

Hedges: 13 MS

Isolated trees: 13 MS

Ponds: 11 MS

Ditches: 14 MS

Traditional stone walls: 6 MS

Other LF: 10 MS

Choice between LF defined under Art 45 (set in DA) & under Cross-compliance (CC) requirements

5 MS will allow only LF defined under Art 45

18 MS will allow both Art 45 and CC LF

Greening Ecological Focus Areas – sent by 1 October 2014 (II)

Conference: 2024 Prospects for

EU Agricultural Markets

Brussels,

5 December 2014

Pierluigi Londero

DG Agriculture and Rural Development

European Commission

Outline

• Policy assumptions

• Market outlook

• Arable crops

• Biofuels

• Meat

• Dairy

• Income developments

41

Policy assumptions

• CAP 2013 as far as possible

• Voluntary coupled support

• Greening:

- Permanent pasture kept constant,

- Limited effect of ecological focus area (EFA) & crop diversification at EU aggregated level

• Trade agreements only if ratified:

• Concessions to UKRAINE included

• FTA with CANADA not included

• Russian import ban assumed to remain 1 year

42

Prospects for cereals, oilseeds, sugar and biofuels

• Cereals and oilseeds

• Solid world demand leading to large EU exports of cereals

• EU demand driven by feed use and biofuel use

• Prices below 2012 record prices but above historical averages

• Sugar and isoglucose

• Abolition of the quotas end of 2017 leading to EU sugar prices at world level,

• more sugar produced domestically and lower imports,

• a higher share of isoglucose use in Europe.

• Biofuels

• Lower growth of first generation biofuels than previously expected

• Biofuels to contribute for 7% toward meeting the 10% target of renewables in transport fuel

43

EU cereal market developments

0

20

40

60

80

100

120

140

160

180

2010-14 2024 2010-14 2024 2010-14 2024 2010-14 2024

Total Wheat Maize Barley Other cereals

Million t

Food and industrial use Feed use Bioenergy use Exports

Annual changes in area and yields 2024 vs. 2010-14

Barley

17.4%

Maize

13.3%

Other cereals

6.3%

Oats

3.8%

Rapeseed 9.5%

Rye

3.5%

Sugar beet

2.3%

Durum wheat

3.6% Common wheat

33.3%

Soybeans, 0.7%

Sunflower seed

0.8% Rice

0.6%

0.0%

0.5%

1.0%

1.5%

-1.5% -0.5% 0.5% 1.5%

Annual change in y

ield

betw

een

2010-2

014 a

nd 2

024

Annual change in area harvested between 2010-2014 and 2024

Note: the bubble size refers to the average share in area in the years 2009-13

EU cereal producer prices above historical averages

over the medium term

80

100

120

140

160

180

200

220

240

260

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

EU

R/t

Wheat Maize

Barley Intervention price

46

80

100

120

140

160

180

200

220

240

260

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

EU

R/t

10th percentile

90th percentile

Possible price range as a result of yield and macroeconomic variability

Uncertainties surrounding EU maize price developments

Note: Uncertainty analysis prepared by JRC-IPTS, based on partial stochastic analysis

Biofuel use to expand in the EU but less dynamically than expected

• Assumptions:

- Renewable Energy Directive (RED) target of 10% of renewables in energy share by 2020

- Biofuels to contribute to 7% of liquid transport fuels by 2020

- Share of double counted 2nd-generation biofuels (including from waste oils) to grow

• A lower biofuel use expected because:

- Decreasing trend in transport fuel use

- In recent years, only slow increase in biofuel uptake

- Lack of strong policy incentives to invest

• Stable biodiesel production from domestic oilseeds

• Early increase in maize-based ethanol

-5

0

5

10

15

20

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

Million t

.o.e

.

Ethanol (1st gen) Ethanol (2nd gen)

Ethanol net imports Biodiesel (1st gen)

Biodiesel (waste) Biodiesel (2nd gen)

Biodiesel net imports

A changing sweeteners EU market environment

0

10

20

30

40

50

60

70

80

0

100

200

300

400

500

600

700

800

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

EU white sugar World white sugar

Sugar beet Out of quota sugar beet

Sugar, EUR/t

Sugar beet, EUR/t • EU sugar price getting closer to

world prices at around 400 EUR/t

• An increase in sugar beet production

- Channelled in sugar production

- Ethanol production from sugar beet to decrease

• Less sugar imports

• Isoglucose use to increase significantly to about 12% of sweetener use

Prospects for meat

• Good exports prospects

• for pig meat and poultry,

• driven by a steady growing world consumption,

• supporting firm or even increasing world and EU prices.

• An increase in EU meat production

• driven by a sustained increase in poultry meat production and lower feed costs,

• while, after a recovery in the short-run, beef production should decline at a slow pace

• and pig meat production should stabilise.

• An EU per capita meat consumption on a declining trend

• after a recovery in the short-run,

• back to declining consumption

• except for poultry benefitting from a lower price and a good image close to consumers

49

A slowly declining EU meat consumption

54

56

58

60

62

64

66

68

70

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

kg p

er

capita in r

eta

il w

eig

ht

Economic crises

BSE and FMD

Low meat supply (new welfare rules for pig meat, cow

herd dev.)

Highest ever beef imports from South

America

Recovery of pig meat prod.

and more beef from dairy herd

Change in EU meat production and consumption 2024 compared to 2014

-200

0

200

400

600

800

1,000

Beef Pig meat Poultry meat Sheep meat

1000 t

Production Consumption

EU pig meat export developments

0

500

1,000

1,500

2,000

2,500

3,000

2005 2010 2013 2014e 2024f

1000 t

Total Russia Ukraine China and Hong Kong Japan S. Korea Other

Prospects for milk and dairy products

• Milk remains the white gold for the next decade

• despite the difficult current market situation,

• because world demand is steadily growing,

• prices to stay firm around 350 EUR/t.

• EU deliveries to increase by 12 Mt in 10 years

• Further concentration of milk production in regions with lower production costs

• EU production expansion limited by increasing competition on the world market and by the small potential for higher EU consumption

• Environmental constraints to play a major role.

• More milk channelled into cheese and powders

• Cheese domestic use to continue growing and more exports

• More SMP for the export market thanks to additional drying capacities

• Whey powder exports getting always higher

53

Steady growth in world consumption

• +2.1% per year in world imports

• A slightly lower increase in traded volumes compared to the last decade

• But most of the extra demand to be supplied by the EU

- NZ production and exports limited by natural constraints

- US dom. consumption to grow faster

• China to contribute less to the extra demand

- Africa and other Asian countries to absorb more dairy products

EU

EU

NZ

NZ

US

US Arg.

Arg.

-2

0

2

4

6

8

10

12

14

16

2014 vs2004

2024 vs2014

Exports

Cumulative change in world trade of dairy products million tonnes of milk equivalent

China

China

MLE

MLE

O.

Asia

O.

Asia

Russia Russia

Africa

Africa

-2

0

2

4

6

8

10

12

14

16

2014 vs2004

2024 vs2014

Imports

Higher milk collection in the EU

100

120

140

160

180

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Million t

Milk deliveries Quota*

Milk production

Concentration of milk production in the Northern part of the EU

Increase in MS where lower prod.

costs and investments

DE, FR, PL, NL, UK, IE, DK

Environment

Stable or low quantity increase

elsewhere

Most of the extra milk channelled into cheese

0

1

2

3

4

5

6

7

Prod. Exp. Prod. Exp. Prod. Exp. Prod. Exp. Prod. Exp. Prod. Exp.

Cheese Butter Whey SMP WMP Fresh dairy p.

2024 v

s 2

014, in

million t

onnes o

f m

ilk e

q.

Expected increase in domestic use

A slight increase in real income/AWU in 2024 compared to 2012-14

Value of production

-10%

Total costs

-6%

Subsidies

-21%

Real factor income

-23%

Total labour

-28% Income / AWU

+9%

Summary

• Arable crops and biofuels

• Cereal prices below 2012 record prices but above historical averages

• Less biofuel demand than previously anticipated

• Abolition of the sugar quotas leading to EU sugar prices at world level

• Meat

• Good export prospects for pig meat and poultry, driven by world demand

• A small increase in meat production thanks to poultry

• Meat consumption oriented downwards, except for poultry

• Dairy

• The dairy sector remains the 'white gold' despite the current market difficulties

• An increase in the EU milk production driven by the steady increasing world demand and further increases in domestic use

• Most of the additional milk to be channelled in cheese, whey powder and SMP

59

Report and data available at: http://ec.europa.eu/agriculture/markets-and-prices/medium-term-outlook/index_en.htm

DISCLAIMER: While all efforts are made to reach robust market and income prospects, uncertainties remain. This publication does not necessarily reflect the official opinion of the European Commission.

© European Union, 2014 - Reproduction authorized provided the source is acknowledged