Prospects for agricultural markets in the next few years are relatively buoyant, according to the latest outlook report from the EU Commission, though uncertainties over the WTO talks and avian influenza could still mess up the forecasts.
In terms of farm income, the EU’s analysts are predicting 13% growth between 2004 and 2012 in real terms and per labour unit.
The bulk of this will be in new member states, which will enjoy a 50% income gain, while farmers in the old EU15 will experience a more modest 6% increase.
“The medium-term scenario for the EU15 exhibits a rise in the value of oilseeds, poultry and pork that would outweigh the decline in the value of milk,” says the report.
“Gross value-added would be further strengthened by the projected increase in the value of fruit and vegetables.”
In the cereals sector, the report points to “a fragile situation” in the short term, due to continued overhang of high stock levels from 2004.
But medium term a combination of falling stocks, 10% set-aside, decoupled payments, moderate yield rises and more favourable world markets will boost returns.
“The assumed return to a weaker euro over the medium term should also help to restore competitiveness for cereals,” says the report.
It does, however, point to specific difficulties for coarse grains, in particular for barley.
Marketing inefficiencies could also blight the prospects for soft wheat and maize in south-eastern Europe.
The prospect for oilseeds is somewhat brighter, supported by productivity increases and increasing demand for biofuels.
“But the production of non-food oilseeds will remain constrained by the Blair House agreement, with maximum production of 1m tonnes of soybean meal equivalent on set-aside land,” the report notes.
In the meat sector, prospects for pigs and poultry are positive, with overall consumption projected to increase by 2.2% by 2012.
But beef output is expected to decline due to CAP reform and strong import competition.
A combination of decoupling in some countries, such as the UK and Ireland, and rising feed costs is expected to push beef production down by 4% to 7.6m tonnes in 2012.
“A relatively stable demand and a tight domestic supply are expected to result in firm prices, attracting more imports, notably high quality beef cuts from South America.”
The analysis for meat markets takes no account of the prospect of avian influenza.
This could have a pronounced effect on trade flows and market prices for all meat products, says the report.
Similarly, the WTO talks could have a dramatic effect on EU commodity market prospects, especially for beef, dairy and sugar producers which remain dependent on export aid and import protection.