EU FARM INCOMES are set to grow by nearly 12%, but most of that increase will go to the ten newest member states, says a Brussels report.

Prospects for Agricultural Markets and Income 2005-2012 analyses the outlook for the main commodity markets and then translates them into income projections for EU farmers.

But whereas farmers in the EU-15 will see a “rather modest” 4% upturn over the period, those in the new member states will benefit from a massive 50% rise.

Compared with their position in 2003 – before joining the EU – farm incomes per labour unit will be 137% higher by 2012.

“Apart from generally positive price developments, this growth in income will be supported by the implementation of the common agricultural policy, integration into the single market and, most significantly, by the sharp rise in subsidies,” notes the report.

In the cereals sector, EU output for 2005 is forecast to fall to 261m tonnes, down from last year’s bumper crop of 285m tonnes.

“The impact of higher set-aside, the implementation of decoupling and moderate yield growth will combine to limit production growth over the medium term,” says the report.

This will result in a gradual fall in stock levels overhanging the market, while moderate gains in the animal feed market as consumers in developing countries eat more meat will also benefit prices.

In the meat sector, the report predicts a return to normality, after recent problems with BSE, foot-and-mouth and avian flu.

Beef producers should benefit from a continued recovery in consumption against falling production in line with reductions in the dairy herd.

“A tight domestic supply and steady demand are projected to keep prices relatively high, attracting more imports entering at full duty from South America.”

In the dairy sector, the report forecasts a fall in butter and skimmed milk powder production, as more milk is directed to cheese and other high value-added dairy products.