EU Agriculture in a globalised context

1. EU Agriculture in a globalised context CLITRAVI 50th Annual General Assembly,Portoroz, Slovenia, 8 May 2008 Lars Hoelgaard, Deputy Director-General

2. Before • Now • Ahead?

3. Before – ”Good old days” • Stable framework • Intervention prices • Tariffs • Export refunds • Intervention stocks • Surplus – minimum/maximum prices • Monetary compensatory amounts – green rates/accession compensatory amounts

4. Disappearance of public stocks Composition of public stocks in the EU (mio t), 1995-2014 Butter, SMP, beef – same picture

5. Now – ”volatility” - EU-related • CAP-reform – market orientation • Real ”Filet de sécurité” • Direct payments – income security – but price volatility • Exchange rate US-dollar/Euro

6. Volatility - global • Energy crisis – 120$/barrel • Global warming • Bio energy - EU: • Renewables – 20% - 2020 • Bio fuels – 10% - 2020 • Others • Demand for raw materials • Food/feed/energy/industrial • Renewables - environment

7. Slightly expanding cereal markets and emerging bioethanol markets…. Development of cereal markets in the EU, 1995-2014 (mio t)

8. Food crisis? – or price adjustment to real cost of production • Energy  cost of production • Environment – water  cost of production • Global warming – renewables  CO² - cost of production

9. Demand driven • Bio ethanol – maize – US – Iraq - war • Odd man out – sugarcane and bio ethanol – Brazil • Emerging economies ”Chinda” (China/India) etc. - Diet patterns • Population growth – 9 billion in 2050 • Hedge funds – Soros – add to speculation – gold/oil

10. Opportunities/supply • Africa potential – high prices good or bad? • GMO’s – productivity and environment • US-dollar – reserve currency – imbalances • Deficit in federal budget (Iraq war) • Deficit in trade balance (China) • Low interest rates  house prices inflated consumption  subprime

11. WTO • Lower tariffs • No refunds 2013 Market outlook

12. EU to remain net importer of beef EU production, consumption, trade and intervention stocks (mio t c.w.e.)

13. Growth rates for pig meat production and consumption are expected to be lower than in the 90s EU production, consumption and trade (mio t c.w.e.)

14. Meat • Beef production to continue falling below consumption throughout the projection period due to: • Declining cattle herd from dairy sector • Impact of decoupling of direct payments • Pig meat production expected to keep its slight growth thanks to: • Solid demand both in the EU-15 and in the EU-12 • Exports to decline slightly due to greater competition from low cost exporters, imports to remain at low level • Poultry meat demand to grow faster than production, leading to EU becoming net importer of poultry meat • EU sheep/goat meat production to continue its declining trend

15. Imports from developing countries (2005) 15

16. Health check (HC) – how does this fit? • Further decoupling • Modulation • Balance Pillar I and Pillar II • More market orientation • Article ”68” (old 69) • LFA’s • ”New challenges”

17. CAP expenditure and CAP reform path EU-10 EU-12 EU-15 EU-25 17

18. Challenges • Demand is there • Can Europe keep pace? • RD + innovation • Reinvent yourselves – value added • Competition – more, not less

19. Conclusion - ahead • More volatility • More market • Risk management • Instruments – hedging – futures • Locking in prices • But public intervention still necessary – market does not solve all • Future CAP post 2013?