EU Commission positive, but beef prospects mixed
In its just published seven year trade outlook, the European Commission takes heart from a predicted return to "more normal" levels of beef production.
And it's expected emergence of world markets from prolonged downturn would lift all boats, including those of agri-exporters.
In general, the Brussels report on Prospects for Agricultural Markets: 2002-2009, is broadly positive for most agricultural products.
In particular, a continued increase in consumption and a "sustained recovery in EU cereal exports" are projected.
In beef, the industry could not be blamed for expecting greater benefits from measures like the "Purchase for Destruction" scheme and the "Special Purchase" scheme, which together withdrew and destroyed the meat of around 1.1 million animals.
In addition, culling linked to the Foot and Mouth disease (FMD) in the UK, the Netherlands, France and Ireland took out about 850,000 cattle, mostly in the UK.
As a result, and with an unexpectedly smaller backlog of animals, beef production for the year 2001 dropped to 7.26 million tonnes, down 1.8% from the already relatively low production level of 2000.
However, the dramatic drop in beef consumption by about 12%, compared to 1999 put strong pressure on beef prices, which dropped below intervention level and even below the safety net (for a short period and only in Germany and the Netherlands).
Intervention stocks grew rapidly, and reached around 259,000 tonnes.
Signs of recovery appeared since March 2001, with beef prices continuing to improve, reaching about 90% of intervention level by the end of the year (except for cow meat, where prices remained low throughout 2001).
Net beef production in the EU is estimated to increase in the year 2002 and 2003, as it returns to more normal conditions, with improved prices and no destruction schemes in place except for the Over Thirty Months Scheme (OTMS) in the UK, which is assumed to be maintained until Spring, 2004.
There is some impact from the special measures decided in June 2001, notably a stocking density reduction and temporary changes in the suckler cow premium for 2002 and 2003.
But EU beef and veal production is estimated to increase up to 7.7 million tons in 2004 and then decrease slightly in the following years, as the beef production cycle reaches its low point by the year 2005/06, at around 7.6 million tons.
Producers are then expected to respond to market improvements, lifting production slightly to reach 7.75 million tons by 2009.
Overall, the lower production in 2001; the assumed prolongation of the OTMS scheme in UK; the quick recovery in beef consumption; and the impact of the special measures taken in 2000 and 2001, indicate that the balance of the EU beef market is likely not to worsen in the next few years.
Intervention stocks could be cleared in 2003, and no buying in is expected by Brussels over the forecast period up to 2009. Export outlets are expected to be sufficient to cope with cyclical ups and downs in production.
The one major new feature in the farming decade ahead to be taken into account by the European Commission is the US Farm Bill.
The main conclusion in Brussels is that the Bill's increased level of US support will generate higher agricultural production in the US, and this should put further downward pressure on market prices.
The greatest impact would be felt in the cereal sector where the Farm Bill is expected to increase the competitiveness of US products, as well as boosting their grain production levels.
Oilseed production may decrease somewhat, releasing some pressure from market prices.
For the EU, the largest kickback from increased farmer subsidisation in the US is expected in the wheat sector, and in coarse grains and meat production to a lesser extent.
So there could be a US sourced impact on Irish cattle farmers.
At least, Irish farmers can count their blessings that they are not growing rice or rye. Preferential trade agreements, notably the "Everything But Arms" (EBA) Agreement with the Least Developed Countries (LDCs) is projected to have a "dramatic" effect on the EU rice market.
And the rye market is foreseen "to display a continuous and structural imbalance", largely due to its relatively high market prices and lack of market outlets.
