Competitiveness and

Sustainability of EU agriculture

Herman VERSTEIJLEN

Director Agricultural Markets

European Commission

Wageningen - Publiekbijeenkomst Europese Commissie 06.02.2014

Key drivers for EU food security:

1.Enhanced competitiveness

2.Improved sustainability

2

EU competitiveness - Milk

3

Increasing demand:The main driver in the dairy outlook

4

5

7.7%

9.0%

9.5%

10.2% 10.1%10.3%

10.6% 10.7% 10.7% 10.7% 10.8% 10.8%11.0% 11.1%

6%

7%

8%

9%

10%

11%

12%

2 009 2 010 2 011 2012e 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f 2021f 2022f

EU exports of dairy products (in milk equivalent) in % of EU Milk production

Source : DG AGRI Medium Term Outlook, Eurostat (Comext)

60

25

50

75

100

125

150

175

200

225

250

275

300

325

350

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EU

R/t

on

ne

EU-25 EU-27

EU Wheat Rouen

EU cereal support price

US SRW Wheat

EU-25 EU-15

EU competitiveness - Wheat

7

EU competitiveness - Maize

0

25

50

75

100

125

150

175

200

225

250

275

300

325

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EU

R/t

on

ne

EU-25 EU-27

EU Maize Bourdeaux

EU cereal support price

US 3YC Maize

EU-25 EU-15

8

EU competitiveness - Sugar

The path of CAP expenditure 1980-2020 (in current prices)

9

Source: DG Agriculture and Rural Development

0

10

20

30

40

50

60

70

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

in b

illio

n EU

R -c

urre

nt p

rice

s

Export refunds Other market support Market-related expenditure Coupled direct aids

Decoupled direct aids Direct aids Rural development

EU-10 EU-12 EU-15 EU-25 EU-27 EU-28

2013 = Budget (in commitments); 2014-2020 = in commitments2014 = after transfers from P1 to P2 (before flexibility and capping)

10

ALTERNATIVE VIEWS ON EXPENDITURE

CAP expenditure in 2009(%)

CAP expenditure 2009(euro)

0.5% ofEU GNI

41% of EU budget

Source: European Commission - DG Agriculture and Rural Development

1. Enhanced competitiveness

2. Improved sustainability

11

Decreasing share of CAP expenditure in EU Budget (37,8% for the years 2014-2020);

Direct payments to farmers in exchange for public services & specific objectives, e.g.:

Payments for green services

Payments to young farmers

Payments to areas with natural constraints

12

New focus of direct payments

13

The new greening architecture of the CAP

Agricultural area(eligible for direct payments)

Cross compliance

Greening

Ruraldevelopment

Cu

mu

lati

ve

en

vir

on

men

tal

ben

efi

ts

Regulatory(Statutory

ManagementRequirements andGood Agricultural

EnvironmentalConditions)

Mandatorywith financial

support(decoupled “green”

payment per hectare)

Voluntarywith compensationfor cost incurred

and income forgone

Implementation mechanism

Agricultural

Research

European

Innovation

PartnershipFarm

Advisory

System

14

Standard of living of farmers compared to the standard of living of employees in the whole economy*

* Standard of living of farmers as a share of the standard of living of persons employed full-time in the whole economy (calculated on the basis of entrepreneurial income/salary in EUR/hour worked)

Development of agricultural income in the EU-28 (average 2003-07=100)

15

The new CAP contributes to EU food security by:

• Keeping EU agriculture competitive at world level

• Supporting public services: sustainability, greening

However, agricultural incomes are low as compared to the rest of the Economy.

Thank you for your attention !

Conclusions