INTERNATIONAL AGRICULTURE AND TRADE--EUROPE UPDATE SUMMARY    April 23, 1997
            Approved by the World Agricultural Outlook Board
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This SUMMARY is published by the Economic Research Service, U.S. Department 
of Agriculture, Washington, DC 20005-4788.  The complete text of INTERNATIONAL
AGRICULTURE & TRADE (Europe Update Summary), WRS-97-S2, will be available
within 1-2 weeks following release of this summary.
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BSE Crisis Unsettles EU Markets While Economic Recovery Fuels CEE Export Growth

The European Union's (EU) agricultural sector experienced a number of shocks in
1996.  Revelations of a possible link between bovine spongiform encephalopathy
(BSE) and a related human brain ailment, Creutzfeldt-Jakob Disease (CJD)
precipitated a widespread health scare that led to a significant drop in beef
consumption, falling producer prices, and uncertainty in beef markets. 
Additionally, high world grain prices prompted the EU Commission to tax grain
exports.  Tight supplies on the EU market brought about a reduction in the
mandatory set-aside rate for 1997/98 to 5 percent, although a large harvest was
expected in 1996/97. These events have significantly affected the European
agricultural sector and its outlook from 1997-2006.

The BSE crisis has affected EU agriculture well beyond the beef sector.  EU
beef consumption has been gradually declining since the late 1980s, and BSE
will accelerate the trend.  Consumers have replaced beef with pork, poultry,
and other products.  Pork and poultry consumption is projected to continue to
increase at the expense of beef.  Due to lower feed costs, pork and poultry
production are expected to increase over the projection period.

The BSE crisis has also affected the EU grain markets. Because pork and poultry
are "grain-based" meats--that is, they eat far more grain than cows--feed use
of grain is projected to increase. By contrast, feed use of non-grain feeds,
particularly corn gluten feed and other high energy non-grain feeds, will
decline due to lower beef production.  

EU grain production is expected to increase over the projection period. 
However, much of that increase in production will be consumed by the EU's
livestock sector as animal feed.  The GATT limit on subsidized exports will
constrain the volume of EU wheat exports until 2001/02 when the EU wheat price
is projected to fall to world price levels.

Seven years after beginning the transition to a market-oriented economy, much
of Central and Eastern Europe (CEE) has entered a period of sustained GDP
growth.  Most countries have adhered to prudent monetary and fiscal policies,
and undertaken the privatization of state-owned enterprises.  Agricultural
production has begun to recover under stable market conditions in Poland, the
Czech Republic, and Hungary, while it continues to lag in countries such as
Bulgaria and Romania, that are experiencing high inflation and banking crises. 
Provided that inflation is brought under control, the outlook remains promising
for a significant recovery throughout the region over the next 10 years.

The 1997 ERS baseline for Central and Eastern Europe projects the region to
become a growing net exporter of wheat, corn, and beef, a declining net
exporter of pork and poultry, and a growing importer of soymeal and soybeans. 
Grain and beef exports should increase over the 1997-2006 projection period
despite rising incomes and falling prices, because productivity gains out pace
consumption growth.  Net exports of pork and poultry should decline due to
strong growth in consumer demand.  Finally, healthy demand growth for oil
meals--at 2.6 percent per year--is projected to make the region an increasingly
significant importer of soymeal and soybeans, as well as a declining net
exporter of domestically produced oilseeds and oil meals.

For more information, contact Susan Leetmaa (202) 219-0647.

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