The study, which examines the prospects of various markets up to 2013, could help commodity users identify growth opportunities and prepare for possible price increases.
"The medium-term income projections display a rather favourable outlook as the EU-27 agricultural income would grow by 23.2 per cent between 2005 and 2013 in real terms and per labour unit (9.3 per cent in the EU-15, 37.1 per cent in the EU-10 and 105.1 per cent in EU-2)," said the commission report.
"Even though the overall outlook for EU agricultural markets and income over the next seven years appears relatively favourable, it clearly remains subject to some important uncertainties."
For example, medium-term projections for the EU cereals market appear moderately positive thanks to the expansion of domestic consumption (growth in emerging bioethanol and biomass demand) and cereal exports.
But despite these favourable general conditions, the further delayed integration of land locked EU-12 Member States into the single market owing to marketing inefficiencies and low competitiveness of the livestock industry presents a "significant downward risk for regional cereal markets."
"Structural surpluses, particularly of maize, would weigh heavily on the Bulgarian, Hungarian, Romanian and Slovakian markets over the projection period," said the commission report.
The sugar markets of courser are characterised by a phase of transition until 2009 during which the reform of the sugar CMO will be implemented. The EC said that the main medium-term downward risks are the slow take-up of restructuring as well as the high level of stocks both of which could weigh heavily on the sugar industry post 2009.
The market balance for the major dairy products on the other hand is expected to improve over the medium term, with increasing cheese production and consumption, but lower availabilities of butter and SMP.
The latter relate in particular to the outcome of the Doha Development Round of trade negotiations and to the risks linked to animal disease such as Avian Influenza, which could have far reaching implications for the future pattern of EU agricultural markets.The commission report is designed to provide a picture of the likely medium-term developments of agricultural markets, based on a certain number of assumptions and on the statistical information available at the end of November 2006.
The report covers the market and income prospects for the period 2006-2013 within the EU for the following products: cereals, oilseeds, sugar, meat, eggs, milk and the main dairy products.
The changes in legislation proposed or adopted since November 2006, e.g. on maize intervention, have not been taken into account.
"Moreover the projections do not take account of the potential outcome of the multilateral trade negotiations within the framework of the Doha Development Round," said the EC in a statement.
"Therefore, the Uruguay Round Agreement on Agriculture and other existing trade commitments are assumed to remain unchanged and to be met over the period 2006-2013."