This paper identifies major future trends and driving factors and perspectives and challenges resulting from them for European agriculture and food sectors until the year 2020. The focus of the paper is an analysis of key driving forces and the provision of a well developed reference scenario under the assumption of continued CAP reform and taking into account the framework discussions in the Doha Development Round. To assess the impact of policies the paper also examines a liberalisation (no support) and regionalisation (max support) scenario. In terms of policy options the paper shows that structural change process in agriculture is a long-term process that continues with or without policy changes. EU is facing an increasing diversity of structure and structural adjustment. The livestock sector faces important challenges and restructuring. Alternative policy settings may not produce very different effect on the overall production. However, the regional impact may prove to be more significant.