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 regionalization (maximum support) scenario. In terms of policy options the paper shows that the structural change process in agriculture (measured in terms of agricultural share in GDP) is a long-term process that continues with or without policy changes. The EU is facing an increasing diversity of structure and structural adjustment. The livestock sector (especially cattle) faces important challenges and restructuring. Alternative policy settings may not produce very different effect on the overall production as factor markets adjust. However, the regional impact on the environment and on the number of farms may prove to be more significant.