The European Commission’s short-term outlook – Autumn 2022 edition – shows that production of meat and dairy products in the European Union is expected to decline this year, and the following one.
Persistently high feed costs and African swine fever (ASF) continue to limit the growth of EU pigmeat production.
Beef production is expected to decline by -0.6% in 2022, mainly due to structural adjustment in the beef and dairy sector, despite high prices.
New records in Europe of Highly Pathogenic Avian Influenza (HPAI), and a persistent virus in wild birds continue to impact the poultry sector.
Signs of declining livestock production warn of limited supplies which could exacerbate the high food inflation in Europe. The historic drought has reduced the availability of grass and feed (especially maize), thereby increasing costs for farms, which are also faced with soaring energy and fertiliser prices.
In view of a review of animal welfare legislation the Commission has published a “Fitness Check” which gives an overview of the achievements and challenges of current animal welfare legislation.
The European Scientific Committee of the Nutri-score has published an update of the algorithm which is supposed to be more “consistent” and “aligned” with nutritional and public health recommendations. These changes propose a more severe rating for certain foods, including meat.
The European Parliament voted in mid-September to extend the list of agricultural products covered by the future new anti-deforestation law to include maize, poultry and pork.
According to the World Climate Report, methane emissions are overestimated, with cattle producing 3 to 4 times less carbon dioxide than assumed.
The Swiss initiative “No to intensive livestock farming in Switzerland” was rejected by 63%.
The outbreak of the Russian war in Ukraine not only has sent shockwaves through the energy sector, but also through the agricultural sector in particular via an explosion in energy costs, as well as an increase in input costs, primarily in nitrogen fertilizers.
To address this situation, the European Commission announced in March the activation of the crisis reserve, provided in the Common Agricultural Policy, of around 500 million euros — a historic first as this tool, created in 2013, had never been used until now.
At the same time, the European Commission has announced the possibility for Member States to largely top up this support for the agricultural sector through national aid:
by authorizing the Member States to finance the aid from the crisis reserve on a 2:1 basis from national funds, i.e. 1 billion euros;
by validating national aid programs under the temporary crisis framework on state aid in the context of the Russian invasion of Ukraine, with a ceiling that should now be raised to 250.000 euros per farm.
At the same time, the ceiling for de minimis aid, national aid that can be implemented without prior authorization from the Commission, has been raised to EUR 25,000 over 3 years.
Member States have made an extensive use of these flexibilities.
The European Commission has been notified of nearly 20 programs dedicated to agriculture for 2022, for a total amount of nearly EUR 4 billion. This represents a 10% of direct aid amounts. Part of this aid — about a third – has been mobilized to deal with the surge in fertilizer prices, through a very uneven geographical and sectoral distribution.
From Italy to Sweden, Poland, Austria and Bulgaria, considerable financial volumes have been released, going far beyond the inflation recorded within these countries, and thus providing more than a simple compensation for the economic loss linked to inflation and the related loss of value of direct payments for their farmers. This clear support to agriculture is not found in other Member States, thus creating severe distortions.
A second group of countries including the Netherlands, France, Germany, Spain, Estonia, Slovenia and Hungary have compensated partially the chock, without making agriculture one of the key sectors assisted as a priority in the face of the crisis linked to the war in Ukraine.
Finally, a third group of Member States, which sometimes have also been hit hard by the crisis, have not been able to provide significant support to their agricultural sector for political or budgetary reasons. This is notably the case of the Czech Republic, Greece, Belgium and Denmark.
These figures — although already considerable — only give a very partial view of the real aid granted by the various Member States, which goes well beyond the strictly agricultural programs notified within the framework of the TCF.
On the one hand, it should be noted that more than €450 billion of state aid have been granted through framework programs intended for the economy as a whole to deal with the war in Ukraine and which also concern the agricultural sector. This does not include the €200 billion program already announced by Germany.
In total, in one year, this is almost the total amount of the European emergency aid to deal with COVID, which has already been released by EU countries in a scattered manner, instead of a well coordinated programme European level.
In addition to the almost €4 billion of aid targeted at the agricultural sector in the context of the war in Ukraine, there is also state aid that paid to agriculture under the residual programs related to the Covid-19 pandemic. €850 million was released in the year 2022, an intensity of state aid of 12% the amount of the first pillar. For a fair analysis, the 25 billion euros released by the Netherlands as part of its national agricultural transition plan, i.e. 2 billion euros per year, should also be mentioned.
In order to avoid severe economic distorsions — in parallel to the much need and legitimate support to the agricultural sector confronted with a serious crisis — there is an urgent need to reflect on the multiplication of aid at national level, rather than at Community level, for a sector covered by a strong common policy. The crisis reserve has shown both its usefulness and its inadequate budgetary allocation on the scale of the European Union in case of a shock affecting all agricultural sectors.
The lack of budgetary margin within the CAP requires an in-depth reflection on the modalities of action to face crises, even more at a time where the new CAP provides further flexibilities. As shown by the scale of financial volumes currently released at national level, a very clear upward revaluation of the crisis reserve is necessary so that it can be the main lever of solidarity for the European agricultural sector, combining reactivity and equity, both between Member States and between agricultural sectors.
As the expectations around the Commission’s proposal about a EU-wide nutritional labelling systems are getting higher, many events are being organized around this topic. However, the Commission seems that it will postpone this legislative initiative at a later stage of 2023 considering the ‘complexity’ of the issue and the fact that more time is needed for the EU executive to take a final position on the matter. At the same time, Italian researchers have proposed another label to be displayed on food products, the ‘Med Index’, that would promote those products that are in line with the Mediterranean diet and with its principles of sustainability (i.e., nutritional, environmental, and social).
In the meantime, traditional and nature-sourced food products are being challenged by the development of lab-grown protein industry, with start-up in the field raising capitals to open new production facilities to scale up, expand their offer, and the geographical location. In this context, a study analyzed consumers’ openness to lab-grown dairy (through precision fermentation) and found that the overall safety concerns as well as questions about the technical process of production were frequently underlined. However, only few individuals within the early adoption group expressed opposition to the products while the majority of the people interviewed were ‘on the fence’ as to whether they would consider trying the product.
In October, France had a higher estimate for its annual wine production, while wine remained one of the main catalyzers behind the agri-food export in Italy. On a European level, the Commission has estimated EU wine production to be 2.5% above 5-year average (+1.5% year-on-year) in 2022/23. At the same time, exports dropped in Australia, and wine prices are on the rise in the United Kingdom.
Outside the EU, states like Kenya and Ukraine open up to the possibility to have a more flexible legislation around genetic engineering techniques. Within the EU, the French organization for biotechnology pushes for a stronger use of new genomic techniques to assure food security and face the climate challenges. At the same time, EFSA developed some criteria on risk assessment for plants produced by targeted mutagenesis, cisgenesis and intregenesis.
In July last year, the European Commission presented a revision proposal for Regulation (EU) 2019/631, setting new CO2 emission performance standards for light-duty vehicles. The proposal aims to reduce CO2 emissions from cars and vans and raise European citizens’ well-being by improving air quality, increasing energy savings, and lowering the cost of vehicle ownership.
While the general climate ambition is indeed the right way forward, the proposal fails to recognise the potential of biomasses. In the context of the current energy and climate crises, if the objective is genuinely one of reducing our energy dependency rather than merely shifting it, it would be even more imperative to use all the renewable resources at our disposal without an ideological bias.
To contribute to European energy independence and climate goals the future CO2 emissions legislation must be technology-neutral, encompassing all engine technologies. Electrical, hybrid, e-fuels and internal combustion engines (ICE) should all be considered in the new regulatory framework, provided they will reach carbon neutrality by 2035. The legislation must account for the entire carbon cycle of our mobility rather than focusing on a narrow-minded full-electric mobility approach.
Having a diversified energy mix becomes even more urgent now that electricity consumption for all usages is booming. While electric vehicles will of course play an important role, some types of mobility will require alternatives in the long run. In this context, biomass is a complementary lever for mobility decarbonisation like we already see today via conventional and advanced biofuels with tangible achievements at an affordable cost.
Looking at the bioenergy sector’s performance in terms of emission savings it is easy to figure out why. In 2020, bioethanol reduced GHG emissions by more than 75% compared to fossil fuels, with the most advanced producers reaching the 90% range. Similar examples in the biogas and biodiesel industry could be mentioned as well. These are not static percentages: they have been increasing each year for the last nine years, making it thus realistic to assume that by 2035 biofuels could reach at least the carbon-neutral — if not carbon-negative — status, as the progress to make is lesser than the progress achieved in the last decade, that took place without significant recourse to new technologies.
New technologies, like precision farming and New Genomic Techniques (NGTs), will help optimise production cycles at the agricultural level by reducing emissions and increasing carbon stock in soils. The adoption of these new technologies will be a cornerstone of the strategy to reach European’s ambition to make the agricultural sector carbon-neutral by 2035 and open the way to attain a carbon-negative status in the following decades. In this pathway, the investment will be crucial, as well as developing new outlets for biomass capitalising on biomass’ unique capacity to transform solar energy and capture carbon via photosynthesis.
The benefits of biofuels in terms of GHG emissions reduction in the transport sector become especially evident when we consider a “well-to-wheel” assessment. This method of emissions assessment includes all emissions related to fuel production, processing, distribution, and use.
Today only “tank-to-wheel” emissions are accounted for, which considers merely the emissions generated by a vehicle’s tailpipe. According to this emissions calculation method, electricity and hydrogen used as fuel in electric and hydrogen cars are today considered carbon-free, even when generated through heavily GHG emissions sources like coal, oil or fossil gas. This aspect is even more worrying considering that fossil fuels accounted for 37% of EU electricity production in 2021, with much higher figures in those Member States reluctant to mobilise nuclear energy. The current legislation lacks a real correlation between electric vehicles and their impact on the climate and environment in terms of emissions. If today in most Member States, those vehicles can give car drivers a clear conscience is largely because they displace emissions rather than eliminate them.
Therefore, the car emissions regulatory framework must be faithful to the technological neutrality principle, not only in the general principles of the CO2 emission standards for cars but also in the core regulatory framework.
Still, it should be clear that using carbon-neutral biofuels to decarbonise conventional cars would not mean a push-back against electrification. Quite the contrary: ICE cars exclusively fuelled by carbon-neutral biofuels are a necessary complement to the electrification strategy. Indeed, their large-scale adoption would increase the resilience of the EU economy in the face of unforeseeable shocks. Biofuels would help less affluent households, who cannot afford to change their car, access affordable green mobility. They would offer a choice to those drivers whose specific circumstances make electric vehicles non-suitable. All these aspects combined would allow the EU auto industry to remain a world leader in the automotive sector and support the growth of the EU alternative fuels, meaning that jobs will be retained and new jobs will be created – also in the respective value chains (i.e. automotive parts, agriculture, carbon capture).
While investment in other renewable sources remains paramount for attaining Europe’s climate targets, a greener and more independent Europe cannot materialise by betting on a single solution. Shaping a sustainable and diversified energy mix shall be the way forward, with a significant biofuel (liquid and gas) component for all sectors, including the most complex to decarbonise, such as transports.
Agricultural common sense reminds us: let’s not put all our eggs in one basket.
Following the Commission proposals on a Green Deal and Farm to Fork strategies, we’ve been hearing too often, including from Vice-President Timmermans, that any negative impacts on farmer’s incomes can be compensated by the Common Agricultural Policy.
The latest concrete example of this argument is in the Commission proposal for a Regulation on the Sustainable Use of Pesticides (SUR). The Commission explicitly says that the additional regulatory costs could be compensated by the CAP budget. The financing of the new RePowerEU’s ambition on biomethane could also be mentioned.
There are however two problems with this approach “CAP pays it all”.
The first is that as the CAP budget is already allocated, transferring funds to new forms of support necessarily entails withdrawing funds from existing forms of support.
A less obvious, but even more significant problem, is that the CAP budget is quickly shrinking. The culprit is high inflation, which reduces the real value of support.
When the new CAP budget was agreed the scenario was still one of low inflation, the maximum rate expected being the ECB yearly 2% target. Or today we witness an average EU inflation close to 10%, and the ECB was obliged to significantly up its forward inflation forecasts.
To make matters even worse, inflation in a number of countries is running well above the average. Those countries where inflation is below the EU average are still facing high inflation, well above the old 2% target.
Taking the ECB data and inflation forecasts, which could well be too rosy having regard their recent overly optimistic inflation forecasts, the real value of the CAP budget will shrink by an aggregate 84.57 billion euros in real terms in the period 2021-27. To put it in perspective, the aggregate 2021-27 real value of the CAP budget will shrink 21.95% with regard to 2020, and in the last year (2027) 34.12% vis-à-vis 2020. Over one third less real support in 2027.
Direct support received by farmers is directly and heavily impacted. Even investment aids are impacted as the total amounts available shrink with inflation. Pillar I will lose a staggering 68.60 billion euros, and Pillar II 15.97 billion euros.
Under those circumstances, finding a new political path to deliver the green deal, based on a green growth strategy for the agricultural sector is urgent, switching from a regulatory based strategy aiming at cutting productivity tools to a proper investment strategy fostering agronomic systemic approaches and innovation, embarking farmers on a positive path for both the economy and climate.
The remedy to a CAP funding melting away like snow in the sun is to reprice the CAP budget in real terms, i.e. to adjust it yearly by the level of inflation, in addition to building a proper EU investment fund targeted on strategic sectors in need of transition like agriculture and energy, instead of leaving a haphazard approach based on state aid.
Will co-legislators adjust the budget for inflation? Taxes perceived by Member States go up with inflation, shouldn’t support do likewise?
Over the summer, the scientific committee in charge of NutriScore, the front-of-pack nutritional labelling systems in used in 6 EU countries agreed on changing the algorithm behind the scoring system. The changes concern the calculation of fats and oilseeds, and a specific rule for red meat. On the same front, Italy upgraded the national nutritional labelling, Nutinform, with the digital version of it: an app.
In preparation for the awaited renovation package concerning Food information to consumers (expected to be advanced in the early months of 2023), the Joint Research center published some research on nutritional labelling, origin labelling, alcoholic labelling. These studies will be most likely used as a base for the Commission to draft its legislative proposals.
During the informal meeting of agriculture ministers held in Prague, Commissioner Wojciechowski hinted to the need for the EU to have a fertilizer strategy, notably in this time of agricultural price crisis.
On the revision of the use of plant protection products, some delegations led by the Polish one strongly asked for an effective revision of the Commission’s proposal, considered ‘outdated’ and out of context, in light of the events in Ukraine and the fact that the impact assessment did not consider any consequences on food security. At the same time, the Commission adopted new rules to fast-track the adoption procedure of new biological pesticides.
On animal transport, the European Agency for Food Safety published some reports on the matter. These ones will be used by the Commission as a base for its legislative proposals (expected for the fourth quarter of next year). The reports find that providing more space, lowering maximum temperatures, and keeping journey times to a minimum are all needed to improve the welfare of farmed animals during transport.
After the informal AgriCouncil in Prague middle of September, EU ministers seemed to be particularly open to the new modifications of the EU legislations on GMO, assuring solid impact assessment and safety as the top priority.
In Austria, an NGO guides a pan-European on-line petition to keep the status quo on GMO regulations, fearing that a possible modification would allow what they call ‘new-GMOs’ to be sold in the market without following the security measures needed.
On the other side of the Atlantic, while the USDA approved a gene-edited tomato rich in nutrients, the US government approved an executive order that set the guidelines for future cooperation amongst governmental bodies to boost the US biotechnology and bio manufacture industry. At the same time, a federal judge claimed that current GMO labelling rules do not assure the safety of consumers because they prevent some from accessing the information.
