Whatever dreams environmentalists may have of a world fed by a chemical-free organic agriculture, the hard reality is likely to be something very different. Laudable though the green farming paradigm may be, it is certain that a largely increased and more prosperous world population will only be fed by increased agricultural output. Such increase can only be achieved by the increased inputs of fertiliser, crop protection measures and better technique. Whether or not this increase can be achieved sustainably depends heavily on the ingenuity of scientists and farmers.
These thoughts are stimulated by the recent Economist Conference  ‘Feeding the World 2013’, in Amsterdam, which was devoted to the challenge of feeding a future 9 billion plus global population. The proceedings were understandably dominated by speakers involved in the business of food production or supplying the food producers with their vital inputs. This fact unsurprisingly stirred the usual brickbats from the green lobby. They of course not only question the basis of what they regard as the ‘commercial agriculture paradigm’, but also increasingly question the well supported estimates by FAO and other agencies that the world’s food production has to increase by 70 per cent to feed an expected 9+ billion world population.
They argue that the world is physically incapable of continuing with what they tend to call the ‘Western consumption model’. This is in any case a highly contentious thesis. But what is important is to question the underlying figures which support what has become the conventional wisdom on the world ‘food crisis’ issue. What is not generally known or accepted is that the FAO’s 70 per cent figure is well on the conservative side. If the world population does increase to 9+ billion by 2050 – that is, almost a third more than the current population – and the prosperity of Asian and African countries improves to the  levels  predicted by the World Bank and the IMF, then the actual increased demand for basic food commodities will not be 70 per cent but something between 85 and 100 per cent.
The FAO’s calculations are based on the assumption of a continuation of the present trend of increase in global average daily consumption. They do not allow for either the possibility that several important  currently less developed regions will not only aim to raise their daily food consumption to equal the so-called ‘Western diet’, but also want to eat more high quality proteins in the form of meat and dairy products. This will raise the demand for both food and feed grains to somewhere close to twice the current annual global output.
This will demand, most importantly, new crop varieties and new agricultural techniques to counteract current declining yield growth rates.  What the comfortably housed, well fed and well educated western eco-warriors argue of course is that the world has to be re-educated to be satisfied with a much simpler, low protein diet so as to relieve the pressure of world agriculture on the environment. Try telling that  to a starving Mumbai slum dweller or an African family struggling to survive on a drought-ridden and under-funded smallholding  on the edge of the Sahel desert. Or even, a Chinese family struggling to keep up with the rising living standards of the rest of their compatriots.
Given the right attitudes by governments and provision of cash for agricultural research, infrastructure improvement  and agricultural development , the world’s agricultural system is quite capable of adequately feeding a 9 billion population, without destructive pressure on the environment. The priority is adequate funding of agricultural research. Achievement of such an objective demands the right initiatives to be taken by politicians. But the adoption of such attitudes is not aided by the vociferous, basically anti-science, whingeing of too many of the green NGOs.<02/05/2013>

Whatever governments may or may not agree on GHG emissions, the one thing that is likely is that average global temperatures will continue to rise. What is also likely is that the world’s food production capacity will be affected by the change that temperature rises will create.  There is however no consensus on what the overall effect is likely to be by the mid 21st centre or later.  What is certain is that climate change which not only creates more floods, heat waves, droughts and freeze-ups will create fluctuations in agricultural production. Whatever happens, climate change is a threat to global food security – unless steps are taken to mitigate likely impacts.
As a recent report from the US Department of Agriculture puts it: “New research and development in new crop varieties that are more resistant to drought, disease, and heat stress will increase the resilience of agronomic systems to climate change and will enable exploitation of opportunities that may arise.” On this point there is scientific consensus.
Where there is wider disagreement however is how far climate change will affect crop and livestock production and which regions of the world will be the most seriously affected . There is also disagreement on how far the generally damaging effect of temperature rises will be compensated by the fertilising effect of increased atmospheric carbon dioxide. The main expected – even already apparent – effects resulting from increased CO2 and ozone levels are seasonal changes in rainfall and temperature, as well as modified pest, weed, and disease populations. The main longer term manifestations of this change in agro-climatic conditions are likely to be alteration of  the length of growing seasons, and the necessary change in timing of planting and harvesting. Climate change is also likely to affect water availability and water usage rates.
Assessments of climate change effects would suggest that the implications for the most vulnerable areas of the world are both more immediate as well as the most serious. Without crop growing adjustments and mitigation action, indigenous supplies of the most important food staples will be seriously affected by the late 2030s and will have reached  crisis levels by the mid-century. Without radical improvements in crop varieties, in husbandry techniques, water conservation and infrastructure improvement, the food import dependence of these regions is going substantially to increase. Even without global warming impacts, the pressure of population rise will place food supplies under greater strain than already exists. Without increased inputs into agricultural; research, education and infrastructure, this situation cannot do anything but worsen.<12/04/2013>

It is no surprise that a majority of EU government appear  to be opposed to the European Commission’s proposal to limit the amount of food grains that may be used in biofuel production. Significantly, it was the central European member states that the recent Environment Ministers meeting demonstrated are most opposed to the Commission’s new policy line. These countries have the greatest scope for expansion of cereal production.
In what is becoming an EU grain market strongly linked to the world market, any additional source of internal market demand provides longer term guarantee of firm prices for growers. Seen from Brussels however, the EU does not want to be seen to be boosting food prices in global lean years by fostering  the conversion of bread grain into petrol. There is however a further policy modification that would  increase the internal market demand for grain while at the same time damping the effect of biofuel use on food prices. This could be done by using biofuel production as a flexible market buffer linked to world grain market prices.
Despite arguments to the contrary, there is little danger that pursuit of the current mandated levels of grain use in biofuels would result in indirect land use change (ILUC,) either inside the EU or in third countries. There is sufficient underutilised production capacity in existing arable land in central and eastern Europe to deal with any increased demand. If the current average yield gap between east and west were to be only half closed, EU grain production could be increased by around 10 per cent of current output. There is no technical barrier to this achievement.
Now however, some agricultural market experts are suggesting that the operation of flexible biofuels policies could operate like a buffer stock – but without the political and managerial problems which a pure buffer stock policy based on state financed storage would inevitably involve. ‘Surpluses’ would be taken out of the market by a quasi-commercial use and returned by suspension of that use. Economists at the UK agriculture ministry Defra have suggested that establishing what they call flexible biofuel mandates could provide a buffer against harvest shortfalls. In years when harvests are below ‘safe’ levels mandates would be reduced; in good years they would be increased.
Reduction in biofuel requirement could be triggered when grain price increases exceed  a certain threshold .  The proportion of crops that would in ‘normal’ years go into biofuel production would perform the function of a reserve stock, or ‘virtual grain stock’ as the  Defra economists  put it.  Computer modelling suggests that abolishing EU blending requirements in the presence of a  harvest shortfall of  25%  could reduce a coarse grain price spike by up to 15% and a wheat price spike by between 10 and 35 %. <29/03/2013>

The enthusiasm of the European Union and the United States for the forging of a bilateral trade agreement, while it may be good news – largely for multinationals involved in transatlantic trade – bodes ill for the future of multilateral trade liberalisation. Such agreements are as important for what is excluded as what they may include. In no sector is this more important than in trade in agricultural products. Both Europe and north America have massively expensive agricultural protection policies much of which they will no doubt strive to preserve in any eventual agreement.
The labels give the game away: ‘bilateral trade agreement (BTA)’, ‘preferential trade agreement (PTA)’  and ‘regional trade agreement (RTA)’; the new EU-US arrangement is to be called the ‘Transatlantic Trade and Investment Partnership(TTIP)’. The PTA  is probably the most revealing; trade between the two partners is preferential and by implication excludes anyone else except on special , carefully controlled terms.
The TTIP probably marks the  pinnacle of a marked retreat from the multilateral trade liberalisation achieved in the numerous GATT rounds which have taken place since WWII. For agriculture, the most important of these was the 1994 Uruguay Round, which concluded in the 1994 Marrakech agreement. This forced both Brussels and Washington to scale back excessive agricultural protectionism and begin the process of (slowly) winding down their gross agricultural support policies. Prior to the UR, while steadily scaling down industrial tariffs, neither the EU nor the US had been prepared to make any concessions on agricultural trade. Despite the post Marrakech progress, import charges on agricultural products worldwide still average out at over 60 per cent, while average industrial tariffs are little more than 3 per cent.
The lack of progress in multilateral trade negotiations, most notably in the now barely breathing Doha Development Round, has undoubtedly been an important factor in the growth of bilateral and regional free-trade agreements. These have proliferated  since 1995.  More than 60% of the trade in Asia is now likely to be taking place within the framework of such   arrangements. The World Trade Organisation records that there were 186 such agreements in force in 2005, compared with 50 just prior to the completion of the Uruguay Round in 1994, less than 25 in 1985, and only thirteen such agreements in 1975. The share of world trade now taking place within BTAs is estimated by the WTO to have risen from 22 per cent  in 1975 to over 50per cent in 2005. The effect on the agricultural export trade of the EU and the US  would suggest  an element of retaliation in the latest EU-US moves. As such, they bode ill for the future of global trade liberalisation.
It is not without significance that the refusal of Brussels and Washington to give significant concessions on market access for agricultural products has been one of the major obstacles to achievement of any progress in the Doha trade round.  The losers from the growth of bilateralism will be competitive, but unsubsidised, agricultural exporters in both developing and developed countries. <21/03/2013>

While most of the major items in the European Commission’s CAP reform package which the European Parliament has amended and now agreed will do nothing to improve the focus of Europe’s farm policy, there is one item which it approved which contains the germ of eventual radical reform. It is the proposal to begin capping payments to individual farm business at €150,000 a year. Were it to be approved by Council it would achieve two things: it would mark the beginning of the end for the policy of subsidising farm businesses which, on a rising world market, do not need subsidising and it would provide substantial savings which could be re-directed into specific rural environmental measures.
The rest of the Parliament’s CAP reform agreement is irrelevant twiddling. It is in fact no reform at all, but merely a recipe for perpetuation of the current policy under some vague green camouflage – with added bureaucracy. There are some outstanding examples of irrelevancy. Take for example the proposal  that member states should spend 25 per cent of their 2014-2020 CAP rural development funds on environment and climate measures. Unlike the €45 billion a year that will still be spent on irrelevant farm income payments, this works out to peanuts. Twenty five per cent of €12 billion divided by 27 (member states) would just about pay for a few extra coppices or bumble bee havens.
It would not be so bad if the parliamentarians were not so pleased with their paltry efforts -epitomised by ComAgi’s  Mairead McGuinness :“We are deepening the environmental delivery and linking 30 per cent of payments to environmental measures is a major re-orientation … ,“She claimed. “On direct payments we have attempted to target greening measures on where they will have a real effect. We decided on a more realistic introduction of ecological focus areas to reflect farming realities.” Hardly.  There are so many get-out clauses and leeways for national interpretation that there is little more pressure on landholders for environmental compliance than in the present policy.
A real reform would convert the direct income scheme into a proper social income and structural policy to maintain rural communities, while paying all landholders to provide specific environmental services. An important first step would be capping the direct income payment excess to provide the money for this more radical policy. <14/03/2013>

It seems inevitable that the current drive to reform European agriculture policy as part of the 2014-20 budget re-vamp is likely to be a great opportunity missed. The deliberations of the Commission, Parliament and Council are leading on to a massive over-complication of the policy. The potpourri  of social, environmental  and production supporting measures is going to lead to a new pattern of conflict between agriculture policy and environmental and development policies. The opportunities for fraud and misapplication are going to proliferate on a scale yet to be seen. And yet the policy could be more efficiently focussed on the challenges of rural decline, environmental stress and international trade conflicts merely by simplification.
The CAP as it is currently evolving has two main objectives: supporting farm incomes and protecting the environment from harm – with the emphasis still very much on the first of these objectives. But instead of erecting the current jungle of subsidies in order  to cover the many aspects of protecting incomes, shielding the environment and stimulating rural economic development, the EU merely  needs to divide the policy into two clear parts. The first part should be aimed at protecting rural incomes, where necessary, and the second to paying land holders to provide ‘public goods’. These are activities which, while giving the farmer little profit, benefit society as a whole.
Instead, we have a policy which aims to provide public goods through a massive direct subsidy system which only provides environmental services as a bolt-on to what is still basically an agricultural producer support system.
This highly inefficient and increasingly inappropriate structure is being politically reinforced on an almost daily basis. The recent heads of government European Council agreement on the multi-annual budget, while making a mere token reduction in the farm budget blandly agreed  to make 30 per cent of the massive €40 billion a year direct subsidy budget (Pillar One (P1) conditional upon performance of new   ‘greening‘ measures. Defining how far or how satisfactorily this condition will be met will of course be left to the Council of Agriculture Ministers.
The European Parliament’s agriculture committee – well stacked with representatives of the agriculture industry – were meanwhile voting to water down the linked environmental conditions and to extend the list of exemptions.  The basic flaw in the CAP is of course the so-called ‘single farm payment’ which pays every farmer in the EU27 €300 plus from the public purse for every hectare he holds before he even gets out of bed in the morning. Ever since the introduction of direct subsidies in the early 1990s, the Commission has sought to cap this largesse by ensuring that it would be paid only to the most needy rather than the fattest cats in the industry – but with a singular lack of success. Eighty per cent of the annual €40 billion direct subsidy hand-out still goes to the 18 per cent of farms holding over 100 hectares.
The latest attempt by the Commission to moderate this inequity is to cap the maximum subsidy payment to any one farmer to €300,000. The Parliament’s agriculture committee (ComAgri) has at least added one enlightened amendment which might move the policy in the right direction: to allow member state governments to allocate an additional annual payment to farmers holding up to 50 hectares.
But what is still seriously wrong with the reform package is that the green subsidies for compliance with environmental protection criteria remains a bolt-on to the basic totally protected income payment. Non-compliance would mean farmers only forfeiting the additional green payment itself rather any part of the basic payment. Greening measures thus become optional rather than obligatory.  In addition there exist, and there will be even more so under the new ‘greener’ CAP, a whole panoply of get-outs for national administrations to operate their own environmental schemes (with benefit of European taxpayers’ money, of course).
There is however a simple solution to the whole muddle. As I detail in a recent book: remove all income subsidies to farms larger than 50 hectares and  double the income payments to farmers  in this smallholder class. On a trend of rising farm and food prices larger farms are quite capable of thriving on the market without subsidies. This would cut the direct subsidy bill by some 80 per cent. Part of this saving could then be used to finance better focused, specific environmental schemes (such as Natura 2000). This is probably the only way to transform what is still a common agricultural policy into a common rural policy. <05/03/2013>

The European Union’s biofuels policy is an outstanding example of the working out of the so-called ‘law’ of unintended consequences. At the time of the biofuels policy’s  birth, the advantages of encouraging the conversion of food crops to ‘green’ fuel seemed obvious. In the mid-1990s Europe and the developed world generally were awash with surplus grain. In addition, beet sugar processing plants were expected to become increasingly redundant in the wake of the EU’s desire to cut back sugar production. What would be more logical than to reduce dependency on fossil source oil by replacing it with ‘green’ diesel and petrol (ethanol) manufactured from renewable crop materials?
Less obvious, unfortunately, were two main contrary factors:  governmental determination on both sides of the Atlantic to cut back agricultural production and rising demand for food imports by increasingly economically rich but land-poor countries in Asia, the Middle East and Africa. As demand for and the price of food rose through the early years the 21st century, the green fuel drive seemed less and less credible. There were also hidden environmental costs to which little attention was given fifteen or so years ago. Most obvious was that much of the feedstock for biodiesel,  in particular, would have to come from outside Europe. In addition , land diverted from food to fuel  production in Europe would mean increased food production elsewhere.
Probably most important is the additional non EU production needed to supply vegetable oils to produce biodiesel. Such indirect land use change(ILUC) has to be in regions where the extra production could lead to a reduction in vegetation more useful in environmental  terms as  a ‘carbon  sink’ capable of absorbing GHGs . A recent report by the  International Food Policy Research Institute (IFPRI) indicates that nearly half of  expected carbon absorption gains from switching to biofuels disappears when land use change effects are taken into account. Probably more important, it could also reduce the food production capacity urgently needed to feed local populations.
This view is strongly argued by leading development and aid NGOs. A recent report from Oxfam maintains that if the land used to produce biofuels for the EU in 2008 had been used to produce wheat and maize instead, it could have fed 127 million people for the entire year. While such a claim is extremely difficult to support, there is little doubt that diversion of land and crops to biofuel feedstock will affect food supply and the price of food. And all to very little point.
Greenhouse gas emission reduction resulting from replacement of fossil fuels with biofuels is, in any case, pretty marginal. In truth, policies like the EU and US  renewables mandates  were principally a political response to high oil prices, more than any genuine attempt to tackle the emission challenge. Computer modelling for the Oxfam report suggests that ploughing up land which currently act as very effective carbon sinks, to meet EU biofuel mandates could be as bad for the environment as putting an extra 26 million cars on Europe’s roads. This does assume that the whole of the EU biofuel feedstock would be met from such areas; this is clearly not the case. Nonetheless, the reduction in carbon sequestering capacity could be substantial.
While the environmental justification for biofuels was always pretty thin, the energy security argument was even thinner. Now that the concept of ‘peak oil’ has been replaced by the view that  oil production is more likely to reach a ‘plateau’ over the second half of the 21st century and natural gas is being pumped up on an increasing scale, biodiesel and bioethanol are unlikely to become any more competitive than they are now. Given the latest information on ILUC, continuation of the EU biofuels policy on environmental grounds now looks even more difficult to justify.<25/02/2013>

One of the last and worst bastions of the bad old common agricultural policy, the internationally infamous sugar policy, is it seems to be defended to the last euro of taxpayers’ budget contributions. While the building of European butterbergs, wheat mountains and wine lakes have been consigned to the history books, we still have sugar production quotas and insurmountable obstacles to sugar imports.

And defenders of the traditional CAP faith want them to go on for another seven years  – at least.While the European Commission is planning to phase out the sugar quota system by 2015, a majority in the European Parliament’s agriculture committee wants quota to remain  in place until the 2019/2020 marketing year. Voting in favour of this move the committee is thus supporting the position of the ten beet sugar producing countries in the Council of Ministers, who also want the quotas extended. This can only harm sugar users and consumers and do little for the earnings of sugar beet growers. It will mainly preserve the monopoly profits of sugar beet processors who have already been fed millions of euros from the EU budget to allow them to restructure and meet the realities of an eventual liberalised EU sugar market.

Currently, the EU sugar price stands at 102 per cent above the world price and has been rising steadily as the world price has fallen away from its most recent peak in late 2011. While no one would suggest that the current rock bottom world price is realistic, liberalisation of the EU market would play a major part in stabilising the world market and raising prices to a viable level. Both commercial sugar market analysts and international bodies such as the OECD foresee steadily increasing demand pushing up the world sugar price over the next ten to twenty years.

In any case, even without production quotas, the European sugar industry is likely to remain cosseted  behind the high EU tariff wall. With little prospect of any new agricultural trade liberalisation agreement to emerge from the stalled Doha Round, this protection is likely to remain in place for some considerable time. Sugar market analysts at Czarnikow estimate that the current high stocks to consumption relationship on the world market will decline as world production increase falls behind expected increases in consumption. They expect world consumption of sugar to increase by close to 40 per cent over the next twenty years.
While major world exporter, Brazil, will undoubtedly respond to this improved market situation by increasing output, its production costs are estimated to increase by nearly 50 per cent in the same period. The world price can therefore be expected to rise towards the EU protected level.

The OECD predicts that, while world prices are unlikely to reach the peak of over $US600 a ton reached in 2011, they are expected to increase and remain on a higher plateau of around $400 plus and to average higher in real terms (when adjusted for inflation) over the  period to beyond 2020, when compared with the last decade. There is confidence that prices will be boosted  by a decline in the incipient surplus which has too often in the past dogged the world sugar market.

Cutting down the range of non-agricultural entities which are currently able to claim EU farm income subsidies is one of the important positive changes in the operation of the European Union’s agriculture policy now being recommended by the European Parliament’s agriculture committee ( Com-Agri). The committee voted in favour of this and more than 30 other recommendations at the end of last week. If accepted by Parliament and Council, this proposal alone could save the EU taxpayer hundreds of millions of euros.
There is a downside to the recommendation however: that the definition on non-eligible applicants should be left to national governments. This could make the measure much less effective. A recent Court of Auditors report on the application of the SAPs farm income scheme in the NMS12 showed a massive disparity between the area of land entitled to subsidies and the very much larger areas approved by member governments. In Poland the overpayment in 2010 covered no less than 4.2 million hectares – 18.245 million hectares against 14.137 million ha approved by the Commission.  There was similar proportionate over-payment on non-designated areas in Hungary, Romania and Bulgaria.
Com-Agri  is right to stress that “entities such as transport companies, airports, real estate companies, companies managing sport grounds, campsite operators and mining companies or other non-agricultural enterprises… shall not, a priori, be regarded as active farmers nor shall they be the beneficiaries of any direct payments. Unfortunately the get-out clause that entities on the ‘negative’ list’ could only be allowed to draw EU payments if they can prove to governments that farming forms a “significant part” of their overall business, could allow much of the abuse to continue. The member state record on this issue is not good.
The Court of Auditors pointed out that much of the money paid out under the SAPS scheme has been wasted not only by blatant fraud, but by “inappropriate official allocation”. It recorded that millions of euros in ‘farm  income payments’ were paid out to such non-agricultural entities as hunting grounds, airfields,  military training grounds, ski runs, fishing grounds and public parks.
The most outrageous rip-off the EU farm budget was detected in Romania. The Court found that in 2010 more than 1,000 Romanian municipalities and local authorities had received €23.5 million in SAPS aid paid on some 340,000 hectares of public land without trace of any farming activity. This land has no agricultural function.  At the same time, many genuine farmers in Romania are still excluded from SAPS payments.  In Bulgaria and Hungary the Court found similar cases. The Court found that in Poland, in 2010, 1,345 hunting associations had legally received SAPS aid worth €2.54 million in relation to 19,000 ha of so-called ‘agricultural’ land. Similarly, in Hungary, 337 hunting associations received more than €1 million in SAPS aid on 7,000 hectares. <28/01/2013>

According to defenders of an unreformed European agriculture policy, current plans to harmonise and restrict EU farm income payments are likely to threaten viability of the agriculture industry and restrict output. Such an effect would, it is argued, pose a serious threat to the ability of the EU farm industry to improve both EU and global food security. It could be however that reform would have the opposite effect.
Historically, when famers’ incomes fall their immediate response is to increase production to compensate for the fall in revenue – what economic historians have labelled the aberration of the ‘backward sloping supply curve’. It is an aberration, of course, because it can only happen when there is surplus capacity in the industry: if producers are already at the point where their land, labour and other inputs are already operating at full stretch, no compensating increase in production is possible. This is probably the situation in the major crop producing areas of western Europe (original EU15). It is not however the case in the newer member states of central and eastern Europe.
This is certainly the major thesis of a recent report by agricultural experts at Rabobank. Their report argues that while EU 15 farmers are already operating at full capacity and if anything have been showing a tendency to  ‘de-intensify’ , those in the EU12 are doing the opposite – largely in response to the stimulation of EU agriculture policy. The Rabobank report argues however, that cutting back income subsidies – as could happen as a result of CAP reform- will stimulate increases in output in the east of the Community. This is likely to result because of the large reserves of underutilised land and other resources left behind after the collapse of the command economies which once dominated the region. These countries have enormous potential to boost productivity  and will prove to be the most dynamic in the next five to ten years as their farmers seek to increase yields “in order to counteract declining growth in direct payments and rising fixed costs”.
According to a recent report from the European Commission, this process has already been taking place. It says that there has been a decrease in the share of the Union’s farmed area (the so-called ‘utilised agricultural area’ (UAA)) managed by highly intensive farms in EU15and an increase in the UAA share managed by low input farms, with the opposite development  in the ‘new’ member states.
If this process of intensification is stepped up in the NM12 the prospects for increased production in Europe is enormous. To take the major group of food crops, cereals, as an example, the current average yield gap between EU15 and EU12 is close to 40 per cent. In the major cereal growing regions of France, Germany and the UK the average wheat yield is over 8 tonnes a hectare; in the EU12 the average is less than 5 tonnes. The EU12 currently produces around 45 per cent of the total  annual EU27 production of 140 million tonnes of wheat. If then the central and eastern Europeans catch up with the west – which they are quite capable of doing, given the innate fertility of their land – then EU27 wheat production could increase by around 25 million tonnes, or 18 per cent. There could be proportionate increases in other major food and feed crops such as maize, barley and rye. If the Rabobank analysis is correct, then this is as good an argument as any for cutting farm subsidies in a world where the demand for food is rapidly increasing.