A repeat of the 2008 global food price scare is not ruled out.
That could trigger global unrest, especially in poor countries
Few French farmers are thought to have voted for the country’s new president-elect, François Hollande. In any case, with only 4% of the electorate, they had little say.
But as one of the main power-brokers in the EU, Hollande will have a big say in farmers’ fates, as one of the leaders who decide the EU budget and the spending on agriculture which absorbs 36% of the EU budget.
Hollande wants change, insofar as he wants to rebalance Europe away from austerity and towards growth. Whether that shifts France into the member states seeking to cut the proposed CAP budget remains to be seen.
He may not agree with Ireland’s view that a strong CAP will make an important contribution to European economic recovery in the years ahead. Not much is known about his thinking on the CAP. With farmers so inconsequential in the election, neither candidate had to expound their farming policies.
His election is yet another complication in EU agriculture talks which many fear will not be finalised even in Ireland’s EU presidency for the first six months of 2013 — an outcome which could leave EU agriculture in a kind of limbo for a protracted period, because some important EU national elections later in 2013 could delay progress.
Along the way, there are plenty of signals that decisions on agriculture should not be put on the long finger.
Worldwide, prices of commodities ranging from soyabeans and maize to rapeseed and cattle are soaring, as bad weather and strong demand in China combine to tighten supplies and trigger food inflation fears. A repeat of the 2008 global food price scare is not ruled out.
That could trigger global unrest, especially in the poorer countries where so much disposable income is spent on food. It’s less of a worry in developed countries, where groceries today cost one-thirteenth of what they did 150 years ago, according to a recent study in the UK (it was calculated that a weekly basket of food, drink and household items priced at £93.95 now would have cost an 1862 shopper £1,254.17 in the real terms of today).
In 1862 the average shopper would have spent about a third of their earnings on groceries, now it is 7% to 12%, if you include eating out.
However, food can get dearer quickly; there was a steep rise in egg prices throughout the EU during early March, due to new hen welfare rules.
There have been steep global rises in the price of maize, and of oilseeds such as soyabeans, rapeseed and canola, which are not only a source of edible oil for cooking and processed food, but also the main source of protein-rich meals used to fatten cows, sheep, pigs and poultry. This rise is pushing up meat costs worldwide. Soyabean prices have risen more than 20% since the start of the year.
Add in the 20% price rises for fuel and electrical energy in some EU countries, and the ingredients are in place for rising food prices.
A robust CAP needs to be in place in the EU to cope with such trends — and to insulate the EU food and drink sector, which has become a net exporter for the first time in ten years.
The world’s largest food and drink exporter for some time, the EU now exports about €65.3bn and imports about €55.5bn. However, its market share of global exports continued to decline slowly (from 20.1% in 2001 to 17.8% in 2010), as emerging economies such as Brazil, China, Thailand and Argentina increase their exports.
Still, 4.1 million people in the EU work in 274,000 food and drink companies, the largest manufacturing sector in the EU, with 16% of manufacturing turnover.
It’s an industry that cannot be taken for granted.
It depends on an ageing workforce of farmers for raw material. The share of land farmed by under-35s in the EU has fallen from 13% in 1990 to 8% in 2007.
This is due to relatively low returns in farming compared to other occupations, and unwillingness to live in more remote rural areas.
And farm work is unattractive to many. In the US, the occupation of dairy farmer was voted one of the worst in 2012 in a survey by leading career website CareerCast.com. It ranked 199 out of 200, with only the occupation of tree feller rated worse. Top of the table, on the other hand, is the job of software engineer.
That’s sobering news in a country where agriculture is a huge and appreciated industry. But it may point to a dangerous global taking-for-granted of farmers — as does the current decimation of the US beef cattle industry, to its lowest size since 1952.
The US now has only 90.8 million cattle, after its longest consecutive decline in history, with 14 years of herd reduction out of 16.
Drought is the primary reason. But many have taken the easier route of replacing their cattle with game birds and catering for rich hunters rather than for meat processors.
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