Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Ensuring availability and affordability of fertilisers’ (COM(2022) 590 final)
Date: 2023-03-23
Institutions: European Economic and Social Committee
Subjects: EU strategy, common agricultural policy, fertiliser, fertiliser industry, food production, food security, natural gas, security of supply, shortage








C_2023184EN.01010901.xml










25.5.2023   


EN


Official Journal of the European Union


C 184/109






Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Ensuring availability and affordability of fertilisers’
(COM(2022) 590 final)
(2023/C 184/21)






Rapporteur:



Arnold PUECH d'ALISSAC











Referral


European Commission, 9.12.2022




Legal basis


Article 304 of the Treaty on the Functioning of the European Union




Section responsible


Agriculture, Rural Development and the Environment




Adopted in section


9.3.2023




Adopted at plenary


23.3.2023




Plenary session No


577




Outcome of vote
(for/against/abstentions)


170/3/4




1.   Conclusions and recommendations









1.1.


The EESC welcomes the communication from the Commission on ensuring availability and affordability of fertilisers as the global fertiliser crisis, which started in early 2021 and worsened following the war in Ukraine, is particularly acute in Europe where farmers are facing both record prices and supply shortages. The current situation is a threat to European agriculture and global food security.












1.2.


The EESC highlights that emergency domestic actions are required to limit the impact of the fertiliser crisis. Besides the possibility of directly supporting the most affected nitrogen manufacturers and farmers through State Aid (which faces budgetary constraints, raises risks of competitive distortions and should be subject to conditionality), the EESC considers that corrective measures are necessary to improve the functioning of the EU fertiliser market, as they are likely to have a greater impact on farmers and be more cost effective for taxpayers.












1.3.


To address both fertiliser supply and prices by facilitating imports and domestic competition, the EESC advises taking actions that include the suspension of EU import tariffs on all fertilisers, the facilitation of fertiliser logistics and regulatory flexibilities.












1.4.


The EESC also considers that medium-term measures are required to limit the EU's dependence on imported mineral fertilisers and reduce the environmental footprint of crop fertilisation. These should aim to limit fertiliser use through enhanced plant nutrient efficiency, partly substituting synthetic fertilisers by recycled livestock manure and other waste, and improving Europe's self-sufficiency in fertiliser production, in order to support the agro-ecological transformation of farming.












1.5.


The EESC welcomes the announcement of a new fertiliser market observatory (to be established in 2023), given that transparency in the EU fertiliser market must be increased through the regular publication of representative domestic market prices, and through the development of public statistics on fertiliser production and use.












1.6.


The EESC further calls for taking into consideration the social aspects related to farmers (who are highly impacted by fertiliser prices), food consumers (who are facing food price inflation) and industry workers when adopting new measures.












1.7.


On the international stage, the EESC urges the EU to step up actions against global food insecurity, including the promotion of fertiliser transparency, availability and effective use. Global fertiliser trade should be facilitated by keeping markets open, avoiding export restrictions and bans, increasing fertiliser production in Europe and expanding logistic routes.




2.   Introduction and background









2.1.


Fertilisers are made of three essential nutrients for plant growth: nitrogen (N), phosphorus (P) and potassium (K).












2.2.


Fertilisers are a key input in the majority of current agricultural production. Their availability and affordability play an essential role in food security. Since the beginning of 2021, there has been a global mineral fertiliser crisis, initially due to a surge in demand in the wake of the post-COVID recovery, and further aggravated since Russia's invasion of Ukraine by supply limitations from Russia, Belarus and Ukraine, three major global fertiliser suppliers.












2.3.


The fertiliser crisis has been particularly acute in Europe since (i) the EU is a large net importer of fertilisers; (ii) the EU fertiliser market for nitrogen and phosphorus is protected by import duties pushing domestic prices above global prices; (iii) EU fertiliser imports from Russia, Belarus and Ukraine, which previously accounted for 43 % of EU imports, have significantly dropped since March 2022, in spite of the EU's official no-ban policy on food and fertiliser imports from Russia.












2.4.


Domestic fertiliser prices have risen to record levels (threefold for mineral nitrogen in November 2022 vs. January 2021). Together with scarce supply and delayed purchases, this resulted in a significant decrease in EU fertiliser use for the 2022 harvest (1), and a possible shortage in several Member States in the spring 2023 affecting the 2023 harvest.












2.5.


This is happening in the context of the European Green Deal and the Farm to Fork Strategy (2), as published by the European Commission in May 2020, including the proposed EU-wide targets to ‘reduce nutrient losses by at least 50 %, while ensuring that there is no deterioration in soil fertility’, reducing ‘the use of fertilisers by at least 20 % by 2030’.




3.   General comments









3.1.


The EESC stresses that easily available and affordable fertilisers are essential for agricultural production and food security in Europe and globally. Fertiliser shortages and excessive fertiliser prices lead to reduced crop yields, jeopardise food production and participate in food price inflation at the expense of European citizens and mankind.












3.2.


The current crisis on the fertiliser markets is a particular threat in low-income countries, which are acutely affected by food insecurity. It is also a threat in Europe where vulnerable groups are already facing food affordability challenges, and the fertiliser crisis can lead to reduced harvests, thereby impacting global food security as the EU is a major cereal producer and exporter.












3.3.


The EESC believes that the global scarcity of fertilisers is not only caused by the high price of natural gas, but also by a supply-demand imbalance and logistical limitations. In the EU, this is further aggravated by the continent's high level of dependence on mineral fertiliser imports, EU import duties and the war in Ukraine.





Emergency domestic actions









3.4.


In spite of the high fertiliser prices, the cost competitiveness of several EU manufacturers of nitrogen fertilisers appears to have been affected by the extremely high price of natural gas in Europe, which has reached seven times the US level vs. three times in 2021. Besides prioritised access to natural gas in the event of gas rationing, specific support to the EU nitrogen industry may be useful on a case-by-case basis, with the objective of maximising the use of existing production capacities, as enabled by the amended EU Temporary Crisis Framework for State Aid. In this respect, economic and social conditionality is required to avoid windfall effects, as some fertiliser manufacturers saw their profits boosted in the wake of the fertiliser crisis.












3.5.


Fertiliser users, and notably arable farmers and mixed crop and livestock specialists, accounting for 62 % of EU fertiliser expenses and 69 % of EU nitrogen consumption (3), have been hit hard by the current crisis. They are facing cash shortages for purchasing fertilisers ahead of crop harvest, as well as a cost-price squeeze, as the higher prices for agricultural products may not compensate for the effect of increased prices for fertilisers and other farm inputs (4). Targeted support to fertiliser users may therefore help address the crisis, as enabled by the amended EU Temporary Crisis Framework for State Aid.












3.6.


However, there are strong budgetary limits and priority competition in funding such support by making use of the EU agricultural reserve worth EUR 450 million for the financial year 2023. Funding such actions through national CAP strategic plans is not an appropriate option either, as these have just been approved and would require a long time to be amended. Alternatively, making use of State aid raises both national budgetary constraints and the risk of significant competitive distortions between farmers from different Member States. This is illustrated by the fact that only three Member States so far have implemented aid schemes dedicated to farmers' fertiliser purchases, for a total budget of EUR 855 million.












3.7.


The EESC considers that corrective measures improving the functioning of the EU fertiliser market are thus more advisable and more cost effective for taxpayers. Such emergency, temporary measures should target both fertiliser supply and prices in Europe by facilitating imports and competition. Some fertiliser companies are increasing their profit in huge proportion: a positive and strategic message in favour of this industry is necessary if we want them to use these means to invest in European factories and increase our rate of autonomy, which is the price of our independence.












3.8.


Following the proposal of 17 July 2022 by the European Commission, Council Regulation (EU) 2022/2465 of 12 December 2022 (5) provides for a temporary suspension of import tariffs for urea and ammonia (except from Russia and Belarus). The EESC welcomes this decision, considering that besides partners already benefiting from free trade agreements with the EU (such as North African countries), other major supply sources should be positively impacted by such a suspension (such as the US, and Central Asian and Arab Gulf countries). However, the Regulation entered into force too late to be effective for the 2022/2023 season, as most urea imports have been delivered or ordered at skyrocketing prices, while the Council limited it to a period of six months instead of the initial two years. The EESC advises the Commission and the Council to extend the Regulation to the next season and to all nitrogen- and phosphorus-based fertilisers, as this would promote availability through the diversification of supply as well as alleviate EU domestic fertiliser prices.












3.9.


Other measures should also be urgently implemented to address the functioning of the EU mineral fertiliser market in the fields of logistics and regulation, including (i) incentivising farmers and fertiliser distributors to perform early purchases and manage price risks; (ii) facilitating harbour import logistics for fertiliser vessels and inland truck transportation; (iii) unifying national interpretations regarding fertiliser suppliers with respect to Russian sanctions; (iv) allowing temporary flexibilities in EU regulations including REACH, transport legislation, and the Fertiliser Product Regulation.












3.10.


The European Commission, following the technical proposals from its Joint Research Centre (6), should quickly propose legislative measures enabling the safe use of processed manure above the threshold established for nitrate vulnerable zones by the Nitrates Directive (RENURE), allowing a greater level of substitution of synthetic fertilisers. Pending this new threshold, the EESC recommends that the current maximum threshold of 170 kg/ha/year of organic nitrogen be applied to all EU farmers.





Medium term domestic actions









3.11.


As mentioned in its Strategic Foresight Report 2022 (7), the EESC recommends reducing the EU's dependence on imports of feed, fertilisers and other inputs, and proposes a definition of open strategic autonomy applied to food systems based on food production, workforce and fair trade — with the overarching aim of ensuring food security for all EU citizens through a healthy, sustainable, resilient and fair food supply.












3.12.


When it comes to fertilisers, the EESC is of the opinion that, while emergency actions should be undertaken immediately, longer term measures should also be implemented in order to optimise European agriculture's dependence on imported mineral fertilisers, while at the same time reducing the environmental footprint of crop fertilisation in Europe. These should target (i) optimising overall fertiliser use through enhanced plant nutrient efficiency, leading to lower losses; (ii) partly substituting synthetic fertilisers with a higher use of recycled livestock manure and other waste from the food chain; (iii) improving Europe's self-sufficiency in fertiliser production. The EESC underlines that agriculture is in transition and will continue, with agroecology, conservative agriculture, to get better.












3.13.


Enhancing plant nutrient efficiency is necessary in order to reduce fertiliser consumption as well as nutrient losses to water and air. This should make it possible to decrease fertiliser use without affecting the production volume. This can be achieved through enhanced fertilisation practices, including the use of cover crops, the choice of fertilisers (favouring nitrogen types such as nitrate based and the use of urease/nitrification inhibitors), the use of bio-stimulants as well as precision farming allowing optimised application (split application, balance sheet calculation, soil and plant analysis, plant sensors, decision support tools).












3.14.


Plant breeding is also key to nutrient efficiency, as improved varieties are capable of taking up less nutrients, especially nitrogen, for the same harvested quantity. In this respect, the EESC believes that innovative technologies and seeds should be developed to always be able to provide solutions to farmers faced with restrictions on existing tools (8).












3.15.


Substituting nutrient demanding crops such as cereals, oilseed rape and sugar beet with plants with lower nutrient requirements such as sunflower (9) and legumes is a trend that farmers have naturally adopted since 2021-2022 (10). However, this should be considered with caution in a public policy framework as, given the respective dry matter yields and protein contributions per hectare, such a move could disrupt agricultural markets and jeopardise food security.












3.16.


Partial substitution of mineral fertilisers by organic fertilisers recycled from livestock manure and other organic waste is also a relevant medium-term objective in the EU (11). This will offer benefits for the soils (higher organic content) and the climate (lower emissions from synthetic nitrogen fertiliser manufacturing) as well as decrease import dependence. However, the potential from livestock manure should not be overestimated, as most of it is already recycled, the available resources are geographically limited (regions with structural surplus for manure) and subject to significant mobilisation, processing and transportation costs. Nutrients from human waste are mostly not spread on agricultural soils, even though these could contain two billion kilos of nitrogen (12). The European Commission should also encourage the development of techniques for nutrient retrieval from algae and sewage sludge and safe agricultural application.












3.17.


As regards nitrogen fertilisers, promoting alternative, non-fossil pathways for ammonia production is a highly relevant long-term objective, as this would decrease the EU's gas dependency as well as its carbon footprint. Renewable hydrogen produced by water electrolysis (itself from renewable electricity) is at a pilot industrial stage, while the methanation of agricultural by-products and organic waste can produce both biomethane for ammonia generation and a digestate usable as an organic fertiliser. However, despite the current high market price for fossil-based ammonia, renewable alternatives are far from competitive and will require time, technology maturation and possibly significant public subsidies before reaching the industrial stage.












3.18.


The EESC welcomes the announcement of a new fertiliser market observatory, to be established in 2023, and the organisation of fertiliser stakeholder consultations in the framework of the expert group of the European Food Security and Crisis Mechanism (EFSCM). The EESC also considers that any significant level of transparency in the EU fertiliser market can only be guaranteed by the regular publication of representative domestic market prices for a range of N, P and K fertilisers as well as the development of public statistics on fertiliser consumption.





Social aspects









3.19.


The EESC considers that the Communication does not sufficiently consider social aspects related to availability and affordability of fertilisers. Indeed, farmers (particularly smallholders) have to pay a higher price for fertilisers that may not be paid back at harvest, given that fertiliser purchase and sale of products are decoupled. Moreover, more costly fertilisers are partly responsible for food price inflation, which, more specifically affects the poorest households. Finally, working conditions for employees in the European fertiliser industry are also affected by the losses in competitiveness, production shutdowns, as well as the high level of uncertainty faced by the sector in the EU.





Ensuring availability and affordability of fertilisers in the world









3.20.


The EESC supports efforts by the European Commission, Member States, European financial institutions, G20 countries, UN agencies and International financial institutions to fight global food insecurity, including the promotion of fertiliser markets with healthy competition and transparency, fertiliser availability and their effective use.












3.21.


Transparency in the global fertiliser market is of particular importance. The EESC encourages the G20's Agricultural Market Information System (AMIS) to enhance the representativeness of its fertiliser price database, currently limited to four products and locations.












3.22.


The FAO and WTO recently warned (13) that that global shortages in fertilisers will likely persist into 2023, threatening agricultural production and food security in Africa in particular. Global fertiliser trade should urgently be facilitated by keeping markets open, avoiding export restrictions and bans, increasing fertiliser production, expanding logistics routes and maximising fertiliser efficiency. The EESC welcomes international initiatives in this respect, including the Global Crisis Response Group on Food, Energy and Finance (UN), the Global Alliance on Food Security (G7), FARM (EU, G7, African Union) and the Global Fertilizer Challenge (US, EU).












3.23.


High import prices for food and fertiliser and disruptions of supply chains add up to urgent balance-of-payments needs in certain low-income countries. The EU should step up efforts in this respect both bilaterally (Food security and resilience facility) and through multilateral initiatives such as the IMF's Poverty Reduction and Growth Trust (PRGT) and Food Shock Window.





Brussels, 23 March 2023.


The President of the European Economic and Social Committee

Christa SCHWENG




(1)  According to the European Commission, ‘a combination of drought and high fertiliser prices resulting in lower application rates of P and K in particular, (…) contributed to lower yields’ and the 8 % drop in the EU 2022 cereal harvest vs 2021. Source: Short-term outlook for agricultural markets, European Commission, 5.10.2022.

(2)  COM(2020) 381 final, 20.5.2020.

(3)  Source: FADN, 2017

(4)  For reference, the price for ammonium nitrate in France in November 2022 was 203 % above the level of January 2021. By contrast, the price for milling wheat had risen by 45 % in the same period. Source: La Dépêche Le Petit Meunier.

(5)  https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32022R2465 (OJ L 322, 16.12.2022, p. 81).

(6)  https://publications.jrc.ec.europa.eu/repository/handle/JRC121636

(7)  https://www.eesc.europa.eu/en/our-work/opinions-information-reports/opinions/strategic-foresight-report-2022 (see OJ, p. 45).

(8)  OJ C 194, 12.5.2022, p. 72.

(9)  The area sown with sunflower in the EU has gained 750 000 ha while the cereal area has decreased by the same magnitude in 2022.

(10)  OJ C 75, 28.2.2023, p. 88.

(11)  https://www.eesc.europa.eu/en/our-work/opinions-information-reports/information-reports/benefits-extensive-livestock-farming-and-organic-fertilizers-context-european-green-deal-egd-ir-information-report

(12)  It is estimated that one person excretes more than 4 kg of nitrogen via urine per year (Viskari et al., 2018 — https://www.frontiersin.org/articles/10.3389/fsufs.2018.00032/full).

(13)  Global fertilizer markets and policies: a joint FAO/WTO mapping exercise, 14 November 2022, https://www.wto.org/english/news_e/news22_e/igo_14nov22_e.htm