Debate: The surge in commodity and input prices in the agricultural sector
Date: THURSDAY, 17 FEBRUARY 2022
Speaker: Helena Dalli
Language: EN

Food and agriculture are exposed to energy costs, both directly and indirectly, from fertilisers to transport and freight. These knock—on effects concern both the farmers, who see their input prices increase, and consumers, who have to cope with higher food prices. Therefore, I welcome the opportunity to exchange views in this House on the challenges for our food system in the midst of this commodity price surge. Energy and fertiliser prices have increased 3.5 times more than agricultural prices at global level. The Commission is analysing and following these inflationary pressure developments carefully, including farmers’ ability to recover higher input costs within the value chain in order to ensure that we maintain a resilient agri—food production system, which both protects farmers’ incomes and ensures affordable food prices. The prevention of, and the response to, market crises and negative impacts of the current import price surge on consumers, agriculture and the food sector require both short—term and long—term solutions. In view of the central role of energy prices, most of these are clearly beyond the scope of the common agricultural policy. Firstly, to address the difficulties of the food sector, any short—term measures aiming at reducing energy prices and the factors that drive energy prices higher will immediately help the food sector by reducing input prices, relieving the squeeze in farm margins, and contribute to affordable food prices. As you know, many such measures are the responsibility of Member States in the form of taxation, both in energy and other input costs, for example relating to fertiliser, as well as in farm income or in state aid.  The Commission will also carefully assess its state-aid tools in this respect, taking into account the requests of Member States. Any longer-term measures that can contribute to reducing the energy dependence of the EU will obviously help. For example, the transition to green ammonia and the hydrogen—based fertiliser industry or the development of the circular bio-economy, more generally speaking. Such measures are identified in the Commission communication of October 2021 on tackling rising energy prices, which included a toolbox for action and support and which you debated on 20 October last year. But also the new common agricultural policy has the potential to mitigate energy costs in the medium term through its future strategic plans, such as by supporting precision farming, which has the potential to reduce the use of fertiliser without compromising optimal crop growth, encouraging circular agriculture, and the use of organic manure, supporting better use of risk management measures.  Notwithstanding the outcome of the policy debate on short—term measures, the current crisis provides an opportunity for more lasting long—term solutions to these challenges in line with the Green Deal. An agricultural sector that is less dependent on external sources of energy does not necessarily imply lower production. It requires innovation through knowledge, technology and adoption of best practices. That can mitigate the significant pressure on production costs without hurting production capacity. This leads to progress rather than regression in productivity to achieve the green transition.  Finally, as to the current demanding situation in the pigmeat sector, this is the result of an imbalance between demand and supply aggravated by high input costs. After strong price declines in 2021, the pig market now shows signs of stabilisation. The Commission has repeatedly highlighted to Member States and to your Committee on Agriculture and Rural Development the options for specific market measures within the framework of the Common Market Organisation Regulation (EU) No 1308/2013 and the other available measures under the rural development funds, the Temporary Framework for State Aid and  In view of the specific situation in the pig sector in relation to African swine fever (ASF), in particular, CMO Article 220 allows compensation measures for market losses related to movement restrictions imposed by veterinary measures taken to fight against animal disease. It requires a specific request by the Member State concerned, which needs to co-finance it at 50%. With regard to private storage aid, the Commission is of the opinion that this could postpone market adjustment or even make the problem worse because the relevant stocks would eventually have to find a market at a later stage. Import bans by China and other third countries make exports impossible for Member States affected by ASF. China’s reduced demand is also to be taken into account.