International and Australian farm policy news

Food, fertiliser and fish

Agriculture remains a major threat to water quality in Europe, according to a report by the European Union’s (EU) environmental agency. It reports intensive farming practices are contributing ‘significant loads of pollutants’ in surface water. The Agency reports that 48% of streams and lakes in the EU will fail to meet good ecological status by 2015 as required by the 2000 Water Framework Directive.

Excessive nutrients from fertilisers are a leading problem with one consequence being the growth of algae that chokes off oxygen to fish and plant life in lakes, streams and bays. The European Commission’s Water Blueprint, released a day later, calls for better enforcement at the national level of EU laws designed to reduce pollution ‘from nutrients and/or other chemicals from agriculture, households and industry.’

But the fight against pollution is destined to run head-on with concern about food security. There is growing pressure globally for farmers to be more productive. Farm, fertiliser and crop protection groups say the smart use of nutrients and pesticides can boost yields while minimising harm to the environment. Industry also says better use of fertilisers pays another environmental dividend – improved productivity reduces the need to clear forests and fallow land for farming.

Intensive farming alongside the development of buffer areas and natural habitats that can protect water bodies, improve soil quality and nurture wildlife practices, is needed to both feed and protect a growing planet. Increases in crop yields in the future will require more than just conventional management practices, pesticides and fertilisers. Ecosystem services, for example natural pest control and pollination will need to be captured to increase crop yields over the long term.

Biofuels still gobbling food

Biofuels account for the largest source of new demand for agricultural production and have helped drive price volatility in grain crops like wheat and maize, the UN Food and Agricultural Organization State of Food and Agriculture 2012 report says. The report says biodiesel accounted for 80% of the EU’s vegetable oil production while 37% of the grain crop in the United States (US) went towards ethanol production.

Droughts that hurt production in southern Europe and devastated the US corn output triggered calls for the US and EU to suspend all biofuel mandates. In addition, prolonged dry spells in China, Russia, France, Spain, Portugal and the southern US have affected crop output and lead to frenetic food pricing.

The report advocates a balance between improving farm output, to meet rising food demand and to prevent price shocks, while also ensuring environmental sustainability. The UN agency attributes growing volatility in farm commodity prices to population growth as well as higher per capita incomes, urban migration and the associated changing diets in developing countries, weather-related production shocks, trade policy shocks and rising demand for biofuel feedstocks.

Food prices in 2012 moved downward from the peaks of 2008 and 2011, but rose when cereal crops in the US and parts of Europe failed. The FAO’s December food price index was at its lowest point since June, although dairy prices rose partly due to tighter feed supplies.

US Farm Bill negotiations extended

The US Congress has provided some short-term certainty to US farmers by extending parts of the 2008 Farm Bill until 30 September 2013. The 2008 Farm Bill was due to expire on 30 September 2012 and without a new Farm Bill in place, a raft of rules dating back to 1949 would have been triggered and pushed up milk prices in particular.

The extension renews subsidies for grain, cotton and soybeans but cuts budgets for organic and environmental initiatives. The extension also included provisions to prevent the price of milk skyrocketing. However for those farmers looking longer term, many are frustrated at getting so close to a new five-year program and now being left with uncertainty about what the future agricultural policies may be.

The US Congress has until 30 September 2013 to approve a new five-year plan, however with the US’s fiscal woes, agreeing to a five-year plan and budget will be difficult. The US Farm Bill is the US agricultural law which governs food aid to poor families, rural development, and research funding allocation as well as crop subsidies.

Global food prices remain high

Global food prices will stay at high levels in 2013 and low stocks pose the risk of sharp price increases if crops fail, the United Nations’ food agency (FAO) has predicted.

A surge in food prices over the summer of 2012 fuelled by the worst drought in more than half a century in the US and dry weather in other major exporters raised fears of a new food crisis such as the one seen in 2008. FAO has said food stocks remain low, which with the possibility of a better economic situation in 2013/14 should encourage consumption, assisting the market price to remain up.

Better international coordination was helping prevent countries from using export bans, which was creating a calmer situation compared to 2008, when unexpected national controls worsened the food crisis. Good supply prospects for corn and soybeans in the southern hemisphere would help offset supply tightness in the northern hemisphere reducing the risk of supply shocks.

But the FAO Food Price Index – which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar – fell for the third month in a row in December to 209, its lowest level since June, led by declines in cereals and oils prices. Soy prices have fallen following forecasts of near-record South American production and this has brought down other grain prices.

For 2012 as a whole, the index averaged 212, down 7% compared to 2011, but still at historically high levels.

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Images:  Alex E Proimos,  David J Thomas, USDA