A proposal to restrict the use of some key crop inputs in the European Union threatens to drive up global food prices, cut into trade worldwide and worsen food insecurity around the world, according to a report from the U.S. Department of Agriculture's Economic Research Service, or ERS.
A few measures of the potential impact: The proposal could lead to a 12% reduction in EU ag production, a 5% increase in U.S. food prices, a 9% increase in world food prices and a 17% rise in EU food prices, according to the report written by Jayson Beckman, Maros Ivanic, Jeremy Jelliffe, Felix Baquedano and Sara Scott of the ERS.
A little background on the proposal, which is beginning to garner more attention in U.S. ag circles:
It's a EU "Green Deal" that aims to promote sustainability in ag. It calls for a 20% reduction in the use of fertilizer and 50% reductions in the use of pesticides and antimicrobials. It also calls for 10% percent of existing farmland to be removed from ag use, all by 2030. The proposed reductions would be from 2020 levels.
The initiative, sometimes known as "Farm to Fork and Biodiversity Strategies," is proposed by the European Commission, the executive body of the European Union — the political and economic union of 27 primarily European countries with a combined population of about 450 million. Among its most prominent members are Belgium, France, Germany, Italy, the Netherlands, Poland and Spain.
The Farm to Fork Strategy "is at the heart of the European Green Deal aiming to make food systems fair, healthy and environmentally friendly," according to the European Commission web site. "The European Green Deal is our plan to make the EU's economy sustainable. We can do this by turning climate and environmental challenges into opportunities, and making the transition just and inclusive for all."
There will be inevitable consequences if the proposal is adopted, said Frayne Olson, North Dakota State University Extension crop economist/marketing specialist. He was asked by Agweek to comment on the report.
"If you drop a pebble in pond, there are ripples," he said.
The United States and the European Union compete for global sales in some crops, so reduced EU production of those crops could benefit U.S. exports. On the other hand, the proposed EU Green Deal could limit America's ability to export some crops to what currently are good markets in Europe, Olson said.
More potential results
The ERS report identifies three key potential results of the proposed input cuts:
- Production costs could increase as farmers substitute labor for other inputs.
- Ag output could decrease as fewer input are used.
- Prices on the international market could increase because of the tightening of available supplies and inelastic food demand. (Elasticity, in lay terms, is the extent to which a change in price, up or down, for a product affects demand for it.)
The report also finds that an additional 22 million people worldwide, primarily in low- and medium-income countries, could become "food insecure" by 2030 if the proposal is adopted by the EU.
Balancing environmental and food-security considerations is difficult, with no easy answers, Olson said.
The EU proposal would take on even greater significance if it's adopted worldwide, the report concluded. Among its most striking conclusions: worldwide food and agricultural production volumes could fall as much as 11%, the United States could witness a decrease in food and agricultural output of 9% and the number of food-insecure people worldwide could rise by 185 million.
The ERS report is based on several important assumptions, Olson said.
One is that the proposed input reductions are applied on a per-acre basis, rather than a per-bushel basis. The other involves the extent to which genetically engineered crops are used in EU ag. Olson said the report's authors did the best they could in making those assumptions, but there's no guarantee they're accurate.