Brussels, 20/05/2008 (Agence Europe) - A complex crisis, requiring multiple responses. In a communication adopted on Tuesday 20 May in Strasbourg, the European Commission provided an analysis of the world food crisis and the hikes in food prices in Europe and worldwide. It also outlined some elements in the responses it will be calling for in the medium and long term. The College of Commissioners matched their words with action and thus backed up the directions they developed at the exploratory debate on 7 May, as requested by President José Manuel Barroso, to identify how they could take action (EUROPE 9657). The document, “Tackling the challenges of rising food prices - Directions for EU action” is expected to be submitted for approval by heads of state and government during the European Council on 19-20 June.
Biofuels - the Commission sees no reason to go back on the EU's strategy. It believes that the target of 10% biofuels by 2020, as set out by the European Council in March 2007 for transport, will not have played a role in the current crisis, and that the sustainability criteria currently being elaborated will help lessen any future impact on European production. The Commission is convinced that US policy, on the other hand, has had a significant impact on the maize market (25% of production goes on biofuels) but that this policy has had only had a slight effect on general food prices.
The Commission's solutions include: action to tackle the effects of price increases in the medium and long term (monitoring of prices, adapting the common agricultural policy to the most economically disadvantaged people through a revised food safety programme, setting up a task force to examine how the food chain operates, monitoring speculative investments on the financial markets and derivatives); action to strengthen agricultural supply in the long term (promotion of policy for European biofuel sustainability, promotion of sustainable production of biofuels worldwide, enhancement of agricultural research for fostering sustainable growth in agricultural productivity in Europe and developing world, maintaining of open but vigilant policy on genetically modified organisms based on GMO authorisation requests in compliance with European legislation); actions tackling the effects of the crisis at an international level (continuation of open trade policy and promotion of rapid conclusion of Doha Round at the WTO, increase in humanitarian aid beyond the €333 million already mobilised in 2008 for emergencies, support for medium and long term structural reforms to reinforce policies and investment in rural development, food security and farming in developing countries through European development policy, coordinated EU contribution to UN initiatives while taking into account the potential effects of the global food crisis on world security in the re-examination of European security policy).
Although the price rises affecting cereals, meat and milk products are generating macroeconomic imbalances in the whole world, developing countries are hardest hit. The Commission notes in its introductory observation that millions of people have been affected and are threatened by starvation and malnutrition.
Food price inflation in the EU reached 7% in March 2008, which led to an average fall of 0.7% in household purchasing power (between February 2007 and February 2008). This hit the 16% of Europeans living below the poverty line hardest of all (21.8% in Bulgaria, 17% in Estonia and 5-7% in the EU15). This phenomenon coincides with spending on food in household budgets in these two groups of countries (9.06% in the United Kingdom, as opposed to 41.87% in Romania).
Wheat and rice prices are increasing due to supply problems but maize and soya prices are more linked to increased demand, explains the Commission. Whilst the increase in prices has benefited cereal producers, cattle producers have paid the price for increased animal fodder costs.
Globally and in the short term, the biggest beneficiaries of the crisis are net exporters and the losers are net importer developing countries, as well as the urban poor and poor farmers. The Commission believes that in the medium and long term, the increase in prices could bring new opportunities for farmers' incomes, as well as increasing agriculture's contribution to economic growth. It is highly likely that the hike in price increases has not ended, although it appears to have peaked. The Commission provided assurances that it would continue to follow the situation closely. (A.N.)