Relaxing green measures falls short as cereal production set to drop

Date:10-07-2022

By Julia Dahm

Despite the EU’s efforts to ramp up cereal production in the face of the Ukraine war by relaxing environmental rules, the area under cereal production has dropped below the five-year average and production is expected to decrease significantly, according to the European Commission.

Overall EU cereal production is projected to stay 5.1% below the five-year average and fall by almost 8% this year compared to last, according to the EU’s most recent short-term agricultural outlook, published by the Commission on Wednesday (5 September).

According to the data presented, this is in large part due to this year’s severe droughts reducing the yields per hectare in many regions, but also because the arable land used to produce cereals decreased – despite the EU’s measures specifically meant to increase the production area of cereals.

In view of the effects of the Ukraine war on agricultural markets, the Commission has allowed member states to temporarily loosen some of the environmental requirements for receiving payments from the CAP, the EU’s massive farming subsidies programme.

Apart from rules on crop rotation, these derogations concern the requirement to declare a portion of a farm’s land ecological focus areas, such as fallow land or grassland.

The relaxation of these rules is meant to increase the area farmers can use to produce grain and oilseeds in order to compensate for lower exports from Ukraine to the EU and international market.

Still, the area used to produce cereals did not increase but dropped by 1.3% compared to the five-year average, according to the report.

However, the derogations do seem to have had an impact when it comes to oilseeds. ″Given high prices and the temporary derogation to allow the cultivation of certain crops on set-aside land, the area under oilseed crops is expected to reach an all-time high,″ the report reads.

Recently, an EU official said during a meeting of the Special Committee of Agriculture that the EU executive does not yet have a clear picture of the impact the adopted derogations will have on yields.

Drought brings down yields

Meanwhile, cereal yields, the amount harvested per hectare, fell by almost 7% compared to 2021 and 3% compared to the five-year average. According to the Commission, this is mainly due to the droughts many European regions faced this summer.

″Weather conditions in the EU deteriorated exceptionally in summer 2022, one of the hottest summers in recorded history, with record hot and/or dry conditions,″ the report stressed.

Summer crops were hit especially hard, first among them maize, a key commodity for feed production, which saw production drop by almost 24% compared to last year. Many farmers have already warned that the shortage of fresh feed on the market was driving them to start using up their winter feed stocks way earlier than usual.

The European Drought Observatory also warned on Wednesday that significant parts of Europe continue to be plagued by drought, with more than a quarter of EU territory currently in the service’s red-alert category.

The report also identified a lower use of fertilisers due to cost spikes as another reason for the low yields seen this year.

Mineral fertiliser supply in the EU has increasingly come under pressure. This is due to sanctions introduced in March on imports of potash from Belarus and interruptions to trade with Russia, two main suppliers of mineral fertiliser, but also gas price spikes hampering domestic production.

Stocks help grow exports

The Commission report sees the cost and availability of fertilisers as a ″major concern for agriculture″ in the upcoming season.

On Thursday (6 October), Agriculture Commissioner Janusz Wojciechowski announced that the Commission will present a new communication to address the recent increase in fertiliser prices caused by the war and the energy crisis.

Meanwhile, EU grain exports are still expected to grow despite the decrease in production, according to the report, which projects a 6.5% growth of exports compared to last season and a 21% rise compared to the five-year average.

This is thanks to higher ending stocks – grain still in storage from previous seasons. ″The EU will continue to play its part to contribute to global food security,″ the report stressed.