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Statement by State Secretary Janez Lenarčič on behalf of the EU Council on Rising Food Prices in the EU and the Developing Countries

Plenary Session of the European Parliament, Strasbourg, 22 April 2008

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Distinguished Members of the European Parliament,

The European Union is greatly concerned about the rise in agricultural product prices, a problem encountered in the EU and elsewhere in the world. We are aware of the severity and the scale of the potential consequences, in particular for the poorest countries of the world.

On the supply side, the price rise is mainly due to the crop shortfall resulting from the impact of climate change and the consequent reduction in cereal stocks, and higher production costs. At the same time, world population growth and the rapid development of a number of large countries, such as China, India and Brazil, reinforce demand. Increased purchasing power and higher standard of living in these countries brings about dietary changes. The increase in demand for meat and dairy products has a direct effect on the increase in prices for feed grain. Many parties also cite as a reason the expanding biofuel market and the related demand for agricultural products for uses other than human consumption (for example, the United States, the world’s largest maize exporter, uses more maize to produce bioethanol than it exports). It is precisely for this reason that the EU Council, through the working groups established for that purpose, is endeavouring to identify clear sustainability criteria which will facilitate the sustainable production of biofuels with minimum impact on factors such as food prices.

Since, on both the supply and demand sides, the reasons for higher food prices are structural in nature, prices and price increases can be expected, in the long term, to remain at a level higher than that to which we have become accustomed in the past decade.

Globally, the rise in food prices will have an especially harmful impact on countries where agricultural products and food represent a significant share of imports. This question is particularly important in countries with lower and medium GDP per capita and with less competitive structures in terms of processing and trading foodstuffs. This raises the question of macro-economic stability and adds a new dimension to the issue of poverty. Consequently, rising food prices would cause even more severe riots against the price rises worldwide and would thus threaten political stability.

In order to ensure the basic food supply, it is necessary, among other things, to encourage agricultural production in poorer countries. At the same time, wealthier countries should be encouraged to allocate funds for development aid to the poorest countries and to become even more intensively involved in humanitarian organisations.

The EU endeavours to curb rising food prices in different ways: recent common agricultural policy reforms were aimed at greater sustainability and at a market-oriented European agriculture. The EU has already adopted the set-aside requirement for 2008, increasing the volume of arable land dedicated to food production in the EU. In the framework of the CAP Health Check, the final abolition of this obligation and the elimination of energy crop premiums were proposed. 

Efforts to promote research to facilitate the production of second-generation biofuels are also of crucial importance. By-products (straw, parings, slaughter by-products) would be used in their production. In addition, in the context of WTO negotiations, the EU is willing to eliminate export subsidies by 2013. In this manner, the issue of the instability of agricultural markets is becoming one of the main challenges facing EU agriculture and agricultural policy.

With a view to considering possible consequences, the issue of high prices was already discussed by the EU Agriculture and Fisheries Council at its meeting in April. It is likely to be discussed further at future meetings. Indeed, the EU Ministers participating in the other configurations of the EU Council will also need to pay attention to this issue.

International organisations in the area of agriculture are also making efforts to curb the rise of food prices, including the Food and Agriculture Organisation (FAO), the International Fund for Agricultural Development (IFAD), the UN World Food Programme (WFP) and other UN agencies. The Slovenian EU Presidency will take part in the international High-Level Conference on World Food Security and the Challenges of Climate Change and Bioenergy to be held in Rome from 3 to 5 June 2008, under the auspices of the Food and Agriculture Organisation.

The rise of food prices is a global problem. It needs to be addressed with due consideration and with intensified efforts in all related areas.

Our aim is to recover market price stability.

Thank you for your attention.


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Date: 22.04.2008