EU launches food security plan with €500 million in crisis aid for farmers

• The European Commission launched a plan to ensure food security against the impact of the war in Ukraine
• EU farmers will receive up to €1.5 billion in aid through a crisis reserve and can produce food on land set aside for biodiversity
• Private storage aid will be introduced for pork, EU state aid and trade rules will be relaxed
• Farming representatives support the aid package, but environmentalists are furious because the measures go against the EU's sustainability ambitions of the Farm to Fork (F2F) strategy

The European Commission has launched an EU plan with several aid measures to safeguard food security against the impact of the war in Ukraine.

On 23 March, the Commission announced a package of measures to enhance food security and support EU farmers suffering from high costs of inputs such as for energy and fertilizers.

The EU executive said it will provide €500 million in aid to the bloc's most affected farming sectors by triggering a crisis reserve under the Common Agricultural Policy (CAP) that has never been used before. EU member states can top-up this funding to a potential total of €1.5 billion and will be able to use these funds to help their farmers cope with market disturbances, higher inputs costs and trade restrictions caused by the war.

The package will also see the introduction of private storage aid for pig meat to ease to European pork sector's economic troubles. The Commission had ruled out this market intervention for months despite repeated calls from EU farming ministers, but the impact of the war in Ukraine made the EU executive change its mind and the exceptional EU market aid for the industry will be launched soon.

Flexibilities will also be introduced to existing import requirements for animal feed to alleviate the pressure on livestock producers, while the EU's state aid rules will be relaxed for the agriculture and fertilizer sectors to allow up to €5,000 in aid to be distributed to individual farmers.

Additionally, member states will be able to advance CAP direct payments and rural development aid to their farmers from 16 October 2022 onwards - an aid measure that has been introduced several times in recent years during crisis periods.

The Commission also confirmed that it will pause some of the CAP's environmental rules for 2022 to boost the EU's food production and offset trade losses from the war in Ukraine. Specifically, crop production will be allowed on land currently lying fallow as part of crop diversification requirements or Ecological Focus Areas (EFAs), which requires 5% of arable farmland to be set-aside for biodiversity under the current CAP's greening conditions . National authorities can also allow farmers to use pesticides in these areas to ensure the crops' growth while still paying out the green CAP payments.

Agriculture Commissioner Janusz Wojciechowski explained that this "exceptional and temporary derogation" could quickly free up to 4 million hectares of land for the production of food and animal feed - amounting to 5.7% of the EU's total agricultural land.

Reactions

EU farming representatives had been asking for these measures for weeks and welcomed the emergency support package, with farming association Copa-Cogeca saying it shows the Commission "recognises the strategic role of European agriculture production in global food security".

Agriculture ministers and members of the European Parliament (MEPs) in the Agriculture Committee (AGRI) had also pushed for these measures and further urged the EU executive to put the implementation of the Farm to Fork (F2F) strategy's sustainability ambitions on hold to avoid any negative impacts on food security. These demands convinced the Commission to also postpone their revision of the EU's pesticide rules that aims to make the F2F's 50% reduction target legally binding .

However, these emergency measures have sparked strong backlash from MEPs in the Environment Committee (ENVI), who urged the EU executive to keep pursuing their green ambitions despite the impact of the war in Ukraine. Environmental groups are also furious and called the measures "absurd" because they would lead to more pesticide and fertilizer use on farmland and further threaten ecosystem collapse instead of tackling these challenges.

The Commission has also been internally divided on whether the F2F's ambitions should be temporarily suspended due to the Ukraine crisis, but stressed in their new plan that sustainability is an integral part of food security and they will continue to implement their F2F objectives. Trade Commissioner Valdis Dombrovskis said: "Short term emergency measures are important, but they do not replace the importance of refocusing agricultural food sector towards sustainability."

Aid for Ukraine

The Commission explained that food availability is currently not at stake in the EU because the continent is largely self-sufficient for many agricultural products, but it pointed to high input costs and food prices as the main causes of concern. An expert group set up as part of the EU's contingency plan for food security will now assess the implications of the invasion of Ukraine and analyze the risks and vulnerabilities of the bloc's food supply chain before recommending further measures.

Meanwhile, the EU executive said food security is a great concern in war-torn Ukraine, especially in besieged cities, because "Russia appears to be deliberately targeting and destroying food storage locations". This is expected to cause more food shortages for Ukrainians as well as supply disruptions that will affect the whole world, especially lower-income countries dependent on imports.

The Commission therefore committed to taking measures to ensure that the EU - a net food exporter and major agri-food producer - can contribute to food security in Ukraine. "We will not let Ukraine stand alone in the face of Russian aggression," Wojciechowski said, stressing that the EU's "first priority is to make sure that Ukrainians have enough food, fuel and water".

Apart from food aid, the Commissioner promised to help the country's planting and growing of cereals and oilseeds to ensure their own food needs as well as to facilitate their exports. This will be done through an EU Emergency Support Programme of €330 million that will secure access to basic goods and services in Ukraine and protect the local population.

The EU also committed to helping food security in other parts of the world, such as in North Africa and the Middle East, which largely rely on imports of cereals, as well as in Asia and sub-Saharan Africa, with humanitarian and development assistance. The Commission added that it will keep advocating strongly against any form of food export restrictions and trade bans within and outside of its internal market.

Distribution of EU Crisis Aid between Member States

Posted 01 April 2022 by Pieter Devuyst, News Analyst, IHS Markit

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.