A Break From the Past

On behalf of our delegation from the Midland Northwest constituency of Ireland we would like to put forward a different vision of agriculture post-2020. As part of that vision, we challenge others to look outside the box and break out of the group-think that has dominated agricultural thinking and policy in recent decades.

This submission draws from publications and reports from the UN, the EU and the FAO among others. Overnight change is not expected as many practices are deeply embedded both ideologically and financially and change will require time. However, we feel that it is imperative that the policy-makers in the EU set the tone of the discussions and also, set the long-term goals, because the discussion which is being initiated now for the next round of the Common Agricultural Policy (CAP) will determine the face of agriculture in 2027.   


Major changes are needed in our food, agriculture and trade systems, with a shift toward local small-scale farmers and food systems recommended.

A TALE OF TWO SIDES

Multinational companies operating in the agriculture sphere both upstream and downstream continue to use their multi-million-dollar PR budgets to push the narrative that increased intensification and GMOs are needed to “feed the world”; meanwhile an oft-overlooked report released in 2013 by the United Nations tells a completely different tale, that small-scale organic farming is the key to feeding the world and improving food security for the needy.

That was the key point of a publication from the UN Commission on Trade and Development (UNCTAD) titled “Trade and Environment Review 2013: Wake up before it’s too late,” which included contributions from more than 60 experts around the world.

The findings on the report seem to echo those of a December 2010 UN Report in many ways, one that essentially said organic and small-scale farming and not GMOs and monocultures ,is the answer for “feeding the world”.

According to the first UN report, major changes are needed in our food, agriculture and trade systems, with a shift toward local small-scale farmers and food systems recommended. Diversity of farms, reducing the use of fertilizer inputs and other changes are desperately needed according to the report, which was highlighted in an article from the Institute for Agriculture and Trade Policy. It also said that global trade rules should be reformed in order to work toward these ends, which is unfortunately the opposite of what mega-trade deals like the proposed Transatlantic Trade & Investment Partnership (TTIP), CETA (the proposed deal with Canada that was recently approved by the European Parliament) and Mercosur aim to do.

FOOD PRODUCTION AT A CRITICAL POINT

Agricultural development, the report underlines, is at a true crossroads. By way of illustration, a few stark facts:

  • Food prices in the period 2011 to mid-2013 were almost 80% higher than for the period 2003-2008;

  • Global fertilizer use increased by a factor of eight in the past 40 years, although global cereal production has scarcely doubled at the same time;

  • The growth rates of agricultural productivity have recently declined from 2% to below 1% per annum;

  • The two global environmental limits that have already been crossed (nitrogen contamination of soils and waters and biodiversity loss) were caused by agriculture. GHG emissions from agriculture are not only the single biggest source of global warming (besides the transport sector), they are also the most dynamic;

  • Most important of all, despite the fact that the world currently already produces sufficient calories per head to feed a global population of 12-14 billion, hunger has remained a key challenge. Almost one billion people chronically suffer from starvation and another billion are malnourished.

The scale of foreign land acquisitions, driven by the search by investors for secure investment opportunities has generated interest in agricultural commodities and their most important source – fertile soil. The acquisition of large areas of land by investors (often termed ‘land grabbing’), especially in countries with weak governance and insecure land rights, has emerged as a new threat to the livelihoods of rural people and small-scale farmers, while these ‘speculators’ are harvesting enormous returns from farmland.

A NEW DIRECTION IS NEEDED

The current demand-trends for concentrate animal feed, high meat-based diets and post-harvest food waste are regarded as a given, when in fact we should be challenging their rational.

Priority in international policy discussions remains heavily focused on increasing industrial agricultural production, mostly under the slogan "growing more food at less cost to the environment", or “sustainable intensification”.

The strategy recommended to developing countries of relying on international markets to meet staple food demand while specializing in the production and export of 'lucrative' cash crops has not produced the intended results, because it relied on low staple food prices and no shortage of supply in international markets, conditions that have drastically changed since the turn of the century.

Globalization has also encouraged excessive specialization, increasing scale of production of just a few crops and enormous cost pressure. All this has aggravated the environmental crisis of agriculture and reduced agricultural resilience.

What is now required is a shift towards diverse production patterns that reflect the multi-functionality of agriculture and enhance close nutrient cycles. Trade rules need to allow a higher regional focus of agriculture that would prioritize regional/local food production through 'logical' market mechanisms where the benefits would remain in the area/region.


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Major changes are needed in our food, agriculture and trade systems, with a shift toward local small-scale farmers and food systems recommended.

BABY STEPS...

The Common Agricultural Policy focused on short food supply chains for the first time during the current funding period (2014-2020) and producers can now benefit from support from the European Agricultural Fund for Rural Development to set up such schemes.

Additionally, small farmers have consumers on their side: a recent Eurobarometer survey (2016) found that four out of five European citizens believed ‘strengthening the farmer’s role in the food chain’ is either ‘fairly important’ or ‘very important’. The survey stressed that the utilisation of short food-supply chains leads to fairer prices for farmers, given the obvious fact that there are fewer middlemen, thus ensuring farmers get a larger slice of the profits.

The benefits from this are many and varied:

  • It results in greater trust between producer and consumer;

  • Local markets also give consumers better access to fresh, seasonal produce;

  • Then we have the more solid benefits - local economies benefit from these exchanges with an increase in local creation and this is especially vital in rural, disadvantaged areas;

  • There is far less impact on the environment due to reduced production and transport associated with local foods.

In summary, short food-supply chains have the huge advantage of placing the emphasis on quality, and generating interactions between the farmer and the consumer. Quality here is also intended as food education, as through this particular form of purchase it is possible to better understand the features and seasonality of the products.

SLOW FOOD

Today, a properly organised small farm can be as productive as a larger unit which would traditionally be regarded as having economies of scale that would give it a competitive advantage.

There are online platforms in every EU country directly connecting farmers and consumers. Smart short chains, supported by digital technologies, can be a resource for farmers.

A short chain isn’t to be confused with a short distance - for example, an Italian farmer opened a restaurant in Brussels where products from his farm can be bought and enjoyed. This is not zero-miles but it is a short supply chain.  

We should not be bound to the vision that short-chain is just a matter of distance. There are so many smart ways to promote and exploit short chains, even if it’s not at zero miles. ‘Short chain’ has to be understood to mean everything that contributes to bringing consumers and farmers closer to each other, despite physical distance; it is not something that is based solely on the spatial dimension.

FINANCE

Another aspect we would like to draw attention to is the attempt to mainstream the concept that financial instruments and the futures markets can combat volatility and provide stability in agricultural markets. While it may be theoretically sound, there is little evidence to back this up.

An internal World Bank report stated that the main reason for the food price spikes in 2008 was the speculation with agricultural commodities on the commodity futures exchanges, as well as the production of biofuels. This sparked much debate among scientists over the impact on society of speculation with food.

On the commodity futures exchanges, traditionally, contracts have always been concluded on future deliveries of agricultural commodities at a prior agreed-upon price. This safeguarded both seller and buyer against any excessive price jumps, for example those caused by the vagaries of the weather. If the fixed price was higher than the current price at the settled date, the seller benefited; if the fixed price was lower than prices were at the time the contract is settled, the buyer made a profit. It was a fair system, both parties able to agree the price at the time a contract was closed.


DICING WITH DEBT

Over the past couple of years, however, investors and speculators who have nothing to do with wheat, soy, maize or rice have gotten involved, and this has turned into a veritable casino. To these individuals, this isn’t about food production and supply to the markets, this isn’t about feeding the population; these are truly simply ‘commodities “all that’s important to them is that the prices do not follow the same logic as the share prices on the DAX or NASDAQ, on which they speculate at the same time in order to spread their risk. The higher the spike, the deeper the trough in agricultural commodities, the better their returns.

A few sobering facts:

  • In the 1990s the deregulation of commodity futures trading in the United States made it possible for institutional investors to enter this market on a large scale;

  • Since then, on the world’s most important futures exchange CBOT in Chicago, the percentage of commercial traders has decreased remarkably while the number of speculative traders has exploded;

  • In 2002, eleven times the actual amount of wheat available was traded on the CBOT;

  • In 2011, 73 times the actual US wheat harvest was traded.

According to many analysts, the investors who bet on long-term increases in food prices are now having a price-driving effect. The effect of this is that speculators get rich when cereal prices rise, but this in turn leads to poverty and hunger for millions of families.

Hedge funds, pension funds and investment banks such as Goldman Sachs and Morgan Stanley now dominate the food commodities markets.

Some have taken the honourable route and in 2013, several European banks pulled back from speculative trading in agricultural commodities in response to public campaigns by many non-governmental organizations. Barclays - the United Kingdom’s biggest player in food speculation - announced it would no longer trade in agricultural commodities for speculative purposes. In Germany, most financial institutions gave up direct speculations with agricultural commodities, with the glaring exceptions of Allianz and Deutsche Bank.   Goldman Sachs, Barclays, Deutsche Bank, JP Morgan and Morgan Stanley were the top five global investment banks involved in global commodity markets between 2010 and 2012, making an estimated £640 million ($1 billion) from speculating on food in 2012 alone. Over the period 2010-2012, they made an estimated total of £2.2 billion from trading food commodity contracts.

CREDIT ONLY WHERE IT’S DUE

We believe that the current focus on financial instruments is not in the farmer’s interests in the long term. This concept presupposes that the issue for farmers is lack of credit. This is not the case; the problem is lack of profitability in the farm enterprise which undermines repayment capacity. Offering “soft” loans, encouraging unsustainable debt only exacerbates the underlying weakness in the enterprise. This approach would not be considered prudent lending in other sectors and it is difficult to envisage it being of benefit to the farmer.

THE ENVIRONMENTAL EFFECT

The final area we would like to draw attention to given the constraints of this submission is the effect that current agricultural policy and practice is having on the environment.

The loss of traditional farming practice to intensive agriculture throughout the EU has led to:

  • soil erosion;

  • Water pollution;

  • Over-exploitation of water resources;

  • The loss of biodiversity, pesticide-born damage and risks for human health.

Reforms of the CAP from the1990s, to the current reform have brought about some improvements but more is needed to balance agricultural production, rural development and the environment. The loss of biodiversity does not only involve wild species, but also agrobiodiversity, namely the animal breeds and plant varieties which, since the birth of agriculture 10,000 years ago, have gradually and consistently been domesticated to be grown or raised to produce food. Thanks to the selection performed by farmers over the centuries, local varieties and breeds have adapted to the local environment, becoming stronger, more resilient and demanding less external inputs, such as fertilizers, water, pesticides, veterinary care, than their conventional equivalents.

However, over the last 50 years, industrial agriculture has invested in an ever-smaller number of hybrid varieties and commercial animal breeds, selected and created to increase productivity, to the detriment of diversity and the connection to the collective knowledge and flavours of individual places.

According to FAO estimates, 75% of agricultural crop varieties have disappeared and 20% of animal breeds reared for food, meat or milk, face extinction.


THE REAL EXPERTS

The farmers, herders and fishers who know and respect the fragile equilibrium of nature are the last real guardians of the planet. For millennia, they have been working in harmony with ecosystems, not in competition with them.

As stated by the FAO, family farming is the most common form of food production in both the global south and north, and plays a fundamental socio-economic, environmental and cultural role. Europe’s biodiversity is inextricably linked to agricultural practices creating valuable agro-ecosystems across whole of Europe. A large number of highly valuated wildlife species and semi-natural habitats types in Europe are dependent on continuing low-intensity agricultural practices. Therefore, the future CAP should be even more targeted on supporting diversity for all its farmers and for the rural areas in Europe, as it generates the public goods which European society expects.

BIOMASS AND FORESTRY

A further aspect within this area that requires further analysis is the use of biomass and the promotion of forestry as an offsetting tool in the need to curb and mitigate CO2 emissions.

The use of wood for electricity generation and heat in modern (non-traditional) technologies has grown rapidly in recent years. For some, it represents a relatively cheap and flexible way of supplying renewable energy, with benefits to the global climate and to forest industries. To others, it can release more greenhouse gas emissions into the atmosphere than the fossil fuels it replaces, and threatens the maintenance of natural forests and the biodiversity that depends on them. Like the debate around transport biofuels a few years ago, this has become a highly-contested subject with very few areas of consensus. In fact, since in general woody biomass is less energy-dense than fossil fuels, and contains higher quantities of moisture and less hydrogen, at the point of combustion burning wood for energy usually emits more greenhouse gases per unit of energy produced than fossil fuels.

It is often argued that biomass emissions should be considered to be zero at the point of combustion because carbon has been absorbed during the growth of the trees, either because the timber is harvested from a sustainably managed forest, or because forest area as a whole is increasing (at least in Europe and North America). The methodology specified in the 2009 EU Renewable Energy Directive and many national policy frameworks for calculating emissions from biomass only considers supply-chain emissions, counting combustion emissions as zero.

These arguments are not credible. They ignore what happens to the wood after it is harvested (emissions will be different if the wood is burnt or made into products) and the carbon sequestration forgone from harvesting the trees that if left unharvested would have continued to grow and absorb carbon. The evidence suggests that this is true even for mature trees, which absorb carbon at a faster rate than young trees. Furthermore, even if the forest is replanted, soil carbon losses during harvesting may delay a forest’s return to its status as a carbon sink for 10–20 years. Forest modelling demonstrates that it takes 35 to more than 90 years for new forest growth to offset the extra CO2emissions from burning biomass rather than fossil fuels,

Another assumption that leads to the perception that biomass energy is zero-carbon at the point of combustion derives from the international greenhouse gas reporting and accounting frameworks established under the UN Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol. In order to avoid double-counting emissions from biomass energy within the energy sector (when the biomass is burned) and the land-use sector (when the biomass is harvested), the rules provide that emissions should be reported within the land-use sector only.

While this approach makes sense for reporting, it has resulted in significant gaps in the context of accounting – measuring emissions levels against countries’ targets under the Kyoto Protocol and the Paris Agreement, largely deriving from the different forest-management reference levels that parties have been permitted to adopt. The problem of ‘missing’, or unaccounted-for, emissions arises when a country using biomass for energy:

  • Imports it from a country outside the accounting framework – such as the US, Canada or Russia, all significant exporters of woody biomass that do not account for greenhouse gas emissions under the second commitment period of the Kyoto Protocol;

  • Accounts for its biomass emissions using a historical forest-management reference level that includes higher levels of biomass-related emissions than in the present; or

  • Accounts for its biomass-related emissions using a business-as-usual forest-management reference level that includes, explicitly or implicitly, anticipated emissions from biomass energy (since the associated emissions built in to the projection will not count against its national target).

This risks creating perverse policy outcomes. Where a tonne of emissions from burning biomass for energy does not count against a country’s emissions target but a tonne of emissions from fossil fuel sources does, there will be an incentive to use biomass energy rather than fossil fuels in order to reduce the country’s greenhouse gas emissions – even where this reduction is not ‘real’ in the sense that it is not accounted for by either the user or the source country.

If the land-use accounting rules are not reformed, a more radical option would be to account for carbon dioxide emissions from biomass burned for energy within the energy sector, with additional rules to avoid double-counting in the land-use sector.

These issues in relation to the uses of biomass must be fully explored and quantified in advance of continuing down the road of increasing afforestation in the belief that there are environmental benefits to be accrued.

CONCLUSION

It is without doubt that to move agriculture away from its current industrial model based on ever-increasing exports will meet resistance from many. Nevertheless, the discussion must take place.

While great progress has been made in agriculture in the last five decades, the missing link in this progress has been the return to the primary producer. All studies show that while the farmer has continued to produce to an ever-higher standard, taking on new roles in the provision of public goods, the share they receive of the final retail price continues to decline.

Of all the founding principles of the CAP the one of “a viable living for those working the land” is perhaps where the least progress has been made. The failure of policy in this area is self-evident when the age profile of farmers across the EU is examined, brought about by the drift from the land over the decades. Reversing this is perhaps the biggest challenge for CAP 2020-2027.

Best Regards,

Luke Ming Flanagan MEP.

Paul Cotter