One of the hottest topics over the month of August was the rising price of food. The media in Germany went into overdrive over the soaring cost of milk, and the story rapidly spread further afield. There was similar concern about the effect of tight grain supplies on retail prices for bread and meat.
I’ve obviously been watching the market situation very closely.
We find ourselves in a world no-one would have imagined a year ago, where the dairy sector has moved from a market under pressure to a situation where prices are surging.
Likewise, for grain, we suddenly find ourselves in a situation where supplies are tight and prices are way above recent levels.
While this has a lot to do with circumstances beyond our control, I think it’s fair to say that it also reflects very positively on the reform process we kicked off in 2003.
In fact, it reminds me of the election slogan of a certain well-known US president: “It’s the economy, stupid!”
Recent price developments are no more and no less than the market in action, which is precisely what we want from European agriculture in 2007. That was what the reforms were in large measure about – making farmers react to the market and making EU agriculture competitive.
If further proof were needed about our enhanced competitiveness, we only have to note how export subsidies for all dairy products have been set at zero since June. Our farmers are able to compete in the global marketplace without export assistance from the EU! That is good news indeed.
Of course, this is not the end of the story. I have made it very plain that we should abolish milk quotas by 2015 – they are an anachronism in the post-reform world, where farmers should be able to adjust rapidly to changing market circumstances. It is also wrong that young farmers in some countries have to fork out a small fortune just to buy a quota.
But we need a soft landing. We can’t simply get rid of quotas from one day to the next. That is why I believe the most realistic option is a gradual increase in quotas leading up to 2015. This is a discussion we must have in next year’s CAP Health Check.
As far as grain prices are concerned, I am keen to refute the idea that some people are putting about that it is largely the recent interest in biofuels that is driving up prices. This is not the case – they play a marginal role at most in the EU context. More significant by far have been low harvests in many regions of the world, bad weather in Europe and growing demand from east Asia. Here too, I have shown my willingness to act, by suggesting a cut in the set-aside rate for next year. And the entire principle of set-aside will also be high on the agenda of the Health Check.
Of course, in this whole debate about food prices, we cannot lose sight of the effect on consumers. It hurts consumers in their pockets when food prices go up.
Here, I will say only this: the increases in supermarket milk prices in some Member States are definitely not warranted by the overall market supply situation in the EU. And, as we all know, the contribution of the raw material to the final price of foods like bread is relatively small, so I hope that the supermarkets and discounters will act responsibly.
Concerns have also been raised that livestock producers face much higher feed prices in the short to medium term. Certainly, this is a concern that I share. Having said that, pig and poultry producers all over the world are affected by high cereal prices, even in low cost competitors like Brazil.
This will lead to adjustments in world meat prices. So I hope that the global competitiveness of European farmers should not be overly affected by the current situation.
Finally, as I’ve said on numerous occasions, I hope European consumers will put their money where their mouth is and be prepared to pay a little bit more for EU produce.
Where we win out every time is in quality and in the attention we pay to animal welfare and the environment. That is something well worth paying for.