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Report to the Committee on Agriculture and
Rural Development
October 2001
In its communication to the Council and the European
Parliament, the Commission has looked at options
to promote the cultivation of plant proteins in
the EU, aimed primarily at making up the anticipated
shortfall caused by the continuing ban on meat
and bone meal (MBM), arising from measures introduced
during the BSE crisis.
The Council of Agriculture Ministers meeting
in Luxembourg in June 2001, did not manage to
reach a qualified majority either for or against
a decision to extend the ban on MBM. The decision
to do so therefore now lies with the European
Commission. It is within its remit to extend the
ban at least until 1 January 2002, and possibly
for a maximum period not exceeding two years in
total, that is until 1 January 2003.
The Agriculture Committee was therefore asked
to draw up a report, commenting on the Commission's
Communication and analysing the options that may
exist for filling this anticipated shortfall in
feed proteins. Although the question is primarily
directed towards making up an anticipated shortfall
of 50% protein in feed rations for non-ruminants,
there is, nevertheless, likely to be an impact
on protein feeds across the entire livestock sector.
However, it was decided in the Committee meeting
of 18 September, 2001, that Hearings would be
held to disucss the situation comprehensively,
using this document as a basis for discussion.
The principal EU protein sources are legumes
(peas, beans, sweet lupins, lucerne, red clover,
sunflower, soya-bean), cereals and grasses, brassicas
(kale, swede, turnip, mangels, rape). Some of
the crops can be ensiled and/or incorporated into
other feeds by compounding. The nutrient values
are reasonably well known, although not all are
appropriate for widespread cultivation in most
of the EU, particularly the Northern Member States
(soya-bean, sunflower etc.). There is a vast range
of other crops, as well as crop wastes following
extraction of oils, that can be used for fodder
purposes.
CONCERNS LEADING TO A EUROPEAN SHORTFALL:
1. Shortcomings in world supply
Since the last two common agricultural policy
(CAP) reforms and the World Trade Organisation
(WTO) agreements, the European Union's degree
of self-sufficiency in plant proteins has again
fallen, last year sinking to below 25%. The European
Union imported 34.3 million tonnes of oilseed
cake during the 1999/2000 season, 26.3 million
tonnes of which was soya cake. The EU is the foremost
importer on the world market, importing 40% of
the market supply. Even if some factors indicate
that Europe's protein supply position on the world
market is not quite as weak as all that, others,
on the contrary, raise much more concern about
the situation. In fact the relationship between
supply and demand on the world market is changing
in a way which is not at all favourable to the
European Union.
In the 15 years between 1985 and 2000, world
production in protein-rich substances increased
by 60%. At the same time, world trade in these
products increased, amounting to 53% of world
production, as compared to 14% for cereals. World
trade in oilseeds is now almost the same in value
as trade in cereals, with a turnover of around
55 billion dollars per annum . This increased
supply is concentrated - geographically speaking
- in three countries, namely the United States,
Brazil and Argentina, which between them make
up 80% of world production. The impact of this
geographical concentration of supply is enhanced
by the supply situation of the economic operators
in the soya cake market. In the United States,
which puts out 45% of world production, fewer
than five industrial groups alone account for
90% of pressing capacity. There have been similar
developments in the seed sector. Along with this
concentration of supply there has also been a
concentration of the products placed on the world
market. Soya has rapidly become the main resource
of protein-rich substances. The relative share
of protein-rich substances other than soya in
world trade is steadily shrinking. It dropped
from 27% in 1985 to 22% in 2000.
World demand has rapidly diversified and is growing
by 4% to 5% per annum. Demand is very dynamic
relative to the world cereal market which has
been stagnating since the 1980s. Until the mid-80s,
the European Union was the main client on this
market, importing more than 64% of production.
Nowadays it imports less than 40%. In the meantime
China has increased its imports to account for
10% of trade in this sector. The United States
and Brazil have also boosted their white meat
productive sectors. In addition, it should be
noted that in some countries, development most
often leads first to success in animal protein
production before success in plant protein production.
Therefore the economic emergence of some countries,
particularly in Asia, may cause a further imbalance
between supply and demand on the world market,
as already seen in 1973.
A concentration of supply in certain countries
- subjecting these crops to greater climatic risk
- in addition to the risk that farmers in these
countries might alter their output by reducing
the acreage used for such crops, means that the
European Union's supply of plant protein is increasingly
vulnerable.
2. Development in Meat Consumption
Another effect of European consumers' crisis
of confidence has been to speed up the partial
shift away from red meat consumption to white
meat; this was already a long-term trend. The
use of MBM in ruminant feeds has already been
forbidden for a number of years in the EU. This
ban was extended to cover the use of animal feeds
for pigs and poultry following a Council decision
in December 2000. The ban has also been extended
to cover fishmeal in ruminant diets, although
marine proteins can still be fed to pigs and poultry.
The slump in beef consumption following the BSE
and foot and mouth crises led to an increased
demand for pig and poultry meat. These animal
production sectors are major consumers of protein-rich
substances and energy-providing substances. Therefore,
this in turn, will have a knock-on effect on the
demand for additional high protein feeds for those
sectors. The European Commission's Agriculture
Directorate published a forward-looking study
in July 2001 8 on the European agricultural market
situation. This indicates that pork and poultry
production will undergo sharp increases. It is
estimated that the cumulative impact of this on-going
ban on MBM will be to remove around two million
tonnes of protein feed from the diet of EU farm
livestock per annum.
The working document produced by the Commission
(SEC(2001) 431) on supply and demand in protein-rich
plants in the EU states that demand per fodder
unit should increase by more than 2.5 million
tonnes for the 2000-2001 season due to the cumulative
effect of withdrawíng meatmeal from use and the
shift in consumption towards white meat. As a
result of this increase, there should be an additional
incorporation of 4 million tonnes of cereals and
a requirement of more than 1 to 1.5 million tonnes
of soya cake. In the long term, internal demand
for animal feed would focus mainly on cereals
and to a greater extent on wheat (more than 17%
between 2001 and 2008).
The argument that the effects of white meat
consumption and the abolition of meatmeal will
have a greater impact on the demand for cereals
(energy requirements) and to a lesser extent on
protein-rich substances are invalid. Unless there
are any major technological advances, the knock-on
effect on the demand for cereals will be similar
to the effect on the demand for substances rich
in plant protein.
However, the prospects for acreage sown for the
2001-2008 period within the European Union remains
0.4 million hectares below the production potential
authorised under the Blair House agreements. This
contrasts with the expected increases in demand
for substances rich in plant protein. It also
reinforces the idea that the upward trend in the
white meat production sector will be weakened
by a drop in the EU's degree of self-sufficiency
in plant proteins as part of Agenda 2000. The
European Union is thus in a unique situation because
it is implementing a set-aside system for crops
for which it has a serious shortfall.
OPTIONS TO PROMOTE THE CULTIVATION OF PLANT
PROTEINS:
A solution must therefore be found to make up
the anticipated shortfall of two million tonnes
of protein in EU animal feeds.
1. Increase aid for protein crops
The first option is for the Commission to step
up specific aid for protein crops and co-finance
aid for improving cropping practices as the rate
of arable aid paid by the Commission as this has
a large bearing on the area of pulses grown across
the EU.
American producers are currently receiving aid
per hectare and a minimum guaranteed price because
aid is coupled to a marketing loan (differential
between a minimum price and the world market price).
This aid scheme, which was set up in the United
States, thus has the major disadvantage of distorting
the equilibrium on the world market (the US produces
45% of the world's oilseed output). It should
be pointed out that in the United States soya
yield is far lower than corn yield and as a consequence
soya prices should be 2 to 2.5 times the price
of corn. If soya prices are twice that of corn,
then corn production will rise to the detriment
of soya. But if the ratio is 2.5, soya production
will take off to the detriment of corn. Finally,
the United States, having deemed the soya market
to be more profitable, is carrying out a policy
which encourages income based on soya production.
At the same time the European Union, in applying
Agenda 2000, is doing the exact opposite. As long
as this system continues as it is, the European
Union will be forced to adopt a similar system
which could take one of the two following forms:
- It could set up a safety net, which already
exists in the cereals sector but not in the
oilseed sector, based on the arrangements in
the United States. This would mean additional
aid per tonne when prices are low and no aid
would come into play when prices are high (as
is currently the case). EU oilseed producers
would still only benefit from the non-crop specific
arable payment, but the safety net would offer
them protection if prices fell below a certain
base level.
- In using the second pillar of the Common Agricultural
Policy, farmers could be encouraged to practise
balanced crop rotation where a certain percentage
of acreage would be earmarked for them to grow
oil-producing crops. This incentive, which could
be called "rotational aid" would also have the
advantage of not raising any particular problems
with WTO rules. The advantage of this option
would be that it encourages good crop farming
practices while increasing the acreage under
oilseed and protein crops. Also, how far could
the EU go in encouraging the use of set-aside
land for growing protein crops, before destroying
the effectiveness of set-aside as a production
limitation mechanism? This would again be costly
and would result in a very limited increase
in protein supply.
Encouraging the production of additional dried
fodder by increasing the maximum guaranteed quantity,
while at the same time slightly decreasing the
aid package, would neither be environmentally
friendly, due to the increased fuel utilised during
the drying process, nor effective in making up
the protein shortfall. This option is therefore
discounted, although some farmers may chose to
increase the amount of dried fodder fed to ruminants,
in order that they can divert protein rich feeds
to other livestock. The overall impact will, however,
be negligible.
In view of the current price relationship between
cereals and soya meal, farmers are unlikely to
make up the anticipated protein feed shortfall
by simply using more soya meal. Although there
are signs of significant short-term price increases
for cereals, particularly wheat, it is still likely
that the uptake of cereals in feed rations will
increase. The Commission point out that although
cereals are low in protein, an additional uptake
of 5 million tonnes in 2001 would in fact provide
some 0.5-0.6 million tonnes of crude protein.
This scenario is highly probable, unless significant
fluctuations in the price of cereals or soya meal
occur, and that therefore the key objective must
be to identify options for making up the remaining
estimated 1.5 million tonne protein shortfall
in EU animal feeds.
2. Import proteins
Yield from these plants does vary considerably,
which indicates that science has not yet fully
grasped the genetics of these plants. Consequently,
upgrading the aid should be backed up by a European
plan for research into these crops. They are,
it is true, quite "recent" in comparison to crops
such as cereals and an extensive research and
development programme into the increased yield
potential, utilisation and nutritive value of
pulse crops and brassicas in the EU would be beneficial.
Such a programme should examine improvements to
these crops through the utilisation of appropriate
plant genetics and breeding programmes aimed at
increasing the efficiency of production (lower
inputs, better pest/disease resistance, higher
yields) which may require genetic solutions.
In addition, growing additional protein crops
is likely to lead to increased nitrate leaching
and consequent water pollution. Therefore, protein
crop production does not offer an economically
viable alternative to the importation of soya
meal because such programmes require funding.
There is great hypersensitivity, some would say
unjustified, towards GM crops, especially soya-bean,
which tends to create difficulties for livestock
producers, particularly in terms of meeting the
costs of GM free feeds. However, there is an identifiable
quest for a viable alternative source of protein
but there is an overwhelming public demand for
the unnatural practice of feeding processed animal
protein to cease forthwith.
As far as the presence of GMOs is concerned,
there is currently a ban in the European Union
on the use of new GMOs in human foodstuffs and
animal feed. Nevertheless, comprehensive Community
legislation for managing this health risk has
now reached the last stage of the legislative
process. Directive 2001/18/EC provides Community
bodies and Member States with procedures for monitoring
the possible long-term effects of GMOs. In addition,
Belgian's farm minister, Annemie Neyts, President
of the Council, recently stated that Agriculture
policy makers should be prepared to 'stand up
and tell consumers they are wrong when it comes
to genetically modified foods' and single issue
pressure groups should not shape future policy.
Soya-bean meal is a concentrated source of protein
and energy and is lower in crude fibre than most
other oilseed meals. The higher protein, energy
and lower fibre content of soya-bean meal allow
the animal nutritionist to formulate higher energy
diets which are more efficient in the conversion
of feed to meat. As the Commission report points
out, there is no problem of availability of soya-bean
meal on the world market. The importation of an
additional 1 - 1.5 million tonnes of soya-bean
meal into the EU would only add some 5% to existing
imports. Nevertheless, there will need to be greater
public acceptance of the likelihood of GM soya-bean
meal entering the EU food chain under such circumstances.
Most soya-bean production comes from the US, Brazil
and Argentina, with China in fourth place. The
vast majority of soya-bean output is genetically
modified (89% in the US in 2000). Only Brazil
claims to offer GM free soya-bean meal. Currently,
there is only one variety of GM soya-bean meal
imported into the EU with Commission approval.
Of the other main varieties, one has been authorised
for release in the US but is not yet in general
use and the other is an identity preserved (IP)
variety that commands a significantly higher price
than GM varieties.
There is therefore a high probability that any
additional soya-bean meal imported into the EU
will be from GM sources, unless compounders insist
on purchasing Identity Preserved (IP) soya-beans.
IP soya-beans are sown, harvested and stored in
a carefully controlled regime which ensures they
are at all times kept separate from GM crops.
Needless to say, such soya-bean meal is far more
expensive and would not be a viable option for
inclusion in most EU animal feed rations. The
additional importation of around 1-1.5 million
tonnes of soya-bean meal from outside the EU,
will be a relatively low cost, economically viable,
and essential prerequisite to making up the anticipated
shortfall in EU feed proteins. However, improved
traceability and labelling are therefore indispensable
in order to build public confidence in the safety
and environmental acceptability of GMO's in Europe.
To this end, there is full European legislation
on monitoring undesirable substances in aminal
feed (Directive 95/53/EC and Recommendation 99/26/EC).
These texts are currently being revised and particular
attention is being paid to shortcomings in the
manufacturing processes. Moreover the labelling
of mixed feed for animals (96/225/EC) is also
currently under review. This should make it easier
to identify the raw materials used in plant oil
cake. The responsibility for implementing these
directives lies with Member States.
3. Make use of the opportunity of enlargement
Insofar as the negotiations should be concluded
by 2003, one can reasonably expect that at least
some of the applicant countries will have joined
the European Union by 2008.
The degree of self-sufficiency of the applicant
countries is higher than that of the European
Union, since it was around 80% in 2000. However,
these countries still export their oil seed because
their crushing machinery is obsolete. They therefore
import soya cake in large quantities for their
livestock sector. With the application of Agenda
2000, it is expected that their oil seed exports
will remain stable.
Therefore, although the integration of the applicant
countries into the European Union would mean greater
self-sufficiency in plant proteins by raising
it to nearly 28%, the Commission is forecasting
a fall in their production levels and a shift
towards cereal production.
It is important to offer those applicant countries
with a large farming sector the option of increasing
their production of oil seed and protein crops
for their own market and also for the European
market, which would provide them with an unlimited
outlet. Without such an option, there is a risk
of a further increase in cereal production for
which outlets must be found on the world market,
and a higher set-aside rate would have to be implemented.
Such assistance could provide the beginnings of
a common policy in these countries which have
genuine production potential (rape seed and pulses
in the north and sunflower seed and soya in the
south). At the same time, Europe's position in
plant proteins could be improved and the applicant
countries could be offered a genuine development
and market opportunity.
A plan for giving a new boost to plant protein
crops in the Community will necessarily involve
additional budgetary resources. Nevertheless,
it would be preferable to advocate support for
developing those sectors which do present potential
outlets on the European market and therefore offer
greater economic prospects than would be achieved
by developing those sectors which only target
the world market, with all the disadvantages that
this option would entail.
4. Developing the non-food sectors
Maintaining a diversity of supply sources for
protein-rich substances would decrease the risks
associated with dependence on one source. Developing
the non-food sectors, the co-products of which
are used in animal feed, would spread risk.
The economic development of protein-bearing plant
production slipped back relative to that of cereals
when Agenda 2000 introduced uniform aid for arable
crops. Thus the acreage under protein crops (peas,
beans and sweet lupins) was cut by 13% between
the 98/99 and 99/2000 seasons. Total acreage under
crops in the year 2000 was 11% lower than in 1990.
The same was true for production, which fell by
25% over 10 years. It therefore seems vital that
this production potential, which did have outlets
before the CAP reform, should be regained at European
level.
Maintaining an aid differential of the order
of EUR 20/T would provide a new incentive to farmers
to grow these crops. Specific aid for protein
crops could be increased by EUR 11/T. This aid
could also be based on the agricultural value
of these plants in the crop rotation cycle and
be incorporated into the second pillar of the
CAP. Although Agenda 2000 means that this sector
will no longer be subject to the Blair House agreement
constraints as from the 2002/2003 season, the
implementation of the Agenda entailed a 10% drop
in support for oil seed crops. Thus this sector
was also suddenly faced with external competition
through increases in American support for its
own oil seed sector.
Oil-bearing plant production gives rise to two
products, namely vegetable oil and oil cake (co-products
used in animal feed). Nevertheless the market
in vegetable oil as a foodstuff is not expanding
as the oil cake market is. There would therefore
be considerable economic value in developing the
non-food sector by offering subsidies to grow
crops on land which has been set aside. In the
year 2000, 836,000 hectares in Europe were given
over to crops grown for non-food purposes.
There are, however, serious disadvantages. Growing
crops on set aside land would negate the aim of
set aside land; the means to control production.
Should an increase in production be required;
for example in a time of war when normal supplies
are cut off, there would be no available land.
On the other hand, if over-production existed,
there would be no means of limiting production.
Secondly, good farming practices require crop
rotation combined with a rest period for the land.
If all land is being farmed, soil may decrease
in quality, crops may weaken, and the area may
become more dependent on fertilisers - of concern
to enviornmental groups already. Finally, if subsidies
are provided for growing protein crops on set
aside land, then farmers may grow protein crops
on their normal land as part of crop rotation,
and cereals or protein crops on their set aside
land, thereby either over producing cereals, or
claiming a double subsidy.
Developments in lipochemistry have meant that
several biodegradable products have been created
(surfactants, lubricants, solvents and chemical
intermediates). Industrial demands in the detergents
sector is currently very strong although the bio-lubricant
market is still emerging. Bio-lubricants seem
to have promising prospects for 4-stroke engines.
In addition, the oil seed sector has already begun
to look actively at market possibilities for biodegradable
solvents. The Committee stresses that all these
products fit into the European strategy for sustainable
development. Promoting the prospects for these
products and demonstrating their capabilities
should help speed up the development of this productive
sector.
The second outlet for vegetable oils in the
non-food sector is in bio-fuel production (methyl
ester). This product could meet two major requirements
at European level. First of all it could help
reduce the European Union's energy dependence
on oil products. Recent increases in oil prices
have demonstrated how vulnerable the European
economy is to changes in the supply costs for
this energy source. Thus, developing bio-fuel
could represent one solution for making the EU
less vulnerable.
This product also plays a part in moves to combat
the greenhouse effect. In fact the eco-balance
of diester indicates that one hectare of oil-bearing
plants used for this purpose will mean that 2.71
tonnes less CO2 is produced (this calculation
does not take the use of co-products into account).
Moreover the total energy produced by methyl ester
and its co-products is 2.65 times greater than
the energy used in its production. Developing
the bio-fuel part of the oilseed sector offers
Europe a dual opportunity. Firstly, it will enable
Europe to meet its Kyoto protocol commitments.
Secondly, co-products from the seed crushing process
can be used for animal feed. At present, developments
in the non-food sector are mainly determined by
the tax situation of bio-fuel. For this reason
either the tax status of bio-fuel ought to be
consolidated at Community level so as to take
the environmental advantages into account and
ensure that rules and regulations do not act as
a deterrent to using this fuel. The rules governing
these sectors also ought to be reviewed to provide
farmers with incentives to grow these crops.
Hitherto progress in the non-food side of oil
seed production has occurred where there has been
exceptional authorisation for production on set-aside
land. Currently, EU rules governing this productive
sector are inadequate. Indeed the administrative
monitoring system deters producers wishing to
plant crops on set-aside land for non-food purposes.
Since these prospects (lipochemistry and bio-fuel)
are of considerable importance for the whole Community,
the Commission must change tack and steadfastly
propose a suitable regulatory and fiscal framework
for these product outlets which have proved their
worth despite the regulatory handicaps.
5. Reverse the temporary ban on fishmeal
The final option to increase supplies would be
a reconsideration of the current temporary ban
on fishmeal in ruminant feeds. The ban was first
imposed by the Council in reaction to the spread
of BSE on the continent. Fishmeal should not have
been classified as an animal protein when it is,
in fact, a marine protein. Fishmeal is a natural
product, supplying invaluable sources of oils,
vitamins and proteins and consequently six million
tonnes of fishmeal are used every year world-wide.
It has been widely used in animal diets for many
years and is particularly useful as a feed additive
for pregnant ewes and all classes of dairy and
beef cattle. Fishmeal is incorporated into livestock
feed in the EU under a carefully managed and strictly
controlled conservation regime. There has never
been the slightest suggestion of links between
fishmeal and BSE or CJD. Fishmeal manufacturers
who use fishmeal and who already have the most
stringent controls in place, now have to dedicate
specific plants to producing feedingstuffs only
for ruminants, where all fishmeal has been banned,
while other plants will separately be required
for pig and poultry feed production, where fishmeal
is still allowed. This is causing significant
increases in plant, transport and handling costs
and is damaging for many struggling businesses.
Lifting the ban on fishmeal in ruminant feeds
would play a significant role in making up the
anticipated shortfall in protein.
CONCLUSIONS:
1. Increase aid for protein crops
Advantages:
- increase protein yields
- encourages good farming practices whilst increasing
acerage under oilseed and protein crops
- compete with the US
- safety net supports prices
Disadvantages:
- limits use of set aside mechanism
- increased production results in increased
water pollution and nitrate leaching
2. Import proteins
Advantages:
- increase protein available
- lower fibre content and increased energy
yields of genetically modified soya bean imports
formulates higher energy diets which are more
efficient in the conversion of feed to meet
Disadvantages:
- genetically modified imports
- GM-free feed too expensive
- lack of scientific evidence
3. Make use of the opportunity of enlargement
Advantages:
- increase the self-sufficiency of the EU
- satisfy the market more locally
- integrate ascesion countries more quickly
- greater economic prospects
Disadvantages:
- increased protein yield
- time frame: enlargement is still years away
- budgetary resources required
4. Developing the non-food sectors
Advantages:
- low cost
- combat Greenhouse effect by helping to meet
Kyoto Protocol commitments
- animal feed is a co-product of seed crushing
- decrease dependence on one source
- co-products used in biofuel and lipochemical
industries
Disadvantages:
- over produce cereals on set aside land
- claim double subsidy
- negate aims of set aside land such as limiting
production
- increased soil erosion, increase dependence
on fertilisers, decreased soil quality
5. Reverse the temporary ban on fishmeal
Advantages:
- increased protein availability
- increased oils, vitamins and proteins
- decreased plant, transport and handling costs
Disadvantages:
- cross-contamination with MBM
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