Ecosoc Hearing

December 4th, 2001

1. Background

I have had a great deal of co-operation and assistance from ECOSOC and their rapporteur Mr. Sabin and that has resulted in today's hearing. We will have a second hearing in the early New Year in the Agriculture Committee. I presented my Interim Report to the Agriculture Committee this morning and we had a fairly intensive discussion. This is always a subject which generates a great deal of interest and debate and I am grateful to everyone who has come along today to participate in this Hearing.

2. Shortfall

The Commission anticipate 2 million tonne shortfall in plant proteins in animal feed following the on-going ban on MBM in pig and poultry feed, on top of the long-standing ban on MBM in ruminant rations. The Commission produced a report looking at options for filling this gap. The shortfall in plant proteins has also been exacerbated by a slump in beef consumption in the wake of BSE and FMD and a substantial increase in the consumption of pig and poultry meat. The challenge for us is to determine ways in which we can make up the anticipated shortfall in plant protein supply within the EU, without further disadvantaging economically our own agricultural sector or placing all our eggs in one basket in respect of our reliance on a single source of supply.

3. Self Sufficiency

Right now, the EU's self sufficiency in plant proteins has fallen to below 25%. This is set against a background of sharply rising world levels of plant protein production, up 60% in the past 15 years. However, this increased supply is concentrated in three countries - U.S., Brazil and Argentina, who between them, make up 80% of world production. We imported 34.5 million tonnes of oilseed cake into the EU in 1999/2000, over 26.3 million tonnes of which was soya cake. The vast majority of this comes from the U.S, Brazil and Argentina and most of it is genetically modified. The EU is therefore getting itself into an increasingly vulnerable position.

This position could be exacerbated by importing a further 2 million tonnes of soya meal from these countries to make up the anticipated shortfall. although It is also possible that the market may ultimately drive us towards this solution, whether or not we believe it is in our best interests. Certainly this is the outcome predicted by the Commission.

I know from previous discussions within the Agriculture Committee and from discussions with Mr. Sabin that the majority of my colleagues are unhappy simply to accept the inevitability of increasing EU dependency on imported soya. They argue that to do so increases our vulnerability not only from an economic standpoint, where even moderate price rises could have a serious impact across the EU livestock sector, but also from the risk of climatic changes forcing a slump in production. Our livestock sector is becoming as dependent on imported plant proteins as our industrial sector once before became dependent on imported oil.

4. Options To Promote EU Plant Proteins

a) Fishmeal

So what options exist to make up the anticipated 2 million tonne shortfall in plant proteins within the EU? Clearly we are not going to see a return to the feeding of MBM. The public will simply not accept such practices and we must accept that they are right. That is not to say, however, that we should tolerate the on-going ban on fishmeal in ruminant feeds. The ban was first imposed by the Council in reaction to the spread of BSE on the continent of Europe. They feared cross contamination with MBM in feed mills. However, this is a problem which can be overcome by the application of proper controls and careful monitoring. Indeed, feed producers who use fishmeal now have to dedicate specific plants to producing feedingstuffs only for ruminants, where all traces of fishmeal have been banned, while they must provide separate plants for pig and poultry feed production, where fishmeal is still permitted. This is clearly quite ludicrous.

Fishmeal is a natural product, supplying invaluable sources of oils, vitamins and proteins. It has been widely used in animal diets for many years and is particularly effective as a feed additive for pregnant ewes and all classes of dairy and beef cattle.

There has never been the slightest suggestion of any link between fishmeal and BSE or CJD. Indeed, I visited a fishmeal plant in Denmark two weeks ago where half a million tonnes of meal was being produced annually in the same manufacturing process that was turning out fish oil for human consumption. Anyone who believes in the benefits of cod liver oil for human health, must scratch their head in disbelief that fishmeal can no longer be fed to cows or sheep. So let us do away with this costly ban on an excellent protein source.

b) EU protein crops

However, lifting the ban on fishmeal will only have a tiny impact on the anticipated protein shortfall in the EU. So what other sources of plant protein can we search for within our own borders? The principal EU protein sources are legumes such as peas, beans, sweet lupins, lucerne, red clover, sunflowers and of course soya-beans. Then we have cereals and grasses and brassicas, which include kale, swede, mangels, turnip and rape. Not all of these crops are suitable for widespread cultivation in the EU. For example, sunflower and soya-bean are rarely grown in any of the Northern Member states, although they can be grown with some success in the South.

Production of some of these plants, such as the pulse crops and brassicas, could be increased through improved plant breeding to encourage higher yields, better pest/disease resistance and lower input costs. However, such advances will require increased funding for research and development and may, ultimately, result in even more GMO solutions which may not be compatible with public opinion.

Alternatively we could encourage the production of additional dried fodder by increasing the maximum guaranteed quantity, while at the same time slightly decreasing the aid package. However, this solution would lead to more fuel consumption during the drying process and would not be environmentally friendly nor would the overall impact be sufficient to make anything other than a tiny contribution to the EU protein shortfall. It is, nevertheless, worth remembering that grass is an essential protein source for our livestock sector in the EU and makes a major contribution to our overall feedstock requirements.

However, we are looking at an additional demand for plant proteins, partly brought about by rising consumer demand for white meat, while demand for ruminant meat is falling. This should be borne in mind when looking at the wider picture.

Given the current price relationship between cereals and soya meal, and even factoring in short-term price increases for cereals, particularly wheat, many farmers are still likely to increase the feeding of cereals to their livestock. As the Commission point out in their report, although cereals are low in protein, an additional uptake of 5 million tonnes would actually provide some 0.5 - 0.6 million tonnes of crude protein. Cereals may therefore provide a partial solution to our problem.

c) Manipulating the market

The other possibility is, of course, for the EU to manipulate the market to encourage more plant protein production. This could be achieved in several ways. We could provide increased aid for protein crops. I have pointed out in my report that the U.S., having deemed the soya market to be more profitable than cereals, is encouraging income based on soya production by providing an aid per hectare and a guaranteed minimum price. At the same time the EU, in applying Agenda 2000, is doing the exact opposite.

A key element in the Agenda 2000 decisions was the alignment of oilseed aid to that of cereals as of 1st July 2002. The maximum area agreed under Blair House for crop specific aid is 5.5 million hectares from which we can subtract the set aside rate of 10%, which limits the maximum area to 4.9 million hectares. If set aside is increased then the area agreed for crop specific aid will decline. In any case, we are very close to this limit just now, so any aid package aimed at increasing production of oilseeds is bound to be relatively costly and limited in scope by Blair House as well as dismantling a key element of Agenda 2000. Once again, such measures would not be sufficient to make up the anticipated EU shortfall in plant proteins.

We could also consider the introduction of a price safety net for oilseeds, similar to the US loans deficiency payments or subsidised crop insurance system.

Under such a system EU oilseed producers would still benefit from the non crop-specific arable payments, but the safety net would offer them protection if prices fell below a certain level. However, instigating a safety net, such as a minimum guaranteed price, whether the mechanisms are applied or not, would still be considered a crop specific aid under the Blair House Agreements.

d) Rotational aid

I am rather attracted to Mr Sabin's idea of using the second pillar of the CAP to encourage farmers to practice balanced crop rotation, where a certain percentage of land would be earmarked for the growing of oilseeds. Mr Sabin calls this "rotational aid" and points out that it would fall outwith current WTO restrictions. It would also encourage good, environmentally friendly farming practice while increasing substantially the production of plant proteins. This idea is worthy of further exploration.

5. Enlargement

I think the best opportunities we have for increasing EU self sufficiency in plant proteins will come about through the process of enlargement. By its nature, however, this has to be regarded as a longer-term option. We can assume that some of the accession states may become full members of the EU by 2004. Others will join by 2009. The degree of self sufficiency in these accession states is around 80%, vastly higher than in the existing 15 Member States. The integration of the accession states into the EU will, however, only increase our overall self-sufficiency to around 28%.

However, the Commission is forecasting a fall in plant protein production in these countries, once they become full members of the EU, and a switch to cereals. This would be disastrous. We have a ready-made market for oilseeds and protein crops from which the accession states could benefit greatly. On the other hand, increased cereal production would simply add to the overall surplus and lead to the introduction of higher set-aside rates. We must implement a plan which would encourage the production of rape seed, pulses, sunflower and soya and provide major economic benefits not only to the accession states, but to ourselves through greater self-sufficiency.

6. The Non-Food Sector

I believe that there is also great potential in developing the non-food sector. The production of oil-bearing plants for bio-fuels such as methyl ester and for bio-lubricants and biodegradable solvents, is important in the context of this debate because oil cake is produced as a valuable by-product. The Commission have shown considerable interest in this sector and I think it merits close examination. However, developments in this area are mainly determined by the tax situation for bio-fuels and we have a long way to go before we can expect agreement on an EU-wide harmonised system of taxation which would encourage greater bio-fuel production.

7. Conclusion

In conclusion, there are various things which we can do in the EU to help increase self-sufficiency in plant proteins. Nevertheless, the short-term impact of such measures may be limited, while the longer-term benefits of enlargement may still leave us depending on market-driven imports of soya from North and South America. Bearing this fact in mind, I feel that we will be forced to widen the debate on GMO's. The vast majority of soya-bean meal is genetically modified (89% in the U.S in 2000). Only Brazil claims to offer GM free soya. 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, while the other is an identity preserved (IP) variety that commands a significantly higher price than GM varieties.

I think we will be naive to consider that EU feed manufacturers, or indeed their customers the livestock producers, will be prepared to pay the high prices commanded by IP soya farmers. There is therefore a high probability that any additional soya-bean meal imported into the EU will be from GM sources. Improved traceability and labelling will therefore be an absolute necessity in order to build public confidence in the safety and environmental acceptability of GMO's in Europe.