Commission outlines European response to mitigate effects of rising global food prices

On 20 May the European Commission today adopted a Communication setting out potential policy responses to mitigate the effects of rising global food prices.

The Communication analyses structural and cyclical factors and proposes a three-pronged policy response

Commission President José Manuel Barroso stated: "The European Union has reacted rapidly to the sudden surge in food prices. We are dealing with a problem that has many root causes and many consequences. So we need to act on several fronts at the same time to address them. The possible policy responses we put on the table today complement the measures we have already taken. The Commission calls on Member States to give a united European response to this global challenge. We will coordinate our response with our international partn ers within the UN and the G8".

The Communication examines the reasons behind the recent surge in food prices, both within the EU and internationally.

Among structural drivers of higher food prices has been a steady rise in demand for both staple and higher value-added foods, particularly in large emerging economies and a general growth in world population.

Rising energy costs are having a marked effect on food prices, particularly by increasing the cost of inputs like nitrogen fertilisers, for which the cost has risen 350 percent since 1999, and through increased transport costs. The growth in crop yields has slowed down and new outlets for agricultural products have emerged.

Temporary contributing factors include poor harvests in a number of regions of the world, a historically low level of stocks, the depreciation of the US dollar, and export restrictions in a number of traditional suppliers to the world market. Speculation has amplified the underlying price volatility.

The Commission notes that current increase followed a three-decade long trend of declining agricultural prices.

The document also says that prices have begun to fall from recent peaks and the Commission expects this to continue and markets to stabilise. However, the Commission does not expect a return to the low prices of the past.

The three-pronged policy response proposed by the Commission today consists of the following measures:

1) short-term: the Health Check of the Common Agricultural Policy (see IP/08/762) and monitoring of the retail sector under the Single Market Review in line with competition and internal market principles.

2) longer-term: initiatives to enhance agricultural supply and ensure food security including the promotion of susta inable criteria for biofuels and development of future generations of biofuels in Europe and at international level, and strengthening agricultural research and knowledge dissemination especially in developing countries.

3) Initiatives to contribute to the global effort to tackle the effects of price rises on poor populations including: a more coordinated international response to the food crisis, in particular in the UN and G8 context; continued open trade policy offering preferential access to the EU market to the world's poorest countries; swift response to immediate short-term humanitarian needs; targeting development aid at longer-term projects to revitalise developing country agriculture.

Commission’s document will be discussed at the European Council on 19-20 June. 

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