EFMA Food Forecast 2008-2018

FORECAST OF FOOD, FARMING AND FERTILIZER USE IN THE EUROPEAN UNION 2008-2018

The mission of the European fertilizer industry is to respond to the needs of agriculture and society by providing, in accordance with the principles of Responsible Care, a reliable and competitive supply of high-quality mineral fertilizers.

The industry encourages, moreover, the adoption of Good Agricultural Practices in the use of plant nutrients, thus stimulating farmers and growers to produce high-quality crops in an economically and environmentally sound manner.

The mission of EFMA is to identify, promote and manage the common interests of its members by: • • • •

promoting the role of mineral fertilizers in European agriculture and horticulture; anticipating and preparing for upcoming issues that may affect the industry; being the industry’s spokesperson and sounding board; providing its members with a wide range of statistical information and studies.

ANNUAL FORECAST 2008

Contents HOW THE FORECAST IS MADE

5

OVERVIEW FOR 2018

7

THE CROPPING PATTERN

9

THE FUTURE

11

MORE UNCERTAINTIES

13

MODERN AGRICULTURE FEEDS THE WORLD AND HELPS PROTECT THE ENVIRONMENT AND THE CLIMATE

15

3

“In the next ten years, use of nitrogen in the EU 27 is expected to increase by 3.8%.”

ANNUAL FORECAST 2008

FORECAST OF FERTILIZER USE IN EU27 how the forecast is made

- In spring, a European scenario is established, based on quantitative information from (USDA, FAPRI, European Commission) and qualitative analyses made by the forecasters, EFMA experts.

- Between May and July the general scenario is adapted to the specificities of each country.

National forecasts are then made by forecasters.

- National forecasts are then analyzed and discussed by all experts in July, before integration and publication.

In all EU27 countries, the EFMA Forecast is an upward crop-based procedure, where fertilizer consumption is evaluated by assessing area and nutrient application rates for each crop. However, two different methodologies are used to achieve this crop-based procedure: - In 20 countries (EU15, Estonia, Hungary, Latvia, Lithuania and Poland), representing 87% of the EU27 Agricultural area and 94% of the EU27 fertilizer consumption, the Forecast is an expert-based approach constructed from the national forecast generated by our members.

Fertilizer nutrient consumption in the European Union 27 N P2 O 5 K2 O

Nutrient (million tonnes) 16.000 14.000 12.000

+ 3.8%

10.000 8.000 6.000 4.000

- 0.2% - 4.3%

2.000 0.000 19 27 19 32 19 37 19 42 19 47 19 52 19 57 19 62 19 67 19 72 19 77 19 82 19 87 19 92 19 97 20 02 20 07 20 12 20 17

The EFMA Forecast is an annual exercise that respects the following procedure:

- In the other 7 countries, the evaluation of the production and crop area is based on the economic model used by the European Commission. Application rates used for N, P and K nutrients on each crop are based on an agronomic model developed by a small group of forecasters.

In this report, fertilizer nutrients are expressed as follows: nitrogen (N) as pure element, phosphorus (P) as phosphate equivalent (P2O5, or phosphorus pent-oxide), and potassium (K) as potash equivalent (K2O, or potassium oxide).

5

ANNUAL FORECAST 2008

FORECAST OF FERTILIZER USE IN EU27 overview for

2018

On average, between 2005 and 2008, mineral fertilizers carrying 10.7 million tons (Mt) nitrogen, 3.1 Mt phosphorus and 3.5 Mt potassium are applied each year by European farmers.

phosphorus and 60% potassium, compared to 1979, when phosphorus and potassium consumption peaked.

In the next ten years, use of nitrogen in the EU27 is expected to increase by 3.8%, a confirmation of the positive trend seen last year. Phosphorus is expected to present more moderate decline (-4.3%) than foreseen last year, with potassium having relative stability (-0.2%). By 2018, forecasters expect fertilizers to supply European farmers with 11.1 Mt nitrogen, 2.9 Mt phosphorus and 3.5 Mt potassium.

When comparing the long-term forecast (2017/18) to the last three seasons, we still foresee a rather general reduction for all nutrients in the EU15 countries, but more moderate than in the forecast of previous years. The only exceptions are the increases in N consumption in Austria, Denmark and Sweden due to area increase (development of energy crops drawing profit of the development of rapeseed), and a slight increase of all nutrients in Spain and Portugal due to the development of irrigation.

This is still a substantial downward trend from the consumption peak of the seventies and the eighties.

By 2018 there will be a reduction of 27% nitrogen in the EU compared to 1986, when nitrogen consumption peaked. There will also be a reduction of 68%

In the EU 12 on the other hand, with the exception of Slovenia which is comparable to EU 15 countries, all nutrient consumption will increase.

Forecast changes %inin regional fertilizer use Forecast changes % regional fertilizer use

45

Estonia

Lithuania

5

Portugal Austria

Denmark

Sweden

Spain

Slovakia Czech Republic

15

-15

EU 12

15

Poland

25

-5

Nitrogen Phosphorus Potassium

25

Romania

Latvia

EU 12

5

Thus, the development of grain sector (food-crops and bio-fuels crops) throughout the EU27 will continue to partially compensate the negative impact of the CAP reform on P and K consumption, and contribute to the 3.8% final increase in N consumption.

Forecast changes %ininregional regional fertilizer use Forecast changes % fertilizer use

Nitrogen Phosphorus Potassium

Bulgaria

35

The significant development of nitrogen consumption in the EU12, not offset by a too important decrease of the EU15 consumption, will induce in the whole EU 27 an increase of this nutrient more significant than foreseen in the past.

35

Hungary

55

Due to the current low P&K application rates in the majority of the EU12, strong increases in these elements are forecast in all countries but important variations among countries can appear: in the two new EU countries for instance, Bulgaria foresees a 38% increase for P, whereas estimates show only 25% in Romania.

EU 15

UK

-5

Slovenia

EU 27

Finland Germany

-15

-25

-35

Belgium + Lux

EU 27 Ireland EU 15 Italy

France

Greece

Netherlands

7

In the EU 27 the fertilized area equals 136 Mio ha, of which arable crops account for 68%, (cereals 44%, oilseeds 7%, fodders 9%, other crops 8%), permanent crops 9% and grassland 23%.

ANNUAL FORECAST 2008

FARMING AND FERTILIZING OUTLOOK IN EU-27 Agricultural area in the European Union 27 (current situation)

the cropping pattern

Agricultural area in the European Union 27 (current situation)

Agricultural area throughout EU27 is marked by a large diversity. The current situation is illustrated in the facing pie charts.

Idled land*

In the EU15, fertilized area accounts for 70% of the total agricultural area. The non-fertilized area consists of idle-land, compulsory set-aside (still valid) and non-fertilized grassland.

Coarse grains

The fertilized area encompasses 61% arable crops (of which 37% cereals, 6% oilseeds, 10% fodders, other crops 8%), 11% permanent crops (vineyard, orchards, forest) and 28% grassland.

In the EU12, fertilized area accounts for 76% of the total agricultural area. The non-fertilized area consists of idle-land, and non-fertilized grassland (some non-fertilized grassland is not taken into account in the statistics). The fertilized area encompasses 87% arable crops (of which 61% cereals, 11% oilseeds, 8% fodders), 3% permanent crops (vineyard, orchards, forest) and 10% grassland.

The aggregated figures for the EU 27 are: The fertilized area equals 136 Mio ha, of which arable crops account for 68%, (cereals 44%, oilseeds 7%, fodders 9%, other crops 8%), permanent crops 9% and grassland 23%.

Crop-area combined with the application rates provide the following results: grain sector accounts for 57% of total nutrient consumption, of which 23% is wheat. Grasslands and fodders account for 24%.

Wheat

Grassland nonfertilized

Grassland fertilized Perm. Crops (fruit, vineyard, forest)

Agricultural area in the European Union 15 Idled land* Grassland non-fertilized

Wheat

Agricultural area in the European Union 12

Grassland non-fertilized

Coarse grains Potato Sugar beet

Grassland fertilized

Potato Sugar beet Oilseeds Other crops Fodder crops

Oilseeds Other crops Perm. Crops Fodder crops (fruit, vineyard, forest)

Idled land*

Wheat

Grassland fertilized Perm. Crops (fruit, vineyard, Potato forest) Fodder Oilseeds crops Sugar beet Other crops

Coarse grains

9

Over the next ten years, we foresee that nutrient consumption (N+P+K) will increase by 6% for cereals and 26% for oilseeds.

ANNUAL FORECAST 2008

FARMING AND FERTILIZING OUTLOOK IN EU-27 the future Over the next ten years, the probable new Common Agricultural Policy (CAP) associated with a rather favourable global context for agricultural productions will bring significant changes to the acreage of arable crops in the EU27.

Within the EU27, the acreage of wheat, maize and barley are foreseen to increase again, which, together with a sustained increase in yield, will significantly increase the total EU production of cereals. Other coarse grains, even with a significant drop in the cultivated area, will also present a slight increase in production.

The increase of the oil seed rape production (29%) comes both from the increase in area (20%), and from a sustained increase in yield (7%).

the increased productivity, with the less productive areas being discarded.

Nutrient consumption will decrease by 7% for fodder crops and by 9% for grassland due to the trend toward extensification in the meat sector induced by the new orientation of the CAP. Even if this is a less negative trend than in the past, this does not yet include the future likely abolition of milk quotas. A reason for this limited decrease is of course the still increasing use of organic fertilizers and manure as nutrient sources.

This development in grain production will lead to higher nutrient consumption. Over the next ten years, we foresee that nutrient consumption (N+P+K) will increase by 6% for cereals and 26% for oilseeds.

With regard to sugar beet, the yield increase would all but compensate for the area decrease.

Fertilizer use, however, will drop by 13% due to

Forecast changes 2008/2018 in farming food crops

Forecast changes 2008/2018 in fertilizer use by crop

Forecast changes in farming food crops

Forecast changes in fertilizer use by crop

wheat

wheat

barley

coarse grains

rye, oats, rice

sugar beet

grain maize potato

oilseeds fodder crops

Area (ha) Yield (q/ha)

sugar beet

-20%

-10%

0%

10%

20%

Forecast changes : 2017/18 - Ref.

30%

potato

oilseed rape -30%

Nitrogen Phosphorus Potassium

grassland 40%

50%

60%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Forecast changes : 2017/18 - Ref.

11

ANNUAL FORECAST 2008

THE COMMON AGRICULTURAL POLICY (CAP) more uncertanties For the fourth year we stress the increasing uncertainty around the EU policy context for agriculture. We have reached a new level in 2008 with a dramatic evolution of the global economy and its impact on all EU activities.

this has certainly contributed to the exceptional tension experienced mid 2008 on the global agricultural commodities market. This tension induced strong demand for agricultural inputs especially fertilizers, which have reached record high prices.

The CAP “Health check”.

However, the situation on biofuels has already changed completely with a general stabilization of the biofuels production: a dramatic drop in the USA and a significant slow down in the EU, due to debate on first generation biofuels.

The CAP is now implemented in the EU 27, with 17 Member States already applying the full scheme.

The now agreed “Health Check” will result in more visbility for the CAP over the coming 4 years, and certainly prepare our mind set till after 2013.

Production of biofuels.

Last year, despite the ambitious target set in January 2007 and after an initial slow take-up in biofuel production, the question was “where will it stop?”. The demand was boosted by several factors: • • •

a global demand which has exploded, following the sudden development of bioethanol in the USA. more tensions on the energy market, which keep energy prices at a high level. national biomass plans beginning to be implemented in EU member states.

As a consequence, the food sector has been significantly impacted by the developments, and

The global economic situation.

Despite numerous attempts to reactivate the WTO negotiations, probability for a rapid global agreement continued to fade away. However, the extraordinary financial crisis which now hits the world economy may give new impetus to the procedure. The crisis is becoming the main overall threat, and consequently uncertainty, in any forecast exercise. Despite strong efforts and resource implemented by the EU to react, it is legitimate to consider that the EU now has less control on its economic future. If the tensions on the food supply brought positive incentive for agricultural production, and therefore fertilizer consumption, the impact of the economic crisis on global trade will definitely harm the agricultural development in many parts of the world, especially in developing countries.

NITROGEN, PHOSPHORUS AND POTASSIUM ARE THE THREE MAIN NUTRIENTS OF PLANTS Mineral fertilizers are made from naturally occurring raw materials which have been transformed into a more plantavailable form by industrial processing.

- Nitrogen (N), taken from the air, is essential as an important component of proteins.

- Phosphorus (P), extracted from mined ores, is a component of nucleic acids and lipids, and is key to energy transfer.

- Potassium (K), extracted from mined ores, has an important role in plant metabolism, for photosynthesis, activation of enzymes, osmoregulation, etc.

13

Mineral fertilizers provides 48% of the world population with its food and protein supply.

ANNUAL FORECAST 2008

AGRICULTURE, FERTILIZERS AND CLIMATE CHANGE modern agriculture feeds the world and helps protect the environment and the climate

•

by increased yields from existing farmland; or

•

by expanding farmland area into natural land.

But the creation of new farmland would lead to deforestation and humus depletion. This would release large quantities of carbon dioxide from the carbon which is currently firmly bound in wood and soil organic matter The constant challenge to farmers is to increase the productivity of their existing land, thereby preserving forests and natural areas.

The use of mineral fertilizers provides 48% of the world population with its food and protein supply.

efficient use of inputs such as fertilizer and diesel (for tractors) so that not only are food costs kept down, but greenhouse gas emissions are also kept as low as possible.

Whilst highly productive, European agriculture represents 9.2% of EU green house gas emissions, of which N2O emitted from soils represents 50%. Approximately 2.2% of all emissions are directly caused by mineral nitrogen, 1.2% coming from its use in field (Figure 1). Modern good farming practices are designed to maximize the

Agriculture 9.2%

0% (CO2) 3.9% (CH4 )

Other Sectors

The challenge is to manage the inevitable contribution better by helping farmers to reduce their emissions per unit of production and by reducing emissions from fertilizer manufacture.

Optimized fertilization according to good agricultural practice helps protect the climate.

Modelled calculations of wheat production show that an increased area of farmland, which would become necessary as a result of extensification and reduced fertilization, would lead to increased greenhouse gas emissions (Figure 2).

Figure 2: Half-rate fertilization gives reduced yields so additional land is required to provide food.

Conclusions

Europe, despite a limited land area, has climatic conditions that will continue to make it a key contributor to global agricultural production.

Figure 1

In order to provide the food needed by the growing world population, yields from farmland must be increased significantly by using proven up-todate good agricultural and fertilizing practices. By contrast, extensifying agriculture would result not only in the destruction of currently wild and natural habitats but also in higher prices and higher greenhouse gas emissions per unit of food produced.

4.1% (N2O) Other Sources

Agriculture

1.2% (N2O) Mineral

Nitrogen Other Sectors 90.8%

* (CO2 Carbon Dioxide)

(CH4 Methane) (N2O Nitrous Oxide)

calculation based on UNFCCC(2008), Bouwman (2002), UNECE/EMEP (2007), IPCC (2006)

Figure 2 250 g CO2 eq/kg wheat grain g CO2eq/kg wheat grain

According to the FAO (Food and Agricultural Organization of the United Nations) the need for cereals, will rise globally by 50% by the year 2030.

This increasing need for food can either be satisfied:

GHGemissions emissions due to land use use GHG due to land changeand and cultivation of extra land. change cultivation of this extra-land

200 150 100 50 0

Good GAP Agricultural

Extensive ext. farming

Practice Assumptions: Assumptions: (1) N applied as AN; AN produced with BAT (i.e. incl. N2O catalyst (1) N applied as AN; AN produced with BAT (i.e. incl. N2O catalyst) (2) Yield with GAP: 9.25 t/ha; yield with extensive farming: 7.11 t/ha (2)Additional Yield farmland with GAP: 9.25tot/ha; yield with 7.11 t/ha displaces forest (3) needed compensate for ext.: yield difference (3)Half rate Additional farmland needed to compensate for yield difference displaces forest (4) N fertilization applied in extensive farming compared to good agricultural practice

15

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