Tue. Dec 6th, 2022
Brussels, 9 November 2022

 

Fertilisers play a significant role for food security. Their production and their cost largely depend on natural gas. Following Russia’s invasion of Ukraine, a global mineral fertiliser and energy crisis is now weighing on global food security and food prices. In this context, the European Commission presented today a Communication on ensuring availability and affordability of fertilisers. Today’s Communication presents a wide range of actions and guidance on how to tackle the challenges that EU farmers and industry, as well as developing countries, are currently facing. The need to reinforce the overall resilience and sustainability of our food systems in the medium and the long-term is also addressed, in line with the Communication on safeguarding food security adopted in March 2022, the Farm to Fork strategy and REPowerEU.

Actions to maintain a sustainable EU fertilisers’ production and reduce dependencies

The Communication outlines several best practices and ways ahead to help farmers optimise their fertiliser use and reduce their dependencies while securing yields:

  • Critical sector: Member States may prioritise the continued and undisrupted access to natural gas for fertiliser producers in their national emergency plans in the event of gas rationing, in line with the Commission Communication “Save gas for a safe winter”.
  • Targeted financial support: The amended Temporary Crisis Framework for State aid enables Member States to provide specific support to farmers and fertiliser producers. Funds generated by measures such as the cap on the market revenues of certain electricity generators and the solidarity contribution can also be used, subject to the applicable conditions, for purposes of national support schemes. Furthermore, the Commission will together with Member States examine the expediency of making use of the agricultural reserve worth €450 million for the financial year 2023 for farmers affected by high input costs.
  • Improved market transparency: The Commission will launch a market observatory for fertilisers in 2023 to share data on production, use, prices and trade.
  • Sustainable farming practices and training: The Commission will work with Member States to ensure that relevant interventions such as nutrient management plans, soil health improvement, precision farming, organic farming, use of leguminous crops in crop rotation schemes are widely adopted by farmers. The Commission will also invite Member States to look into further prioritisation and increasing the ambition of such interventions in future revisions of their CAP Strategic Plans.
  • More organic fertilisers: The substitution, whenever possible, of mineral fertilisers by organic fertilisers will reduce EU’s dependence on gas as well as the carbon footprint of the sector. The Fertilising Products Regulation already ensures a better access in the market to fertilisers made from recovered waste and green and circular alternatives to natural gas. Horizon Europe has also invested €180 million in projects on optimisation of nutrient budget, alternative fertilising products and nature-based solutions for nutrient management. The Commission will also adopt in 2023 an Integrated Nutrient Management Action Plan to foster a more efficient use of nutrients, taking into account Member States’ starting points and the Zero Pollution Action Plan.
  • Transition to greener fertilisers: The Commission will encourage Member States to support investments in renewable hydrogen and biomethane for ammonia production.
  • Trade diversification: The Commission has reached out to alternative suppliers of fertilisers to compensate for previous supplies from Belarus and Russia. The Commission also proposed in July 2022 to suspend trade tariffs for ammonia and urea, used to produce nitrogen fertilisers.
Actions to support vulnerable countries and improve global food security

Farmers worldwide and notably those in vulnerable countries acutely feel the impact of the tight fertiliser market. In the international field, the European Commission will continue its efforts to improve global food security by:

  • Continuing to work with its Member States and European Financial Institutions, in a Team Europe approach towards the contribution to the four strands of the Team Europe Response to Global Food Insecurity (Solidarity, Production, Trade and Multilateralism).
  • Cooperating with selected EU partner countries, including through the Global Fertilisers Challenge, to reduce their dependence and consumption on imported mineral fertilisers in improving nutrient management, increased fertiliser efficiency, and alternative agricultural practices, with a particular focus on extension and advisory services for farmers.
  • Improving global market transparency in fertilisers, by contributing to relevant international initiatives concerning fertilisers, in particular the G20’s Agricultural Market Information System (AMIS).
  • Stepping up the support to address balance of payments needs including through the IMF Poverty reduction and Growth Trust, and reinforce cooperation with international financial institutions (IFIs) under the Global Gateway to develop innovative and sustainable investments.
  • Initiating discussions on transparency improvements, including the avoidance of export restrictions on fertiliser trade in the WTO, with the view to delivering on the commitments taken under the declaration on food insecurity agreed at the last Ministerial Conference.
  • Continuing to work with Member States to ensure that global trade in agri-food products, including fertilisers, is able to proceed smoothly.
  • Further strengthening EU humanitarian food assistance, which is already over EUR 900 million so far in 2022. This is around 55 percent more than last year, and almost 80 percent more than in 2020.

Beyond fertilisers’ availability, affordability and use, the EU will continue to address the root causes of hunger, including conflict and insecurity, climate change, and economic shocks. The EU will work with its international partners and Member States to support the enhancement of local production capacities and the creation of sustainable and resilient food systems in the most fragile contexts. While promoting this objective, the EU will pave the way for innovative approaches in support of integrated soil fertility management, applying a diverse set of site-specific soil fertility solutions conducive to sustainable yield gains.

Background

Russia’s illegal invasion of Ukraine has worsened an already challenging situation for the fertiliser market, on the heels of the COVID-19 pandemic. The production of nitrogen fertilisers depends on natural gas. The peak in gas price led to a 149% price rise of fertilisers in September 2022 compared with the year before.  As a result, farmers have been delaying and reducing their purchases of these products. This could lead to lower yields for next year’s harvest, and ultimately to higher food prices, with potentially devastating effects on food security, especially in vulnerable regions of the world that are highly dependent on import of such products and with already high levels of food insecurity.

High and unstable fertiliser prices are challenging for EU farmers. Purchases of fertilisers represent around 6% on average of the share of input costs and up to 12% for arable crop farmers. The objective of the EU’s Farm to-Fork strategy is to reduce nutrient losses by 50% by 2030 while preserving soil fertility. In addition to leading to clear economic and environmental benefits, efficiencies in the EU will reduce tensions in the global market too.

For More Information

Communication on ensuring availability and affordability of fertilisers

Q&A on the Communication

Factsheet on ensuring availability and affordability of fertilisers

The fertiliser market in the EU

Ensuring global food supply and food security

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Source- EU Commission


Q&A: Ensuring the availability and affordability of fertilisers

 

Brussels, 9 November 2022

Why is the Commission proposing a Communication on fertilisers?

The world is currently experiencing a global mineral fertiliser crisis provoked by the high energy prices. Farmers worldwide acutely feel the impact of the tight fertiliser market, since 50% of the global food production today depends on production systems relying on the use of mineral fertilisers. As fertiliser industries need natural gas to produce ammonia and other nitrogen products, they reduce or halt production when the gas prices are too high.

For farmers, the issue is the affordability of fertilisers. In a year, from September 2021 to September 2022, there has been a 149% rise in the price of nitrogen fertilisers. Compared to previous years the increase is even stronger: depending on the products and their composition, it is 3 to 5 times more expensive than usual for farmers to buy fertilisers. As a result, farmers purchase and use less fertilisers, directly jeopardising the yields and quality of their next harvests. Less EU food production could weigh even further on food prices which have been steadily increasing and are an additional burden for households and low-income citizens. While affordability of food is a concern for numerous citizens in the EU, it is the availability of food that has become an acute problem in vulnerable countries around the world.

The Commission’s Communication on fertilisers adopted today analyses the implications of tight fertiliser markets on food security and food prices and lists measures to tackle this. It outlines the measures that have already been taken and the actions currently being implemented or prepared to limit the price of gas. It also proposes medium to long-term measures to reduce the EU’s dependency on imports of fertilisers and to help farmers to optimise the use of fertilisers and shift to organic fertilisers whenever possible. Lastly, it outlines EU support for food security and sustainable food systems in partner countries.

What actions are you taking to help EU farmers?

High fertiliser prices are challenging for EU farmers. Purchases of fertilisers represent around 6% on average of the share of input costs for EU farmers and up to 12% for arable crops farmers. The objective of the EU’s Farm to-Fork strategy is to reduce nutrient losses by 50% by 2030 while preserving soil fertility. This should result in a 20% decrease of use of fertilisers. In addition to leading to clear economic and environmental benefits, efficiencies in the EU will reduce tensions in the global market too.

The Communication outlines several best practices and ways ahead to help farmers optimise their fertiliser use and reduce their dependency on mineral fertilisers while securing yields:

  • Sustainable farming practices and training: All Member States addressed the nutrient use efficiency in their CAP Strategic Plans. The Commission will work with Member States to ensure that relevant interventions such as nutrient management plans, soil health improvement, precision farming, organic farming and agro-ecology, higher use of leguminous crops in crop rotation schemes, etc. are widely adopted by farmers. The Commission will invite, when needed, Member States to look into further prioritisation and increasing ambition of such interventions in future revisions of their CAP strategic plans. Proper advice and training will also be provided to farmers, with the contribution of the new Farm sustainability tool for nutrients (FaST).
  • Targeted financial support: The amended Temporary Crisis Framework for State aid enables Member States to provide specific support to farmers and fertiliser producers. Funds generated by measures such as the cap on the market revenues of certain electricity generators and the solidarity contribution can also be used, subject to the applicable conditions, for purposes of national support schemes. Furthermore, the Commission will together with Member States examine the expediency of making use of the agricultural reserve worth €450 million for the financial year 2023 for farmers affected by high input costs.

In its Communication on safeguarding food security in March 2022, the Commission already adopted several measures to directly support EU farmers. An exceptional support package of €500 million, topped up by national funds, was distributed to farmers and food producers most affected by the serious consequences of Russia’s illegal war in Ukraine. Farmers engaged in sustainable practices were prioritised. The Commission also allowed the production of crops on fallow land, while maintaining the full level of the greening payment for farmers. This derogation was extended to 2023 to enlarge the EU’s production capacity in spite of the limited availability of fertile land.

What actions are you taking to help vulnerable countries?

The European Union has swiftly reacted to the systemic shock generated by the Russian aggression against Ukraine by launching actions to address food insecurity at the global level through the Team Europe Response to Global Food Insecurity. In total, the European Union is estimated to provide € 7.7 billion until 2024 in support to food security and sustainable food systems.

For example, the EU recently mobilised €350 million to boost local food production systems in Africa, the Caribbean and Pacific (ACP). This is an investment in the food autonomy and resilience of partner countries, by enhancing sustainable food production while decreasing the dependence on unsustainable agriculture inputs. Indeed, the EU helps its partners to reduce their reliance on imported fertilisers and dependence on mineral fertilisers by investing in efficiency of use and alternatives, including organic fertilisers, and also sustainable agriculture and soil fertility management.

The Commission will also join the Global Fertiliser Challenge (GFC) launched at the Major Economies Forum in June 2022. The Commission will contribute to this initiative’s objectives by focusing on improving nutrient management for an efficient and sustainable use of fertilisers, with a particular focus on extension and advisory services for small-scale farmers, including women and young people.

Higher import prices for food and fertiliser and disruptions of supply chains for food importers as well as a loss of revenue for some food exporters add to urgent balance-of-payments needs. The Commission’s €100 million contribution to the IMF’s Poverty Reduction and Growth Trust (PRGT) will support vulnerable countries that have seen their import bill increase.

The UN led Global Crisis Response Group plays a key role in coordinating the global response to the worldwide impacts of the war in Ukraine on food, energy and finance systems. The Commission recognises the importance of other international initiatives such as the G7 Global Alliance on Food Security, the Call to Action and FARM. These initiatives include immediate measures to address fertiliser shortages, notably by keeping markets open and avoiding export restrictions, temporarily increasing fertiliser production in order to compensate shortages, supporting fertiliser innovation and promoting methods to maximise fertiliser efficiency.

Finally, the EU is strengthening partnerships for innovative and sustainable investments into the agricultural sector by reinforcing cooperation with International Financial Institutions (IFI) under the Global Gateway, as part of a comprehensive Team Europe response to global food insecurity. This includes the use of the European Fund for Sustainable Development (EFSD+) Open Architecture agriculture investment window that supports climate-smart agriculture systems and resilient value chains. The EBRD’s portfolio already covers significant investments in the agribusiness private sector. The European Investment Bank (EIB) will provide the International Fund for Agricultural Development (IFAD) with a €500 million concessional loan to finance investments to boost agricultural production and generate resilience.

How can the EU secure reliable imports of nutrients and fertilisers?

The EU imported around 26 million tonnes of nitrogen fertilisers, nitrogen and phosphates intermediates in 2021, principally nitrogen-based (10.6 million tonnes), i.e. ammonia, urea, urea ammonium nitrate, ammonium nitrate etc., potash (3.4 million tonnes), phosphorus and precursors (6.4 million tonnes) as well as compound fertilisers containing the three nutrients nitrogen, phosphorus and potassium (5.6 million tonnes). Imports represent respectively 30%, 68% and 85% of the EU consumption of nitrogen, phosphorus and potassium fertilisers. Diversifying the sources of imported fertilisers and intermediate products with a view to ensuring fertiliser availability constitutes a pragmatic reaction to the production woes in the EU.

However, the increased dependence on imports and market volatility particularly exposes EU farmers and the European fertiliser sector. This is why a viable production of fertilisers in the EU is a key factor for our open strategic autonomy and our continued contribution to global food security. A strong domestic EU production also contributes to relieving the tensions on demand in the global market.

In the short term, Member States may prioritise the continued and undisrupted access to natural gas for fertiliser producers in their national emergency plans in the event of gas rationing, in line with the Commission Communication “Save gas for a safe winter”. To improve transparency, the Commission will launch a market observatory for fertilisers in 2023 to share data on production, use, prices and trade.

Over the past year, the Commission has also taken decisive steps to ensure security of supply and stabilise gas markets, a key commodity to produce nitrogen fertilisers. The REPowerEU Communication in May 2022 introduced, among other things, measures to promote renewable gas as well as energy savings, and diversification of energy supplies. It was followed by the Energy Emergency plan presented on 18 October 2022, aiming at strengthening the security of supply and addressing high energy prices.

In the medium to long term, the substitution, whenever possible, of mineral fertilisers by organic fertilisers will reduce EU’s dependence on gas as well the carbon footprint of the sector. The Fertilising Products Regulation already ensures a better access in the market to fertilisers made from recovered waste and green and circular alternatives to natural gas. Horizon Europe has also invested €180 million in projects on optimisation of nutrient budget, alternative fertilising products and nature-based solutions for nutrient management. The Commission will also adopt in 2023 an Integrated Nutrient Management Action Plan to foster a more efficient use of nutrients.

Finally, the Commission will encourage Member States to support investments in renewable hydrogen and biomethane and ammonia produced on that basis. Ammonia produced using renewable hydrogen is a technology that promises to greatly reduce the greenhouse gas emissions from the fertiliser production process and eliminate the EU’s dependence on natural gas for producing fertilisers. The 2022 State aid Climate Environmental protection and Energy Guidelines (CEEAG), allow Member States to set up support schemes which can bridge funding gaps and through the competitive bidding methodology to support the best projects

What are the alternatives to mineral fertilisers?

As part of our medium to long-term response, the Commission’s Communication outlines possible alternatives to mineral fertilisers.

Sustainable farming practices lead to an optimised use of fertilisers that would reduce costs for farmers and benefit the environment. One of the ten key objectives of the new CAP, set to start on 1 January 2023, is to foster sustainable development and efficient management of natural resources such as water, soil and air, including by reducing chemical dependency. Substantial EU financial funding is supporting the high environmental and climate objectives. Indeed, at least 25% of the budget for direct payments will be allocated to eco-schemes, providing stronger incentives for climate-and environment-friendly farming practices and approaches such as organic farming, agro-ecology, carbon farming, etc. as well as animal welfare improvements. Similarly, at least 35% of funds will be allocated to measures to support climate, biodiversity, environment and animal welfare.

Precision farming allows for a more targeted use of fertilisers thanks to satellite technology, among other tools.  Several CAP Strategic Plans support the wider adoption of nutrient management plans that provide recommendations for farmers on which nutrient sources to apply and what rates they should be applied at. The new FaST in the CAP (Farm sustainability tool for nutrients for farmers) will contribute to this objective, simplifying and facilitating the adoption of these plans.

Manure, sewage sludge and biowaste, from methanisation process/biogas or biological and thermal treatments represent organic fertilisers that can partly substitute mineral fertilisers. Developing methods to extend efficient nutrient recycling of organic waste (e.g. livestock manure, anaerobic digestion, sludge and other organic waste streams) into renewable bio-based fertilising products contributes to the objectives of the Farm to Fork Strategy. However, attention should be paid to controlled use in nitrate vulnerable zones.

The Commission had urged Member States to include measures in their CAP Strategic Plans in relation to practices optimising the efficient use of fertilisers, which both reduce dependence from fertilisers and prevent and reduce nutrient pollution. It will ensure that planned interventions are followed up and implemented. It will be possible for Member States to amend their Plans if need be.

There is also potential in the green transition of the fertiliser industry. For example, basing the production process of nitrogen fertilisers on renewable energy and renewable hydrogen, to produce what can be called “green ammonia”.

What about sanctions – are fertilisers from Russia banned into entering the EU, including when destined for third countries?

Russia is engaging in campaigns to manipulate information and spread propaganda. Their aim is to divert the responsibility for the food security crisis away from their illegal actions, by putting the blame on EU sanctions.

None of the sanctions adopted by the EU in view of Russia’s war of aggression in Ukraine target the trade in agricultural and food products, including wheat and fertiliser, including between third countries and Russia. If third countries wish to buy Russian fertilisers, there are no EU sanctions that would prohibit this. In fact, Russian exports of fertilisers to third countries have not decreased.

Far-reaching exceptions for agri-food products exist where they are indirectly affected by other measures.

On 19 September 2022, the EU issued updated guidance on the situation in which EU operators transport a sanctioned item to a third country. It makes it clear that the transfer of Russian fertilisers to third countries is permitted.

What about fertiliser imports from Russia to the EU?

Fertilisers from Russia can enter the EU.

The Commission continues to work closely with Member States to ensure that guidance and implementation by competent authorities are transparent and consistent, and is working to ensure that the effect of sanctions is to achieve the desired objective, namely allowing the transit and flow of fertilisers for use by farmers in the EU and beyond.

For potassium (potash) and potassium containing fertilisers, imports are limited to a quantitative maximum corresponding to the same level of imports from Russia in the period 2017-2021, but this is not a ban. This was introduced to avoid circumvention from Belarus as these products are subject to an import ban from Belarus.

For More Information

Press release on ensuring the availability and affordability of fertilisers

Factsheet on ensuring availability and affordability of fertilisers

The fertiliser market in the EU

Ensuring global food supply and food security

Source – EU Commission

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