Article: Food and Ag Policy Briefing 25 May

This article is taken from our IEG Policy platform dated 25/05/20.

While EU policymakers made some important decisions on their future agri-food policies last week, US farmers got more clarity on the emergency aid that they will soon receive from the government.

The European Commission finally launched the long-awaited Farm to Fork (F2F) Strategy on 20 May, after COVID-19 disruptions had first threatened to delay this release by several months.

The plan aims to drive more sustainable food consumption and production in the EU and forms a key component of the European Green Deal, the Commission's plan to make the EU climate-neutral by 2050.

The F2F strategy includes 27 measures and sets out four key EU-wide targets, namely reducing the use and impact of pesticides, fertilisers and antimicrobials while increasing the amount of agricultural land under organic farming.

To push consumers towards healthier diets, the Commission also backs the use of taxes, nutrient profiles, and a mandatory EU front-of-pack nutrition label, as was reported by IHS Markit's Sara Lewis.

While environment groups have generally welcomed these new green ambitions, some were left frustrated because the Common Agricultural Policy (CAP), which they see as the main weak spot for achieving the sustainability ambitions, will largely be left untouched.

Meanwhile, agri-food associations have expressed worries that the proposals to reduce the use of agri-chemical inputs will lead to higher costs for farmers and have a negative impact on food supplies - declaring that "targets are not solutions" for the sector's problems.

Ahead of the F2F release, IHS Markit's Steve Gillman released our first monthly newsletter on sustainability, in which he starts off by exploring what a green recoveryfor the agri-food sector could look like post-COVID-19.

Earlier last week (18 May), the European Parliament adopted its position on the transitional rules for the CAP, thereby paving the way for 'trilogue' negotiations on the interim policies with the Council and Commission.

The EU executive's original proposal seeks to extend the current CAP rules for 2014-21 by one year, until the end of 2021, to deal with the continued delays in the negotiations on the policy's reform.

However, the Parliament wants to introduce a clause that would automatically prolong this transition period to two years in case no agreement is reached on the CAP reform and EU budget by 30 September - a scenario that seems increasingly likely.

COVID-19 support for US farmers

Across the Atlantic, US President Donald Trump and USDA Secretary of Agriculture Sonny Perdue revealed more details on their Coronavirus Food Assistance Program (CFAP) on 19 May, as covered by IHS Markit's analysts Richard Morrison and Roger Bernard.

The $19 billion support package for the country's farmers includes $16 billion to fund direct payments to farmers and $3 billion to take certain agri-food products off the market.

Although US agricultural groups have generally welcomed the aid payments, many have stressed that more aid will be needed, while some continue to express concerns about the foreseen payment limits.

Apart from these measures, the USDA has also made $1 billion available to guarantee COVID-19 loans to rural business and agricultural producers that are ineligible for Farm Service Agency (FSA) loans.

However, Democratic US President hopeful Joe Biden sharply criticised the Trump administration's COVID-19 response as insufficient and called for more actions to support the country's struggling farmers.

Such additional aid could be coming soon, according to the National Milk Producers Federation (NMPF), as the farming group said it expects another COVID-package to be introduced shortly after the Senate returns from the Memorial Day recess in June.

Meanwhile, US officials have announced further progress in the trade deal with China as the Asian country allowed more imports of specific American agri-food products - bringing good news to US dairy, fruit, grain and meat producers.

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.