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FORECAST OF FOOD, FARMING AND FERTILIZER USE IN THE EUROPEAN UNION 2007-2017

Overview for 2017

Forecast of Fertilizer Use in the EU-27

Taking the average consumption of three campaigns (2005, 2006 and 2007), mineral fertilizers carrying 10.7 million tonnes (Mt) nitrogen, 3.1 Mt phosphorus and 3.5 Mt potassium were applied each year by farmers in the EU-27.

How the EFMA Forecast is Produced The EFMA Forecast is an annual exercise that respects the following procedure: - In spring, a European scenario is developed using quantitative information (e.g. from USDA, FAPRI and the European Commission) and qualitative analyses made by the EFMA Forecasters; - Between May and July, each National Forecaster adapts this general scenario to the specific situation in his country; - These resulting national forecasts are then analysed and discussed by all experts in July and are integrated into this overall EFMA Forecast.

The EFMA Forecast is based on a crop-approach for all the EU-27 countries, where fertilizer consumption is evaluated by assessing area and nutrient application rates for each crop. However, two different approaches are used: - In 16 countries (EU-15 and Poland), representing 82% of the EU-27 agricultural area, the Forecast is an expert-based approach using the national forecasts produced by our members; - In the 11 other countries, the evaluation of the production and crop area is based on the agro-economic model used by the European Commission. The application rates for N, P and K nutrients on each crop are based on an agronomic model developed by the EFMA 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).

Fertilizer Nutrient Consumption in the EU-27 Nutrient (million tonnes) 16

N

14

P205

12

K 20

10 8 6 4 2 0 1950

2

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

In the next ten years, use of nitrogen in the EU-27 is expected to increase by 3.6%, a confirmation of the positive trend seen last year, while phosphorus and potassium are expected to decline by 4.4% and 2.6% respectively, although the decline is more moderate than foreseen last year. By 2017, EFMA Forecasters expect fertilizers to supply European farmers with 11.0 Mt nitrogen, 3.0 Mt phosphorus and 3.4 Mt potassium.

This is still a substantial negative trend from the consumption peak of the Seventies and the Eighties: by 2017, nitrogen will have decreased by 28% in the EU-27, compared to 1986 when the nitrogen consumption peaked. There will also be a decrease of 67% phosphorus and 61% potassium, compared to 1979, when the consumption of phosphorus and potassium peaked.

In the long-term Forecast (2017), we still foresee a general decrease of all nutrients in the EU-15, but more moderate than was forecasted last year. The only exceptions are the increases in N consumption in Austria and Sweden due to a strong development of energy crops. In addition, there is a slight increase of all nutrients in Spain due to the development of irrigation.

ANNUAL FORECAST 2007

In the EU-12 on the other hand, with the exception of Slovenia, consumption of all nutrients will increase.

However, the variation amongst countries can be particularly important with regards to P and K: Bulgaria, for instance, foresees a 48% increase of P, while the increase is only 10% in Romania. Poland, the biggest agricultural country (accounting for approximately 48% of the nutrient consumption in the EU-12), foresees a positive development for N, P and K consumption, albeit on a more moderate level than foreseen in 2006. As a consequence, the significant development of nitrogen consumption in the new Member States will counteract the decrease in EU-15 consumption, resulting in an overall increase of nutrient consumption for the whole EU-27. The increase in the EU-27 consumption is actually more significant than was foreseen last year.

Likewise, the development of energy crops (biomass and biofuels) throughout the EU-27 will continue to partially compensate the negative impact of the Common Agricultural Policy (CAP) reform on P and K consumption, and will contribute to the increase (3.6%) in N consumption.

Changes in Regional Fertilizer Use by 2017 50

N

40

P205 K20

30 20 10 0 -10 -20 Austria Germany Spain

France

United Kingdom

Italy

Sweden

EU-15 Bulgaria Hungary Poland Romania Slovenia EU-12

EU-27

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Farming and Fertilizer Outlook in the EU-27 The Cropping Pattern The cropping pattern throughout the EU-27 is very diverse. The current situation is illustrated in the pie charts on this page.

In the EU-15, fertilized area represents 99 Mio ha, of which arable crops account for 60%, (cereals correspond to 36%, of which wheat represents nearly one half, while fodders account for 10%). Grassland accounts for 29% and permanent crops (fruits, vines and forest) account for 11%.

In the EU-12, fertilized agricultural area represents 39 Mio ha, of which arable crops account for nearly 87%, (cereals represent 61%, with one-third wheat and two-thirds coarse grains, while fodders account for 8%). Grassland accounts for 10% and permanent crops (fruits, vines, forest) account for only 2.8%.

The aggregated figures for the EU-27 show that the fertilized area represents 138 Mio ha, of which arable crops account for nearly 68%, (cereals 43%, fodders 9%) and grassland 24%. Permanent crops (fruits, vines, forest) account for 9%.

Agricultural Area in the EU-27 (current situation)

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Agricultural Area in the EU-15 (current situation)

Potato Sugar beet Oilseeds Other crops Fodder crops Permanent crops (fruit, vines, forest) Coarse grains Wheat

Potato Sugar beet Oilseeds Other crops Fodder crops Permanent crops (fruit, vines, forest) Coarse grains Wheat

Grassland fertilized Grassland non-fertilized Idle land

Grassland fertilized Grassland non-fertilized Idle land

Agricultural Area in the EU-12 (current situation) Potato Sugar beet Oilseeds Other crops Fodder crops Permanent crops (fruit, vines, forest) Coarse grains Grassland fertilized Grassland non-fertilized Wheat Idle land

ANNUAL FORECAST 2007

The Future Over the next ten years, the new Common Agricultural Policy (CAP), as well as a favourable global context for agricultural products, will significantly change the acreage used for different arable crops in the EU-27.

Within the EU-27, the acreage of wheat, maize and barley will increase again. This, together with a continuous rise in yields, will significantly increase the total production of cereals in the EU. Only coarse grains – the cultivated area has decreased significantly – will not follow this trend, although the production is seen as stable. A production increase of all cereals of 12% in the EU-15 compared with a production increase of only 6% in the EU-12, illustrates, contrary to what was foreseen last year, a change mostly due to the development of bioenergy crops.

Fertilizer consumption will decrease by 6% for fodder crops and by 13% for grassland due to the trend toward extensification of animal husbandry induced by the CAP. Although the decrease is less than last year, the figures may well change in the future due to the likely abolition of milk quotas. The limited decrease is due to the increasing use of organic fertilizers and manure as nutrient sources.

Changes in Farming Food Crops in the EU-27 by 2017 Area (ha) Wheat

Yield (q/ha)

Barley Rye, oats, rice Grain maize

The increase of the oilseed rape production (57%) is due to both the increase in area (38%), and a sustained increase in yield (13%).

Potato Sugar beet Oilseed rape

The total grassland area will decrease slightly, due to a 4.5% reduction of the fertilized grassland area.

The developments in the crop area combined with the application rates give us the following results: today, cereals account for 49% of the total fertilizer consumption, of which 23% is for wheat. Grassland and fodders account for 24%. Over the next ten years, we foresee that fertilizer consumption (N+P+K) will increase by 1% for coarse grains (barley and rye), a trend reversal compared to last year. With regards to sugar beet, fertilizer use will decrease by 10% – the decrease is lower than expected due to sugar beet’s potential use as a bioenergy crop. The rate of fertilizer use for oilseeds will increase by 35%, and for oilseed rape by 40%. The rate of fertilizer use for oilseed rape is considered as high, even though it is lower than last year.

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Changes in Fertilizer Use by Crop in the EU-27 by 2017 N

Wheat

P205

Coarse grains

K20

Sugar beet Oilseeds Fodder crops Potato Grassland (fertilized) -30%

-20%

-10%

0%

10%

20%

30%

40%

50%

5

The Common Agricultural Policy

Nitrogen, phosphorus and potassium are the three main nutrients of plants

More Uncertainties

Mineral fertilizers are made from naturally-occurring raw materials which have been transformed into a more plant-available form by industrial processing.

The CAP “Health check”: The Common Agricultural Policy is now implemented in the EU-27, with 17 Member States already applying the full Single Farm Payment scheme. The scheme is however implemented using many different models.

We have already seen that the negative impact of the CAP, especially the implementation of the Single Farm Payment which induced a sharp decrease of the cereal area, has now been totally counterbalanced by the development of bioenergy, especially biofuels, as they will mostly be produced from arable crops in the coming years. However, the mid-term review of the CAP (the so-called “Health check”) will bring new measures which are likely to have various effects on fertilizer consumption: - The abolition of set-aside will contribute to an increase in consumption; - Compulsory modulation will induce a consumption decrease.

The production of biofuels: Contrary to last year, the question is no longer if bioenergy development will finally reach the targets the European Commission set in the 2003 Directives, but rather where the development will lead, even despite the more ambitious targets set by the Commission in the Energy Package of January 2007. The boosted demand is due to several factors: - A global demand which has exploded, following the new sudden development of bioethanol in the USA; - More tension on the energy market, which maintains energy prices at a high level; - The national biomass plans starting to be implemented in the EU Member States.

The food area is consequently impacted by the factors mentioned above. Therefore, the foreseen increase of nitrogen consumption during the coming ten years is largely due to these developments. The key question is now if normal market mechanisms are able to maintain an acceptable balance between the production of food and the production of energy, without threatening the global food supply.

For Europe, the balance between food and energy is also relevant. Europe is already too dependent on imported energy.

The positive development of the European renewable energy production will change this situation only marginally. However, Europe must, under all circumstances, guarantee an independent food supply to her citizens. Therefore, besides the natural mechanisms of the market forces, certain strategic guidance is needed from European policies regarding what will be produced on the different plots of the European fields – should it be food for the Europeans or for export, biomass for energy or industrial raw materials?

The WTO Doha discussions: The possibility that an agreement can be reached is diminishing and will therefore lead to possible new constraints in international trade and consequently greater uncertainties concerning the impact on EU agriculture. New bilateral agreements as well as the possible absence of arbitrage rules which help to solve trade disputes, will most probably put more pressure on agricultural production, even in spite of a favourable global context.

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• 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 the transfer of energy in cells; • Potassium (K), extracted from mined ores, has an important role in plant metabolism, for photosynthesis, activation of enzymes, osmoregulation etc.

ANNUAL FORECAST 2007

High Improvement Potential in the EU-27 Nitrogen Use Efficiency in the European Member States The EU-27 is a large puzzle of countries where the agriculture varies significantly from one country to another. In this context, cereals represent the main common denominator between all these different agricultures.

There is a wide range of yields, both within the EU-15 and the EU-12, due to different climatic conditions (cold weather, drought or temperate climate) and different fertilization patterns.

In the EU-15, when the yield potential is limited, a moderate nitrogen application is maintained, according to the principle of balanced fertilization.

In many EU-12 countries, a greater nitrogen application would lead to an improved cereal production.

In the graph on this page, cereal yield is expressed as a function of the nitrogen rate of application. The fitting lines represent the efficiency index of nitrogen (quantity of nitrogen required to produce an additional quantity of grain). The slope of the fitting line for the EU-15 is slightly lower than that for the EU-12, thus illustrating a better nitrogen efficiency in the EU-15. This shows that better nitrogen efficiency in EU-12 countries would lead to yield improvements – a useful indication for agricultural development.

Nitrogen Use Efficiency in the EU-27 200

N applied on cereals in the EU-15

Nitrogen application rate

180

N applied on cereals in the EU-12

GB

160 140

NL

FR

SI DE CZ

120

IE

BE

IT

100

ES

PT

LT

80 PL

EE

60 CY

40

GR

HU SE

FI

DK AT

SK BG

LV

RO

20 0 0

10

20

30

40

50

60

70

80

90

100

Cereal yield

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