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Few LDCs are net exporters of rice. However, it was feared that LDCs might export, in line with the rules of origin, the totality of their domestic rice production to the EU, while importing their domestic consumption requirements from the world market. Another fear was that the LDCs might import raw rice, process it and then export it back to the EU, adding sufficient value so as to meet the rules of origin requirements. Reducing the support price for rice by around 50% was projected to translate into a very sharp fall in EU domestic prices towards world market levels, which would boost EU rice competitiveness while reducing the attractiveness of the EU market as an export market.

Changes in the EU rice import regime

This reform had a knock-on consequence forthe general import regime for rice. Although the EU had negotiated high bound tariffs in the Uruguay Round, applied tariffs were limited under a special regime negotiated with principal suppliers to a fixed margin of preference over the EU intervention price. With the reduction in the EU intervention price the continuation of this import regime could have led to widely varying border protection which could even fall to zero duty. Thus the EU decided to make use of the WTO provision to withdraw its Uruguay Round offer and introduced a new tariff regime while offering to negotiate appropriate compensation with its principal suppliers.

Although agreement with India and Pakistan (which mainly supply high-quality basmati rice for which a zero-duty regime was agreed) was quickly reached, the US objected to the unilateral change in the import regime and threatened to withdraw an equivalent value of trade concessions from the EU. This dispute was resolved in early 2005 whereby the EU agreed to lower tariffs on husked rice imports from the US provided imports did not grow more rapidly than agreed levels. A final agreement with Thailand was reached soon after.

The European Commission has just released a report reviewing the operation of these trade agreements in the rice sector which concludes that they have worked satisfactorily. Overall, there has been significant growth in EU rice consumption (partly stimulated by the access of Bulgaria and Romania) while EU production has remained stable, with the growing being met by imports. As a result, rice self-sufficiency has fallen from over 90 per cent in the late 1990s to around two-thirds today.

EU rice self-sufficiency to fall further in future

In the future, there is a likely to be a continued trend towards lower self-sufficiency. In recent years, there was a dramatic increase in world rice prices as a result of trade policy interventions by some of the major exporters and panic reactions by some importers, which has also benefited EU rice producers. Rice prices have been more than double intervention levels. With better global rice harvests, rice prices are likely to fall back from recent levels. In the CAP Health Check, the remaining coupled payments to rice producers will be decoupled, although Member States retain the possibility of some coupled payments under the Article 68 national envelope payments.

Further changes in the EU rice import regime will take place this September (when the remaining quotas are removed on imports from LDCs under the Everything But Arms agreement) and on 1 January 2010 when imports will be freed from all African, Carribean and Pacific countries that have signed Economic Partnership Agreements with the EU. However, the latter is not expected to have any major impact as only two ACP countries (Guyana and Surinam) are currently exporters of rice to the EU.

Western Europe’s temperate maritime climate produces one of the longest and most suitable growing seasons in the world for wheat, Mr Atkin explained. While the soils in eastern Europe and the former Soviet Union are often of equal or better quality, climatic and weather constraints temper output. In addition, there is considerable yield volatility in other parts of the world, where occasional crop failures need to be factored in. This is partly why UK what production costs per tonne are lower in Australia, Brazil and Canada.

Moreover, post-farmgate costs needed to be factored in. These can be substantial if infrastructure is poor and costs-to-market are high, as is generally the case in Russia. Costs are rsing in places such as Russia and Romania faster tham in, say Australia and Canada, as land and labour costs escalate.

If UK wheat can compete on world markets, do large-scale arable operations in East Anglia really need subsidies to be viable? Of course, re-directing CAP payments elsewhere could simply subsidise efficiency. Introducing a measure such as a cap on payments to large farmers would disadvantage the UK relative to other member states. But this analysis does raise questions about whether blanket subsidies are still required.

Environmental Defense, a US conservation group, has joined with 14 other NGOs in calling on Congress to resist pressure to release 24 million acres from the Conservation Reserve Progam (roughly three quarters of all land currently enrolled in the program). The letter says:

“We urge you to protect the taxpayers’ investment in soil quality, water quality, and wildlife habitat and not allow landowners to leave CRP contracts early without fully reimbursing the Treasury for the taxpayer-funded investment in those lands.”

Currently, conservation contract enrollees who terminate their contract prior to the end of its 10- to 15-year term must reimburse the federal government for the rental and cost-share payments they have received, plus interest, and a penalty of 25 percent of the total rental payments received.

It is important to note that there is a major difference in emphasis between EU and US conservation programmes in that EU schemes are less about land retirement and more about improving practices on working lands. A European farmer who puts land into an agri-environment scheme is not required to abandon all production on the land, rather to farm the land according to higher standards of soil and conservation, apply fewer agrochemicals and take action to benefit wildlife and biodiversity.

In cases where EU agri-environment schemes do entail a significantly lower intensity of production, I have no doubt that many European farmers are already considering whether it’s worth staying in the scheme.

Senator Grassley knows full well that for the past few years, a full 30 per cent of maize grown in the US is grown not to feed people but to feed automobiles, for the very good reason that a good part of it is grown and refined in his very own home state of Iowa. The notion that withdrawing such a huge volume of land from food production could have any impact on the availability and affordability of food is clearly beyond the Senator’s grasp of basic economic theory. But then again, we are talking about a longstanding member of the Senate Agriculture Committee, the folks that only last year dreamed up a new $5 billion ‘permanent disaster aid program’ to give handouts to farmers in parts of the US where it never rains.

When he was Chair of the Senate Finance Committee, Grassley authored the massive tax breaks that began the ethanol boom. For those who are interested in economic analysis, biofuels are thought to be responsible for between 10 and 25 per cent of recent increases in food prices. The other drivers of price rices include a high oil price, bad harvests in several parts of the world, speculation in commodity markets by investors, decreasing government strategic food reserves and the increased consumption of livestock products in the growing middle classes of Asia and Latin America.

But back to the press briefing. As a performance, it’s a cross between the self-consciously folksy shtick of vintage era Donald Rumsfeld and the cringe-making, rabbit-in-the-headlights inanity of President Bush. In the video I’ve cut in a few choice passages from a rather different speech Grassley made at a New Baptist Covenant meeting at the Carter Center in Atlanta, Georgia, earlier in the year.

Listen to Senator Grassley’s infamous ‘Let them eat rice’ declaration in full

[audio:grassley_audio.mp3]

“I read about the riots over the price of food. It’s bread in Egypt and it’s rice in China, er, I mean Thailand, and maybe other places where they have some riots, but… I don’t see any… I saw a little bit of concern in Mexico maybe three months ago on tortidos. Is that what you call them, tortidos? [Aide: "Tortillas"] Tortillas. And er, and er, but, but, y’know, we don’t make, er, ethanol, out of rice and out of wheat. So I’m not sure that I understand except ignorance on the part of people about the connection between making ethanol and making, and, er, food. Because I could set a bucketful of corn in front of those people from the IMF or we could go where they’re compaining. And they wouldn’t know what to do with it. Any more than I would know what to do if an eskimo set a pale full of blubber in front of me. So, er, so I’m not very sympathetic toward it at this point. When they start getting a connection between corn and food, then I’ll be glad to listen. Part of our problem is that Chinese are going, er, to eat meat. And you’ve got to have corn and soybeans to feed the Chinese, their meat, then why isn’t it just as legitimate for the Chinese to go back and eat rice as it is for us to change our policy on corn to ethanol.”

Can this be the same Chuck Grassley who opined that “turning a blind eye and a deaf ear to world hunger exposes the selfish side of human nature.” With US corn at record highs of $6 a bushel, the selfish side of Chuck Grassley is very much exposed!

Here in the EU, politicians are falling over themselves to recant on any earlier backing of food-for-fuel policies. But for as long as selfish, hypocritical, pork barrel merchants like Chuck Grassley are driving the policy, the US will continue marching down this most crooked of roads that is doing so much harm to world’s poorest people and to the environment.

Of the three remaining candidates to be the next US President, only one has a record of opposing ethanol boosterism: John McCain. The Washington Post recently reported on a physical altercation between Grassley and McCain, though this was NOT over ethanol subsidies. It did lead the pair to be on non-speaking terms for two years, though it is said that they have subsequently patched things up. I’m told that Democrat front-runner Barack Obama has well and truly drunk the biofuels kool aid while Hillary Clinton is just desperate to woo farm state super-delegates as she battles to stay in the race for the Democratic nomination.

If changing EU policy on biofuels feels like turning around a supertanker, changing US policy is more akin to pushing an avalanche back up the mountain.

The four options are:

• Extend cross compliance to include elements which safeguard the general environmental protection benefits which are currently delivered by set-aside. For example, a proportion of eligible land could be required to be left uncropped or ungrazed to provide an area of habitat or environmental protection, or wider buffer strips alongside watercourses and other environmentally important features could be required as part of cross-compliance.

• Develop the ability of agri-environment schemes (in terms of scope and budget) to incorporate specific environmental maintenance and enhancement benefits currently delivered by set-aside

• Introduce a new environmental set-aside to oblige and guide farmers to retain on-farm environmental benefits. This would retain existing set-aside rules but decouple it from any supply management role and give it a clearer environmental focus. It is open to the objection that the Commissioner and many member states have made clear their desire to set aside ‘set-aside’ as part of the campaign to simplify the CAP.

• Develop energy crop schemes to support energy crop growing on all land as part of a coherent package of measures designed to support biofuel and biomass production, subject to safeguards to minimise or mitigate adverse environmental effects.

The report favours a package of measures in which:

• General, countrywide environmental protection benefits arising from set-aside would be delivered through adapted cross-compliance conditions;

• Specific, high-value environmental benefits arising from set-aside would be delivered through agri-environment schemes, and

• The environmental benefits arising from energy crop growing are maintained and enhanced by extending the energy crops supplement to energy crops grown on former set-aside land.

The report acknowledges strengths and weaknesses with each of these proposals but it provides a useful benchmark against which to evaluate the Commission’s proposals when they appear.

There is no dispute on the fact that set aside was not introduced for environmental purpose, and that with decoupling of subsidies and high commodity prices, its supply control objective is no longer justified. However, a mounting body of evidence is suggesting that set aside has brought significant incidental benefits to the EU’s beleaguered biodiversity by ensuring a vital “breathing space” for species driven off most of our farmland through relentless agricultural intensification.

If the EU is serious about its commitment to stop the decline in biodiversity, current set aside should be substituted with a purpose tailored environmental tool, rather than scrapped. The Commissioner has publicly acknowledged the issue and promised to look into it as part of next year’s “health check”, but the recent announcement suggests that we may be causing the damage first, thinking about the problem later. Birds attempting to nest next spring are likely to face entire regions with hardly any suitable habitat. The consequences will be seen before the long term solution is even suggested.

The sad history of the CAP’s environmental impacts would suggest more caution and analysis. Unfortunately, it seems that the wish to please parts of the farming lobby is much stronger than the wish to ensure the survival of threatened species. For the moment the recipe seems to be “act now, think later”

Strong demand for biofuel feedstocks is encouraging farmers to plant these crops instead of grains such as barley. The price of barley has soared in the past week. Futures prices for European malting barley have risen more than €230 a tonne since last May and by a third on the Winnipeg Commodity Exchange over the same period. Admittedly, other factors such as the Australian drought and heavy rains in Europe have affected barley prices.

The US Departent of Agriculture estimates that global barley production will reach 138m tonnes this year, level with 2006, but 10 per cent down on 2005. Global demand has risen two per cent, the fourth year in the last five in which demand has exceeded supply. Global stockpiles have shrunk by a third in two years. The US, which in the 1980s was a leading exporter of barley, is now a net importer.

One consequence could be a long-term rise in the price of beer. Barley and hops account for 7-8 per cent of brewing costs.