Why do the agriculture policies for the year ahead sound so familiar?
Agriculture policy outlook for 2022 is like déjà vu for the sector
By Mark Shenk
You could be forgiven for thinking that the big policy stories that are likely to affect global agriculture in 2022 seem awfully familiar to the same themes that dominated the sector in 2021.
To borrow a line often attributed to US baseball legend Yogi Berra, it feels like deja vu all over again as attention in the coming year remains focused on reforms to the European Union and India, while the US, Russia and Argentina remain areas to watch.
The EU will flesh out its new Common Agricultural Policy (CAP), which was formally adopted on December 2, while India’s government will have to recalibrate its agricultural strategy after Prime Minister Narendra Modi promised in November to repeal three controversial farm laws that promised to overhaul much of the country’s agriculture sector.
The EU’s reformed CAP aims to be better for the environment, with a quarter of payments reserved for green agricultural practices, and aims to be fairer with more payments going to small- and medium-sized farms as well as offering greater flexibility for members as they adapt rules to local conditions.
The accord will take effect on January 1, 2023 and run until 2027.
“Some people fear that the green architecture of the CAP will result in decreased production, posing a threat to food security,” EU Agriculture Commissioner Janusz Wojciechowski, said on December 9 at the bloc’s Agriculture Outlook Conference in Brussels, before adding that “we will be keeping a close eye on this aspect; but I do not think that green agriculture means less efficient agriculture.”
However, environmentalists have expressed disappointment about the €270 billion ($306 billion) 2023-2027 CAP accord, which amounts to a third of the EU’s budget.
“This farming plan serves only the largest and most polluting businesses, leaving small farmers out in the cold – and does nothing to address the terrible impact that industrial farming has on nature, the climate and people’s health,” Greenpeace EU agriculture policy director Marco Contiero, said in a statement on November 23 after the European Parliament voted to adopt the plan.
The environmental organizations say that the changes are mostly cosmetic and will continue to support factory farming, allocate most farm subsidies based on the size, and leave countries too much leeway when they implement the program.
Germany is one EU member that is expected to enact additional legislation in 2022 that goes beyond the bloc’s requirements and is aimed at both reducing greenhouse gas emissions and the pollution that results from farming activities.
The country’s new coalition government has pledged to increase organic farming to 30% of the land used for agriculture, curb pesticide use and introduce new labeling that will inform customers about the way livestock was handled both before and during slaughter.
India’s parliament passed farm laws in September 2020 that aimed to deregulate the country’s agricultural sector in a move that many farmers believed would cut into their profits while increasing the influence of big business.
But with farmers wielding substantial political power, and domestic concerns mounting over the legislation, the country’s supreme court stayed its implementation in January 2021 and the plans were formally repealed at the beginning of December.
Analysts said that the government’s retreat might be tactical, and new reforms could be introduced that will still liberalize the sector.
The present system of subsidies encourages farmers to grow sugar, wheat and rice at the expense of other crops, which has led to both environmental destruction and left the country with huge stockpiles of wheat and rice.
Such are the stock levels that supply can sometimes go to waste or have major impact on global prices as – particularly in the case of sugar – exports to the world market surge.
For wheat, the country has emerged in recent months as a surprise exporter catering to Southeast Asian demand centers as abundant stocks and high freight costs gave the origin an advantage over typical wheat producers and exporters.
Pressure will now be on the ruling Bharatiya Janata Party (BJP) to build a proposal that will achieve both its aims while also keeping farmers on side – at a time when domestic food inflation has already forced the government to intervene in a series of calculated tax changes and the suspension of some derivative trading.
Agricultural policy isn’t high on the list of priorities of either the Democratic or Republican parties in the US, but if the Build Back Better bill is ever passed there will be changes ahead for the country’s farm sector.
The Congressional Budget Office said that agricultural provisions in the bill came to $81.7 billion over 10 years, with about $27.1 billion being spent on conservation.
The bill would extend the $1 a gallon biodiesel and renewable diesel tax credit through 2026 and include funds to encourage the development of renewable aviation fuels that can reduce greenhouse gas emissions by 50%.
Both these measures play into a significant expansion of biodiesel capacity in the year ahead as producers gear up to boost their production in a dynamic that is likely to substantially increase domestic soybean demand.
However, the passage of the bill is far from certain facing opposition from the Republican party as well as some internal Democratic reservations, and if something is finally passed it might not include all the measures that the present incarnation strives to implement.
Rest of the world
Ministers from members of the World Trade Organization were supposed to discuss agricultural trade policy at a meeting that was scheduled to begin on November 30 in Geneva but was delayed indefinitely because of Covid restrictions.
If an accord can be reached, something that is far from certain, there would be a need for major policy changes in many agricultural producers.
For Russia and Argentina, much of the recent policy decisions have been focused on export duties and other interventions, but these are likely to continue to have a considerable impact on exports of wheat, corn and potentially soybeans and their derivatives through 2022.
Barring any other surprises in 2022 – with mounting tension in the Black Sea a key area of concern – it’s a good bet that the places to watch as far as agricultural policy is concerned should remain the EU and India.