The European Commission has adopted a Communication setting out potential policy responses to mitigate the effects of rising global food prices. The document will be discussed at the European Council on 19-20 June 2008.

The Communication analyses structural and cyclical factors and proposes a three-pronged policy response, including short-term measures in the context of the Health Check of the Common Agricultural Policy and in the monitoring of the retail sector; initiatives to enhance agricultural supply and ensure food security including the promotion of sustainable future generations of biofuels; and initiatives to contribute to the global effort to tackle the effects of price rises on poor populations.

Why have food prices risen?

The Communication examines the reasons behind the recent surge in food prices, both within the EU and internationally. The increase followed a three-decade long trend of declining agricultural prices. Recent indications show a decline from the peak levels of early 2008 for most commodities. Among structural drivers of higher food prices has been a steady rise in demand for both staple and higher value-added foods, particularly in large emerging economies and a general growth in world population. Rising energy costs are having a marked effect on food prices, particularly by increasing the cost of inputs like nitrogen fertilisers, for which the cost has risen 350 percent since 1999, and through increased transport costs. The growth in crop yields has slowed down and new outlets for agricultural products have emerged. Temporary contributing factors include poor harvests in a number of regions of the world, a historically low level of stocks, the depreciation of the US dollar, and export restrictions in a number of traditional suppliers to the world market. Speculation has amplified the underlying price volatility.

EC policy response

The three-pronged policy response proposed by the Commission today consists of the following measures:

1. Short-term: the Health Check of the Common Agricultural Policy (see IP/08/762) and monitoring of the retail sector under the Single Market Review in line with competition and internal market principles.
2. Longer-term: initiatives to enhance agricultural supply and ensure food security including the promotion of sustainable criteria for biofuels and development of future generations of biofuels in Europe and at international level, and strengthening agricultural research and knowledge dissemination especially in developing countries.
3. Initiatives to contribute to the global effort to tackle the effects of price rises on poor populations including: a more coordinated international response to the food crisis, in particular in the UN and G8 context; continued open trade policy offering preferential access to the EU market to the world's poorest countries; swift response to immediate short-term humanitarian needs; targeting development aid at longer-term projects to revitalise developing country agriculture.