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Rising Raw Material Costs Threaten Production

14 September 2012

EU - FEFAC, the European Feed Manufacturers' Federation has stressed the need for consumers to pay higher end product costs to reflect the dramatic increases in vegetable proteins and energy crops, on the back of two successive major soybean crop failures in South and North-American as well as a record low wheat harvest in Russia.

FEFAC highlights that compound feed manufacturers play a key role as a buffer for absorbing price shocks on raw material markets to help reduce pressure on livestock farmers.

This buffer function however has its limitations and the only way forward for livestock producer to maintain their economic viability is to transmit the recent significant upward cost pressure to downstream market partners and to final consumer.

The latest market quotations for pork and milk have provided some positive signals, however they are not sufficient yet to cover increased costs for raw materials, despite constant efficiency gains linked to R&D and innovation efforts.

FEFAC, therefore, underlines the common responsibility of EU decision-makers and G-20 partners to keep the markets for agricultural raw materials open. Free market access is a precondition to allow markets to function normally. FEFAC, therefore, welcomes the G-20 Farm Minister declaration calling on governments to avoid any measures which could aggravate the present market access and supply situation for agricultural raw materials.

Currently, however, the EU's asynchronous GM approval policy is preventing market access to CGF/DDGS which is today the only alternative source available for vegetable proteins.

In the longer run, the EU needs to reflect on effective measures to raise the attractiveness of growing more vegetable proteins in the EU. The ecological focus areas proposed in the new CAP could provide an interesting option in that regard.

FEFAC urges the European Commission to activate the available crisis management tools and to take rapid market management measures, including removal of non-tariff trade barriers, in order to prevent the aggravation of market crisis, as currently experienced regarding the supply of vegetable proteins.

The current discussion on the CAP reform should be an opportunity to set up market management tools for situation of global shortage due to crop failures outside of the EU. These tools currently do not exist.

FEFAC also calls for the development and improvement of price risk management tools for livestock farmers & processors, e.g. via futures markets for livestock products which are not functional in the EU.

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