To feed a growing and increasingly prosperous global population, we need more grain. But achieving greater production, particularly in Europe, relies on all its regions raising output, and that’s not happening.
Eastern and central Europe is still only just returning to pre-1990 production levels after a virtual collapse following the fall of the Berlin Wall. Only an urgent injection of funds and resources from the thriving grain industry of western Europe is likely to unlock the vast potential of a region that could easily increase its own output by 9m tonnes and yet currently lags behind that of its western peers.
To close the yield gap and match the west’s performance, central and eastern European farmers need to invest in land improvement and adopt modern agronomic practices. The timing for doing so is right, now that more recent member states can also benefit from the EU’s Common Agricultural Policy (CAP).
After the collapse of communism, use of inputs in agriculture drastically reduced, while soil quality saw a downward slide. In contrast to the east’s slow, post-1990 recovery, farmers in western Europe have continually increased their annual productivity so that there is now a significant gap in output between east and west.
The good news is that on at least half the land in central and eastern Europe, this gap can be closed relatively easily. This portion of land is in the hands of farms with a size of 100 hectares or more. Farm sizes like this provide a strong enough base for justifying investments for modernising farms – and quick wins can be realised by copying best practices from western Europe.
Increasing productivity on these farms to a similar degree to western Europe since 1990 will result in an additional volume of 9m tonnes of wheat, corn and barley. Anecdotal evidence from the Rabo Farm Europe Fund indicates this yield increase can be achieved and will, in most cases, be exceeded.
However, investments are needed if we want to realise the productivity increase. And farmers will, for the most part, have to fund these investments themselves. They now benefit from the internal European market, with higher and more stable prices. As a result, their access to credit improves. And they receive direct income support from the European Commission, while European and national support funds also make a contribution. The total budget for rural policies in the region amounts to €35bn (£26.7bn).
Domestic funds often supplement these European funds, in addition to private investment funds. Land can be bought and improved, while modern agronomic practices can be adopted. That way, they provide an example to neighbouring farmers of how to improve farm productivity, while increasing the value of their assets at the same time.
But investing alone is not enough. Farming is an art too. Farmers need to learn how to improve practices. This requires a knowledge transfer about the use of modern seeds, agrochemicals, fertilisers and machinery. Increasingly, this knowledge will be supplied by input suppliers who provide total farm solutions rather than standalone inputs. That’s why this region offers interesting market opportunities for companies. One example is UK-based Origin, which also has a presence in Poland and Ukraine. This business has established field plots close to its farmer client base in order to conduct research for the development of integrated agronomic advice and for demonstration purposes.
In the long run, quick wins in eastern Europe can be copied to countries such as Ukraine, Russia and Kazakhstan. The grains area in these countries is three times the size of that in central Europe, which is why the potential additional grains production will be a multiple of the increase in central Europe.
Harry Smit is senior analyst at Farm Inputs, Rabobank Food and Agribusiness Research
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