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What’s happening with farmer protests across Europe?

Mar 4

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The past few weeks have seen farmers’ protests erupting in France and then spreading throughout Europe. What exactly are the goals or demands of those protests, how did they originate, and how did they spread so easily from one country to the next?

Straight Arrow News contributor Peter Zeihan contends that the protests result from European Union funding and regulatory changes that will harm European farmers. Unfortunately, Zeihan indicates, the EU’s decisions were probably necessary.

The following is an excerpt from Peter’s March 4 “Zeihan on Geopolitics” newsletter:

If you’ve seen the videos of tractors driving through city centers and spraying manure on government buildings, then you’re well aware of the farmer protests happening throughout Europe… but why are they protesting?

The protests, which started in France, are in response to regulatory changes and reduced funding for agriculture in the EU. The Common Agricultural Program has seen drastic cuts to funding and increased restrictions facing farmers.

Despite Europe being a very strong agricultural zone, countries like the U.S. and Brazil stack on the pressure for these European farmers with their higher yields and lower price points. We’ll continue to monitor and release updates as this situation unfolds.

Hey everybody, Peter Zeihan here coming to you from the Pacific coast. Today we are going to kick around the topic of what’s going on with farmers in Europe. We’ve got protests on a continental scale, originally starting in France, because you know, of course they did. But now they’re in pretty much every EU country that has an agricultural sector, which is, you know, all of them.

 

The issue is twofold. The first one is regulation. They don’t like that the EU is steadily ratcheting up restrictions for what they have to do in order to qualify for subsidies, or sell on the open market. In addition, the funding that was available for farmers has been restricted.

 

So it used to be that they had something called the Common Agricultural Program, which was over half of the EU budget, and it was basically simply given to farmers in order to help them maintain output. But after a series of evolutions in the industry, which have encouraged larger and larger operators who have been able to take advantage of the subsidies to really increase output, and also significant levels of expansion to countries like Poland that have large agricultural sectors. And the decision has been made year after year after year to steadily slim this down, it is still by far the single largest line item of the EU budget, but with more farmers at a lower level of production and more farmers with huge amounts of production, bit by bit reforms have gone into the system that have shrunk it significantly. And so the farmers are seeing less money and more restrictions, and to be perfectly blunt, kind of pissed off. And there’s nothing about that that is going to change anytime soon.

 

That’s just the nature of the beast, the farmers in Europe still remain some of the world’s most subsidized and you should you try to take the money away, or put hooks on it for any reasons, they’re going to be upset. The bigger issue is competition. Because of the subsidy structure, there hasn’t been a huge amount of reform in European agriculture for the last 50 years. And so the Europeans have some of the highest food costs in the world, despite having some of the most productive agricultural systems, it’s kind of a weird place. Anyway, you bring in any food from anywhere else in the world that functions and a little bit more efficient and market oriented mechanism. And you’re obviously going to produce problems for the European farmers who think of this as their captive market. There are three main competitors that they’re primarily concerned about. The first one is the United States, which arguably as one of the three most efficient agricultural sectors in the world. And so anytime the Europeans can come up with a reason to keep American foodstuffs out of Europe, they take it, sometimes it’s a GMO issue. Sometimes it’s a flat trade issue, sometimes it’s a currency issue. But they reach for whatever they can find. because there just aren’t a lot of producers in Europe that can compete with what Americans can do at scale. Or the second big country is Brazil, which it’s not so much that it’s an efficient producer, its input requirements are massive, because they don’t have a lot of good land. But the volumes that Brazil can produce, and the fact that you can get more than one crop per year, in many cases, means that there’s this steady flood coming in from Brazil to the rest of the world. Now, if you’re an East Asian, you can’t feed your population. That’s great. If you’re in Europe, and you’re supposedly a food exporter, that’s a real problem. So the Brazilians, as part of Mercosur have been trying to get a free trade agreement with Europe for decades, and I never really had much hope that it was ever going to happen. Because ultimately, the Europeans protect our agricultural system, and the South Americans protect their manufacturing system. And ultimately, what the Europeans want to do is export manufactured goods. And what the South Asia South Americans want to do is export food goods. So there was never much of a reason to expect this to go. And now in light of the protests, that trade deal is firmly dead. The third country that is providing competition is a little bit more problematic, because that’s Ukraine. Ukraine normally would export its grain by the water all out of the the NEPA River and the nista River, mostly through Odessa, out the Black Sea through the Turkish straits into the Mediterranean and then the wider world, with the biggest consumers being places like Egypt, Sub Saharan Africa or South Asia markets that for the most part, the European farmers don’t serve because they don’t pay enough. Ukrainian grain is not as good as European grain. But with the Russians attacking Ukrainian ports at will, the ability of Ukrainians to export their massive volumes of wheat and corn and soy and oil and remember that we’re number five exporter for wheat and the number four exporter for quarter soy. And number one for seed oils. It has to go somewhere. And so it either rots in a silo or it gets shipped via truck or train into European Union countries.

 

Now even if all it’s going to do is transit the EU to get to an external port that it can then go to the wider world. It is then competing for storage and transport and poor capacity with European farmer output. And so we’ve got situations in Poland where farmers have basically hijacked a lot of the cargo that’s coming in from Ukraine has dumped it along the side of the road. And since the Ukraine war is an issue of existential concern for the Europeans, they they know that if Ukraine falls there next, we have this tight competition between what has been an entrenched economic and political interests in agriculture, and the undeniable strategic interests that come from Ukraine. So this is not going away anytime soon. Almost every aspect of this has legs and it’s going to go until something breaks or until someone decides to suck up the cost and pay the farmers to be quiet about it. Way too soon to know which way it’s going to go.

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