ForecastFood, Farming and Fertilizer use

in the European Union2010 - 2020

THE 3 MAIN NUTRIENTS OF PLANTS

NITROGEN, PHOSPHORUS AND POTASSIUM ARE THE THREE MAIN NUTRIENTS OF PLANTS

Mineral fertilizers are made from naturally occurring raw materials which have been transformed into a more plant-available form by industrial processing.

• Nitrogen (N), taken from the air, is essential as an important component of proteins.

• Phosphorus (P), extracted from mined ores, is a component of nucleic acids and lipids, and is key to energy transfer.

• Potassium (K), extracted from mined ores, has an important role in plant metabolism, for photosynthesis, activation of enzymes, osmoregulation, etc.

NITROGEN PHOSPHORUS POTASSIUM

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ANNUAL FORECAST 2010

Contents

OvERvIEw FOR 2020 5FOREcAST cHANGES IN REGIONAL FERTILIzER USE 7THE cROPPING PATTERN 9farMiNg aNd fertiliziNg outlooK iN eu-27 11eu PoliCies aNd eCoNoMiC CoNtext 13CoMMoN agriCultural PoliCy Post-2013 15Biodiversity aNd agriCulture 17

“in the next ten years, use of nitrogen in the eu 27 is expected to grow by around 1.3%.”

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ANNUAL FORECAST 2010

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fertilizer consumption in eu27

On average over the last three seasons in the EU27, fertilizers containing 10.4 million tonnes of nitrogen (N), 2.4 million tonnes of phosphate (P2O5 ) and 2.7 million tonnes of potash (K2O) have been applied to 135.1 million hectares of farmland each season (47.9 million farmable hectares are not fertilized, which include 36.8 million hectares of unfertilized grasslands).

By 2019/20, the Forecasters expect these fertilizer consumption figures to reach 10.8, 2.7 and 3.2 million tonnes respectively, applied to 134.6 million hectares. Considering the economic situation covered in page 13, and in view of the foreseen evolution of the crop areas as presented in page 11, the expected changes relative to the reference period (from 2007/2008 to 2009/2010) appear at first glance, as last year, to be surprising:

The relative increase in N consumption is foreseen at +4% for the EU27, against +4.1% last year.

On the other hand, remarkable are the foreseen changes for P2O5 and K2O continuing last year’s increase:

An increase of 14.1% is foreseen for P2O5 in the EU27 over the next 10 years, as opposed to the 3.9% foreseen last year.

K2O, which was already foreseen last year to significantly increase by 7.7%, now reaches a record value of 18.6% in 10 years.

However, these changes are in relation to the base year, which due to the significant disruptions to supply and demand for both agricultural outputs and fertilizers is significantly different from earlier base years. The apparent changes do not show in the same way if a base year which is less extremely affected is used, as we will see below. The factors which caused the spikes in prices and demands are not expected to persist, but their effect has influenced the current uncharacteristic changes. It is important therefore to note actual anticipated volumes rather than the percentage change.

Considering the reference years

For eight campaigns now, the reference used to calculate the percentage change in the Forecast is based on the average value of the last three campaigns (2007/08 to 2009/10 for the current exercise) This avoids the extent to which exceptional years (positive or negative) may impact on the calculated evolution. This three-year buffer was not sufficient for the current reference which still includes two exceptional campaigns in 2007 and 2009. Whilst the reference volume for N has decreased by 2.7%, the P and K reference volume have dropped by 22.5% and 23.1% respectively inducing the surprising relative positive increases calculated this year. When using 2007 as the base year, the expected changes become +1.3% for N, -11.7% for P2O5 and -8.9% for K2O. This is more or less a doubling of the decreasing rate foreseen last year for K2O.

If the quick recovery is confirmed, the expected consumption will still be far below the normal levels of the period 2005-2007.

FOREcAST OF FERTILIzER USE IN EU27

overview for 2020

fertilizer nutrient consumption in the eu 27

Nut

rient

(mill

ion

tonn

es)

+ 4 + 1.3

+ 18.6- 11.7+ 14.1- 8.9

evaluation onBase year

2010 2007

Nitrogen

Phosphate

Potash

“significant decreases in Nitrogen consumption are foreseen in denmark, germany, france and greece.”

ANNUAL FORECAST 2010

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FOREcAST OF FERTILIzER USE IN EU27

FOrECAsT CHANgEs IN rEgIONAl FErTIlIzEr UsE

The evolutions in N consumption by countries are similar to last year, with few exceptions: after positive trends observed during the last years, significant decreases are now foreseen in Denmark, germany, France and greece. On the other hand, a slight “recovery” is expected in sweden, Austria, with an even steeper “recovery” in most EU12 countries, especially in romania, Bulgaria and Hungary where the increase in consumption is following a new pace in the development of their agriculture.

For P2O5 and K2O, a significant growth is reported in Austria, Belgium, luxemburg, and UK, contributing to the remarkable recovery foreseen for the EU27 in the coming 10 years.

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-

-

forecast changes % in regional fertilizer use eu15

30

20

10

0

10

20

30

40

50

eu 27

eu 12

eu 15

swed

en

Portu

gal

Nethe

rland

s

ItalyIre

land

gree

ce

u K

franc

efinlan

d

spain

germ

any

Denm

ark

Belgi

um +

lux

Austr

ia

Nitrogen Phosphate Potash

forecast changes % in regional fertilizer use eu12

-50

0

50

100

150

200

eu 27

eu 12

slova

kia

slove

nia

rom

ania

Polan

d

latv

ia

lithu

ania

Hung

ary

esto

nia

Czec

h rep

ublic

Cypr

us

Bulga

ria

eu 15

Nitrogen Phosphate Potash

The Forecast is an annual exercise that respects the following procedure:

In spring, a European scenario is established, based on quantitative information (from UsDA, FAPrI, European Commission) and qualitative analysis made by the forecasters, Fertilizers Europe experts. Between May and July the general scenario is adapted to the specificities of each country. National forecasts are then made by the forecasters. These national forecasts are then analysed and discussed by all experts in July.

When the market and economic situation require it, forecasters carry out a last update of the current situation during August, before integration and publication.

In all EU27 countries, the Forecast is an upward crop-based procedure, where fertilizer consumption is evaluated by assessing area and nutrient application rates for each crop. However, two different methodologies are used to achieve this crop-based procedure:

• In 23 countries (EU15, Bulgaria, Czech-republic, Estonia, Hungary, latvia, lithuania, Poland and slovakia), representing 92% of the EU27 Agricultural area and 97% of the EU27 fertilizer consumption. The Forecast is an expert-based approach constructed from the national forecast generated by our members.

• In the other 4 countries (Cyprus, Malta, romania and slovenia), the evaluation of the production and crop area is based on the economic model used by the European Commission. Application rates used for N, P and K nutrients on each crop are based on an agronomic model developed by a small group of forecasters.

In this report, fertilizer nutrients are expressed as follows: nitrogen (N) as pure element, phosphorus (P) as phosphate equivalent (P2O5, or phosphorus pent-oxide), and potassium (K) as potash equivalent (K2O, or potassium oxide).

HOW THE FOrECAsT Is MADE

“in the eu 27 the grain sector (including oilseeds) accounts for 60% of total nutrient consumption. 24% of which is wheat.”

farMiNg aNd fertiliziNg outlooK iN eu-27

THE CrOPPINg PATTErN agricultural area in the european union 27 (current situation)

agricultural area in the european union 15 agricultural area in the european union 12

Agricultural area throughout the EU27 is marked by a large diversity. The current situation is illustrated in the pie charts facing.

In the EU15, fertilized area accounts for 73% of the total agricultural area. Non-fertilized area consists of idle-land, set-aside and non-fertilized grassland.

The fertilized area encompasses 61% arable crops (of which 38% cereals, 6%, oilseeds, 10% fodders), 11% permanent crops (vineyard, orchards, forest) and 28% grassland.

In the EU12, fertilized area accounts for 76% total agricultural area. Non-fertilized area consists of idle-land, and non-fertilized grassland (some non-fertilized grassland are not taken into account in the statistics).

The fertilized area encompasses 86% arable crops (of which 58% cereals, 12%, oilseeds, 8% fodders), 3% permanent crops (vineyard, orchards, forest) and 10% grassland.

the aggregated figures for eu27:

The fertilized area equals 135.1 Mio ha, of which arable crops account for 69%, (cereals 43%, oilseeds 8%, fodders 10%), permanent crops 9% and grassland 23%.

The crop-area combined with the application rates give us the following results in terms of fertilizer consumption: grain sector (including oilseeds) accounts for 60% of total nutrient consumption, of which 24% is wheat. grasslands and fodders account for 23%.

2010ANNUAL FORECAST

9

17%

27%

2%

1%9%

4%6%

2%

8%

18%

6%

Wheat

Coarse gra ins

Potato

sugar beet

Oi lseeds

Other crops

Fodder crops

Perm. Crops(frui t, vineyard, forest)

grass land ferti l i zed

grass land non-ferti l i zed

Idle land

13%

14%

1%

1%

5%3%

8%20%

6%

21%

8%

Wheat

Coarse gra ins

Potato

sugar beet

Oi lseeds

Other crops

Fodder crops

Perm. Crops (frui t, vineyard, forest)

grass land ferti l i zed

grass land non-ferti l i zed

Idle land

14%

18%

1%

1%6%

3%7%

6%

17%

21%

6%

Wheat

Coarse gra ins

Potato

sugar beet

Oi lseeds

Other crops

Fodder crops

Perm. Crops (frui t, vineyard, forest)

grass land ferti l i zed

grass land non-ferti l i zed

Idle land

“over the next ten years, we foresee that nutrient consumption (N+P+K) will increase by 9% for cereals.”

ANNUAL FORECAST 2010

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farMiNg aNd fertiliziNg outlooK iN eu-27

the future

forecast changes 2010-2020 in farming food crops in eu27 forecast changes 2010-2020 in fertilizer use by crop in eu27

Over the next ten years, the new Common Agricultural Policy (CAP) is expected to be more market orientated. Associated with a global context where we foresee more tensions on food supply, this is expected to maintain a sustained demand for biomass production, despite an increase pressure on environmental protection.

The expected cropping pattern, for the next 10 years, sees a stabilization of the cereal area with a small decrease of 0.8% (a 1% decrease was expected last year), of which a 1% increase is foreseen for EU12 and a 2% decrease for EU15. The increase in oilseeds is now 10.4%, a 12% increase was foreseen last year. This drop is particularly in relation to rape seed. This year the increase is expected to be 14%, in contrast to last years expected 18%.

In contrast, the decrease of the sugar beet acreage is now stabilizing, with a

decrease of 2% in EU27 over the 10-year period foreseen. This induces a much more moderate decrease of fertilizer consumption of this crop, now limited to -1%.

However, the stabilization of the grain area (6% compared to 8% last year) is compensated by a sustained increase in yield. This will lead to an increase in nutrient consumption (N+P+K) of around +9% on cereal, and a similar evolution for oilseeds with an expected increase of 19% (compared to 18% last year).

Nutrient consumption will stabilize at +1% for fodder crops, as a partial impact of the expected abolition of milk quotas, but will continue to decrease at the same pace, at around 2%, for grasslands due to the trend toward extensification in the meat sector.

Nitrogen

Phosphate

Potash

% evol. for yield

% evol. for area

-15% -10% -5% 0% 5% 10% 15%

oi l seed rape

sugar beet

potato

gra in maize

rye, oats , ri ce

barley

wheat

-10% -5% 0% 5% 10% 15% 20% 25% 30% 35%

grass land (ferti l i zed)

potato

fodder crops

oi l seeds & pulses

sugar beet

coarse gra ins

wheat

“CaP post-2013 and 2008 Climate and energy package are significant drivers for fertilizer consumption in the coming 10 years.”

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ANNUAL FORECAST 2010

EU POLIcIES AND EcONOMIc cONTExT

food tensions, economic crisis and CaP

The implementation of the CAP “Health Check” and the revised CAP after 2013 on one side, the anticipated impact of the 2008 climate and energy package on the other are the main EU internal drivers for fertilizer consumption in the coming 10 years. However the recent tensions in the energy and food sectors and their related impact on food and fertilizer prices, have been key factors which have induced a drop in fertilizer consumption during the last three campaigns, and will continue to impact significantly EU agriculture.

Concerning the CAP post-2013, we expect a balanced impact between an increase pressure on environmental protection and the clear orientation towards a more productive and competitive EU agriculture. A detailed analysis of the relative impact of the new policies will be made for the next forecast exercise.

Bioenergy and biofuels

It is expected that first generation biofuels will still dominate during the coming decade: cereal grains for the production of bio-ethanol will increase three-fold between 2008 and 2015, with a reduction in exports providing a significant proportion of this grain, and sugar beet will provide the other main feedstock for bio-ethanol. On the other hand, due to agronomic constraints, a deceleration of the expansion of the oil seed area is now foreseen.

land use changes potentially induced by the expansion of biofuel production areas may result in major increases in greenhouse gas emissions. The European

Commission will present, in July 2011, an impact assessment on this Indirect land Use Change, which might lead to the inclusion of emissions resulting from IlUC in the calculations of the sustainability criteria for biofuels. This may result in a drastic limitation of the production of first generation biofuels inside the EU. A detailed analysis on the future of first generation biofuels will be made for the next forecast exercise. Forest thinning and second generation biofuel feedstocks will probably become more significant over the period of the forecast, but are unlikely to affect cropping areas and fertilizer use. specific biomass crops grown for bioenergy, such as miscanthus and willow, will have to compete with arable crops for land other than the most marginal, but with the removal of set aside and an improvement in grain prices, the true profitability of these crops may not be as attractive to farmers as originally thought.

sustainable consumption and production of food

This aspect will develop very quickly during the first 5 years of the forecast period, in two directions:

• Development and communication to consumers of sustainability criteria similar to the ones developed for biofuels, especially gHg and energy consumption. This may have a negative impact on the consumption of certain types of meat.

• linked to the above, an incentive for changing human diet within the EU, with the objective of a better use of natural resources.

OvErvIEW

“CaP post 2013: towards eu food self-reliance and improved environmental protection.”

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ANNUAL FORECAST 2010

CoMMoN agriCultural PoliCy Post 2013

The CAP as implemented from the end of 2003 was definitely far more than a “Mid Term review” of the Agenda 2000, and has introduced certain key measures which have already prepared EU agriculture for new challenges:

• The single Farm Payment associated with the decoupling of aid and • The link with environmental protection

The “Health check” implemented in 2009 went further in the implementation of these new features of the 2003 CAP, updating some measures to become more appropriate in the new economic and market context (abandonment of the set aside, for example).

Background information

Despite the fact that these CAP revisions were in the right direction, the policy proved to be insufficient in the new global context. The vulnerability of the EU to the recent volatility of agricultural markets, with related adverse economic impacts on farmers, and the importance of new agricultural production (biomass, bioenergy) triggered the need for further restructuring. One of the priority objectives of this revision is to enhance the productivity and the competitiveness of EU agriculture whilst simultaneously improving environmental protection.

our vision

Fertilizers Europe believes that the future CAP should include the following targets and measures:

• Increasing agricultural productivity • Improving environmental protection by developing more integration

The first positive outcome of a more productive agriculture will be to increase its competitiveness, ensuring income stability for farmers whilst limiting the need for market support. Another central issue can also be efficiently addressed by improving EU agricultural productivity: ensuring the EU’s self-reliance for food, whilst improving its contribution to global food supply. Moreover, the increase of agricultural productivity in the EU will serve the increasing demand in renewable energy resources, such as bioenergy and biomass, contributing to a decreased EU dependency on imported energy.

On the other hand, improving environmental protection is essential for EU agriculture and its acceptance by EU citizen. Climate change and biodiversity are two areas which, for example, will benefit the most from a greater productivity of land already under cultivation. But sustained efforts should also be made to improve water and air quality.

With such priorities, it becomes essential that the new policy supports measures which reconcile productivity and environmental protection. For example, the development and support of “sustainable productive farming systems” (such as minimum tillage, Integrated Farming systems) are steps in the right direction. such whole farm management systems address appropriately the new demands in economic, environmental, social and animal welfare areas.

Although agriculture has indeed significant effects on our environment, it is important to highlight its role in mitigating certain environmental impacts. For instance, fertilizer use can help EU agriculture to achieve its gHg emission reduction target by contributing to fixing carbon in soils and by avoiding significant land use changes.

THE POsITION OF FErTIlIzErs EUrOPE

“the future challenge is to feed around 50% more people by 2050 whilst managing the land to maintain or even enhance biodiversity.”

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ANNUAL FORECAST 2010

Agriculture, by definition, has an impact on biodiversity through the cultivation of living species, which provide essential food resources for humankind. Today, almost 7 billion people are fed thanks to the successful efforts in selecting high-yielding plants and livestock with high nutritional value, with the utmost consideration to manage competition with other species. Fertilizers used in productive farming systems help feed almost half of the global population. The future challenge is to feed around 50% more people by 2050 whilst managing the land to maintain and or even enhance biodiversity. agricultural productivity & biodiversity

Higher global demand for food in an increasingly hungry world calls for greater agricultural productivity and improved crop nutrition. Increasing the output from agriculture is essential. This can not be accomplished by devoting more land to agriculture or by increasing crop productivity. Fertilizers Europe is in favour of increasing yields from existing cropland. Avoiding the need to crop more land will benefit the environment in two essential areas: biodiversity and the minimization of greenhouse gas emissions. These benefits will derive principally from the fact that the greenhouse gas (gHg) emissions or the loss of biodiversity which would result from land use change, e.g. from temperate forest to cropland, will be avoided.

fertilizers and biodiversity

Agricultural production has to be ensured and actions designed to increase productivity implemented, nevertheless efforts should still be made to minimize the unavoidable impact of agricultural practices on local biodiversity:

• All land receives some deposition of nutrients from the atmosphere, principally nitrogen. An estimated one third of the nitrogen deposition is from agricultural sources and is predominantly from ammonia from livestock manures. Overall best practice on the farm minimizes nutrient losses, it is recognized though that such inputs of nitrogen into nutrient-poor ecosystems has the potential to reduce the native biodiversity by encouraging certain competitive species such as grasses.

• Where crops are grown, good agricultural practice and where possible integrated farming systems which address the whole farm activity, will limit this impact.

Fertilizers Europe recognizes that all types of biodiversity are important at every level (regions to village, farm to field) but the priority of Fertilizers Europe relates to the protection and stimulation of agricultural biodiversity.

Fertilizers Europe has contributed to developing and promoting the implementation of integrated farming systems which include practices which directly benefit biodiversity. These actions and practices include:

• Agricultural tools and infrastructure which help protect biodiversity, such as multi-cropping systems or crop rotation, without jeopardizing agricultural production.

• good fertilization practices such as: - Use of precision farming techniques (right rate at right time) - Choice of appropriate product according to soil characteristics - localization and/or incorporation

Conclusions

Most of the landscapes of Europe, and their associated ecosystems, have been created by man’s agricultural activity; few are truly natural wild ecosystems. Farming created these rural ecosystems, and farmers are best able to manage the balance between the continuing need for food production and responsible care for the maintenance of biodiversity. Biodiversity is a less obvious good than food, but Fertilizers Europe is committed to support farmers addressing this difficult task, reconciling farming productivity and biodiversity.

BIODIvERSITy AND AGRIcULTURE

FErTIlIzErs EUrOPE PErsPECTIvE

the mission of the european fertilizer industry is to respond to the needs of agriculture and society by providing, in accordance with the principles of responsible Care, a reliable and competitive supply of high-quality mineral fertilizers.

the industry encourages, moreover, the adoption of good agricultural Practices in the use of plant nutrients, thus stimulating farmers and growers to produce high-quality crops in an economically and environmentally sound manner.

the mission of fertilizers europe is to identify, promote and manage the common interests of its members by:

• promoting the role of mineral fertilizers in european agriculture and horticulture;

• anticipating and preparing for upcoming issues that may affect the industry;

• being the industry’s spokesperson and sounding board; • providing its members with a wide range of statistical information and

studies.

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ANNUAL FORECAST 2010

© 2011 - Fertilizers EuropeThe information and guidance provided in this document is given in good faith. Fertilizers Europe, its members, consultants and staff accept no liability for any loss or damage arising from the use of this guidance.

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