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Document 52021SC0317

COMMISSION STAFF WORKING DOCUMENT […] Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Contingency plan for ensuring food supply and food security in times of crisis

SWD/2021/317 final

Brussels, 12.11.2021

SWD(2021) 317 final

COMMISSION STAFF WORKING DOCUMENT

[…]

Accompanying the document

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions

Contingency plan for ensuring food supply and food security in times of crisis

{COM(2021) 689 final} - {SWD(2021) 318 final}


STAFF WORKING DOCUMENT – CONTINGENCY PLAN TO ENSURE FOOD SUPPLY AND FOOD SECURITY

Contents

Contents    

Glossary    

1.    Introduction    

1.1.    Purpose and scope    

1.2.    Food supply and food security: concepts and definitions    

2.    The EU food sector: strengths, risks and vulnerabilities    

2.1.    The EU food powerhouse    

2.1.1.    A leading agricultural producer with high food self-sufficiency    

2.1.2.    A key actor on the global food market    

2.1.3.    A limited number of cases where the EU is strongly reliant on imports    

2.1.3.1.    Agricultural commodities    

2.1.3.2.    Fisheries and aquaculture    

2.1.3.3.    Member State level    

2.1.3.4.    Inputs    

2.1.3.5.    Diversity of production and of supply chains    

2.2.    Risks and vulnerabilities    

2.2.1.    Risks to the food system    

2.2.2.    Potential vulnerabilities of the EU food supply chain    

3.    Food security policy in practice    

3.1.    EU policies    

3.2.    Member States’ policies    

3.3.    Third countries and international organisations    

3.4.    Private sector    

4.    EU food crises preparedness and response    

Defining contingency planning    

The EU lacks a formal coordination mechanism for food crises    

Food security policy: building on lessons learned    

Better prepared for crises through contingency planning    

Contingency planning through improved processes    

Annex I - Lessons learned from the COVID-19 crisis    

Introduction    

Disruptions in the agri-food sector    

Agricultural production and incomes    

Disruptions in the seafood sector    

Fisheries production and incomes    

Food supply chain disruption    

Shift in the structure of demand    

The effect of policy measures adopted in the context of the COVID-19 crisis    

Supportive and established policies    

Specificities of COVID-19    

Room for improvement    

Reflection on the crisis    

Conclusions    

References    

Questionnaire - guidance stakeholders    

Annex II – Minutes of the Expert Group meetings    

First meeting Joint AGRI-MARE GREX on the F2F food contingency plan to ensure food supply and food security in the EU in times of crisis – 20 January 2021 - What are the lessons learnt from COVID-19 and other crises with regard to food security in the EU?    

Second Joint AGRI-MARE GREX on the F2F food contingency plan to ensure food supply and food security in the EU in times of crisis – 25 February 2021 - What are the threats to EU food security?    

Third Joint AGRI-MARE GREX on the F2F food contingency plan to ensure food supply and food security in the EU in times of crisis – 26 March 2021 - How are the EU, Member States, third countries and international organisations prepared to handle crises?    

Fourth Joint AGRI-MARE GREX on the F2F food contingency plan to ensure food supply and food security in the EU in times of crisis – 21 April 2021 - How are companies in the EU food system prepared to handle crises?    

Fifth Joint AGRI-MARE GREX on the F2F food contingency plan to ensure food supply and food security in the EU in times of crisis – 20 May 2021 – JRC Workshop    

Sixth Joint AGRI-MARE GREX on the F2F food contingency plan to ensure food supply and food security in the EU in times of crisis – 16 June - How to best organise a coordinated approach?    

Seventh Joint AGRI-MARE GREX on the F2F food contingency plan to ensure food supply and food security in the EU in times of crisis – 15 July    

Annex III – Summary Of Questionnaires Addressed To Member States    

Lessons learnt from the COVID-19 pandemic    

Main threats to EU food security    

Level of preparedness    

Glossary

Term or acronym

Meaning or definition

AWU

Annual work unit

CAP

Common Agricultural Policy

CFP

Common Fisheries Policy

CMO

Common Market Organisation (Regulation)

DG

European Commission Directorate General

EGD

European Green Deal

EU

European Union

F2F

Farm to Fork Strategy

FAO

Food and Agriculture Organization

FSC

food supply chain

GREX

European Commission Expert Group

HORECA

hotels, restaurants and catering

MS

EU Member State

NATO

North Atlantic Treaty Organisation

OECD

Organisation for Economic Cooperation and Development

TFEU

Treaty on the Functioning of the European Union

UN

United Nations

WEF

World Economic Forum

WHO

World Health Organisation

WTO

World Trade Organization

1.Introduction 

1.1.Purpose and scope

A sustainable food system must ensure a sufficient and varied supply of safe, healthy and nutritious, respectful of the environment, and affordable food to people at all times, not least in times of crisis. The recent COVID-19 crisis showed that the EU’s food supply chain (FSC) is resilient, as it responded remarkably well to fast changing conditions: food supplies continued to be available throughout the crisis thanks to farmers, fishers, aquaculture producers, and other actors of the food chain. However, in the initial stages of the COVID-19 crisis, there were some issues that affected the normal functioning of the EU’s FSC and could have posed a threat to food security. These included border controls and sanitary measures at various steps of that value chain that slowed down the free movement of people and goods and restricted the ability of the Single Market to operate fully, to the benefit of consumers; and resulted in market disruptions due to the severe reduction of the demand for some products. Food security in the EU is of primary concern for EU citizens. A recent Eurobarometer survey finds 92% of respondents believe that it is important that the CAP aims to secure a stable supply of food in the EU 1 .

The Farm to Fork Strategy 2 , part of the European Green Deal, envisages the development of a contingency plan by the Commission, to be activated when there is a crisis that affects the entire or part of the EU food system, and endangers EU food supply and food security 3 . According to the strategy, the contingency plan will include the creation of a coordinated crises preparedness and response mechanism, drawing on the lessons learned from past crises, and from the ongoing COVID-19 pandemic. This contingency plan is the subject of a Communication to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions.

The Farm to Fork Strategy includes many actions and has a larger scope than addressing needs in times of crisis. At the heart of the European Green Deal, the Farm to Fork Strategy aims to make food systems fairer, healthier and more environmentally-friendly. One of the key initiatives is a Commission proposal for a legislative framework for sustainable food systems, due in 2023. In preparing this framework, the Commission will consider, among others, more comprehensive options to strengthen the resilience of food systems and the system’s ability to respond to crises threatening food security, including possible legislative changes. The legislative framework for sustainable food systems will be subject to a separate process to the present one on the contingency plan.

The Commission has organised a large consultation process 4 , inviting a wide range of stakeholders to provide feedback on the form, nature and scope that the contingency plan for ensuring food supply and food security in the EU should take, in line with the Farm to Fork Strategy. The following stakeholders were consulted: operators in the FSC (producers, traders, processors, distributors, retailers, food service providers) and their associations; other stakeholders with an interest in FSC operation (input providers, packaging material suppliers, transport operators, insurers, NGOs, etc.); consumers and consumer groups. Member States, and some third countries, were also invited to contribute to the design of the contingency plan, as were several international organisations, think-tanks and the scientific community 5 .

A questionnaire targeted at stakeholders was also open for two months, in March and April 2021 and received over 250 answers. The summary of the main answers is available in a separate synopsis report. In addition, the Commission prepared three separate questionnaires addressed to Member States authorities, the answers of which are summarised in Annex III. In addition, the initiative was presented in a number of meetings of existing consultative fora (Civil Dialogue Groups, Market, Observatories, Advisory Councils, etc.)

Finally, Annex I lists the conclusions drawn from a set of interviews of experts ran at the end of 2020. These interviews sought to draw lessons for the FSC from the COVID-19 pandemic. 

The purpose of this Staff Working Document is to provide an analytical summary of the findings of the consultation described above. Three main areas are described: (1) strengths and weaknesses of the agricultural, fishery, and food sectors in addressing the challenges posed by a changing risk landscape; (2) policies in place to address such challenges in times of crisis; (3) possible improvements.

1.2.Food supply and food security: concepts and definitions 6

There are many possible understandings of several of the concepts used in this document. Both Member States and stakeholders raised the issue of the need for a common understanding on concepts during consultation. This would be useful for more fruitful discussions on the process and content of policies in the area of food security.

We will use the definition of food security set out by the United Nations’ Food and Agriculture Organisation’s  Committee on World Food Security :

“food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life” 7 .

Concepts related to food security include:

Food availability: the availability of sufficient quantities of food of appropriate quality, supplied through domestic production or imports (including food aid). The expression food supply used in this exercise would refer to this aspect of food security.

Food access: access by individuals to adequate resources (entitlements) for acquiring appropriate foods for a nutritious diet. Entitlements are defined as the set of all commodity bundles over which a person can establish command given the legal, political, economic and social arrangements of the community in which they live (including traditional rights such as access to common resources).

Utilisation: utilisation of food through adequate diet, clean water, sanitation and health care to reach a state of nutritional well-being where all physiological needs are met. This brings out the importance of non-food inputs in food security.

Stability: to be food secure, a population, household or individual must have access to adequate food at all times. They should not risk losing access to food as a consequence of sudden shocks (e.g. an economic or climatic crisis) or cyclical events (e.g. seasonal food insecurity). The concept of stability can therefore refer to both the availability and access dimensions of food security. 8

Food safety: refers to “handling, storing and preparing food to prevent infection and help to make sure that our food keeps enough nutrients for us to have a healthy diet” ( Food and Agriculture Organisation ).

Food system resilience: supply chain resilience is defined as "the capacity of a supply chain to persist, adapt, or transform in the face of change" 9 . The Commission used in its 2020 annual Strategic Report 10 the following definition: “resilience is the ability not only to withstand and cope with challenges but also to undergo transitions in a sustainable, fair, and democratic manner”. We use these definitions, appropriately expanded, to the broader food system concept employed in the Farm to Fork Strategy. Food security and food supply are therefore linked to food system resilience. According to Antón 11 , there are several ways to improve food system resilience: i) investments in on-farm resilience capacities; ii) no-regret policies and investments in public goods; iii) greater focus on ex ante policies and strategies; iv) consider outcomes and interests of stakeholders; v) participatory and collaborative processes. The revised CAP mentions resilience as a key element within its specific objectives (which include the need to foster a smart, resilient and diversified agricultural sector ensuring food security). This is a core element of the recommendations addressed to Member States by the Commission for the drafting of their CAP national strategic plans 12 . In the same vein, the CFP has as one of its objectives to promote the development of fisheries and aquaculture activities that are environmentally, economically and socially sustainable, and to contribute to healthy and stable food supplies and security for EU citizens. This is a key aspect addressed by Member States in the drafting of their national programmes under the European Maritime, Fisheries and Aquaculture Fund (EMFAF), which supports the CFP, the EU maritime policy, and the EU agenda for international ocean governance.

Food system: the definition of ‘food system’ has been debated in the preparation of the United Nations Food Systems Summit, building on a variety of previous contributions 13 . The definition proposed is as follows: “food systems encompass the entire range of actors and their interlinked value-adding activities involved in the production, aggregation, processing, distribution, consumption and disposal of food products that originate from agriculture, forestry or fisheries, and food industries”. Further, the broader economic, societal and natural environments in which they are embedded” is relevant. The definition clarifies that not only production in the FSC is concerned, but also activities upstream, services and interlinked value chains: “Production at the beginning of value chains, of course, includes the farming communities but also pre-production actors, i.e., from input industries such as fertilizer or seeds. The range of actors also includes science, technology and innovation actors that are partly integral to the food system, partly embedded, for instance, in the life science and health research systems. In food industries’ processing, foods and non-foods result from interlinked value chains. Related to these value chains is another set of relevant food systems actors, i.e. public and private quality and safety control organisations”.

Food self-sufficiency is defined as the ability to meet consumption needs from own production, rather than by importing food. Food self-sufficiency gained increased attention in a number of countries in the wake of the 2007–08 international food crisis, as countries sought to buffer themselves from volatility on world food markets. Food self-sufficiency is often presented in policy circles as the opposite of free international trade in food, and is widely critiqued by economists as a misguided and counterproductive approach to food security, that places political priorities ahead of economic efficiency 14 ;

Food sovereignty: defined originally by Via Campesina 15 , the concept corresponds to a peoples’ or a countries’ right to independently define their agricultural and food policy, without dumping vis-à-vis third countries,  prioritising local agricultural and food production in order to feed people, and giving access to producers, farmers and landless people to land, water, seeds, and credit.

2.The EU food sector: strengths, risks and vulnerabilities

2.1.The EU food powerhouse 

2.1.1.A leading agricultural producer with high food self-sufficiency 

The self-sufficiency rate is an indicator used to describe the import (or export) level of reliance on trade for specific products. For many food products, the self-sufficiency of a country or territory is explained in part by natural conditions. For example, the self-sufficiency rate for wheat is above 100% in the EU because the natural conditions in the EU are very favourable to the production of wheat. On the other hand, the natural conditions for soya bean production are less favourable in the EU than in other parts of the world, and so the EU is a net importer of these products. Similarly, the EU self-sufficiency rate for tropical fruits is low due to the quasi-absence of tropical climate zones in the EU 16 . Since the creation of the European Economic Community in 1958, the EU has progressively become self-sufficient in most primary agricultural products in volume terms (figure 1). Beyond the natural conditions for food production and consumers’ preferences in the EU, there are other factors determining the competitiveness of the agricultural, fishery and food sectors, among others supportive policies, such as the Common Agricultural Policy, the Common Fisheries Policy, and the Single Market.

Figure 1. EU27 self-sufficiency rate for selected commodities 17

Source: DG Agriculture and Rural Development, based on Eurostat data (2021 figures are estimates).

On average, the main primary products in which the EU was self-sufficient in 2017-2021 include: cereals (soft wheat, barley); sunflower; animal products (all meat and dairy products with the exception of sheep and goat meat); fruit & vegetables (peaches, nectarines, fresh apples and processed tomatoes, and close to 100% self-sufficiency in fresh oranges, fresh tomatoes, and processed apples). The EU’s production surplus is most significant for milk powders (whole and skimmed milk powder, whey), olive oil, and soft wheat.

These figures are for aggregate sectors or sub-sectors. They should be treated with caution when these sectors or markets are segmented, for instance in the case of meat, where various different types of cuts, with different values can exist - e.g., poultry breasts, legs or wings. An above 100% self-sufficiency in poultry production does not mean that the EU only exports poultry meat: EU consumers buy more poultry breasts, which are net imported, and less for other cuts, which are net exported.

Not all food commodities can be produced in any given territory, due to its specific natural conditions or other factors influencing comparative advantage. In the EU, tropical products (avocadoes, bananas, palm oil, cocoa, coffee, warm-water shrimps) are not produced in any significant scale, and need to be imported. Other products are produced under more favourable conditions out of the EU, but not in sufficient scale to meet demand. The main primary food products in which the EU was not self-sufficient included cereals (durum wheat, maize, rice), sugar, protein crops (lentils and chickpeas), oilseeds products (rapeseed, soya beans, palm oil), sheep and goat meat, fishery and aquaculture products (EU self-sufficiency averaged 42.5% in 2018 for all fishery and aquaculture products and 14% for the top 5 species consumed in the EU (i.e., tuna, salmon, cod, Alaska pollock and shrimps 18 ) and certain fruits and vegetables (such as processed oranges – mainly orange juice; see figure 2). 

Figure 2. EU27 self-sufficiency rate for selected Fruits and vegetables, olive oil and wine, fishery and aquaculture products

Source: DG Agriculture and Rural Development, based on Eurostat data (2021 figures are estimates); for fishery and aquaculture products EUMOFA, based on EUROSTAT, FAO, national administrations and FEAP data (2020 and 2021 data not available).

2.1.2.A key actor on the global food market

The EU is a net exporter of agri-food products, and the sector contributes significantly to the EU’s economy. In 2020, net exports reached EUR 62 billion 19 . Higher value products, such as processed food and food preparations, are the main drivers of the EU’s positive trade balance.

Although more than 85% of EU agriculture and food production is consumed in EU domestic markets (traded within the Single Market, used at national, regional or local level), the share of exports to countries outside the EU increased in recent years. In some sectors, extra-EU export opportunities played a large role in recent income growth (e.g. wine, cheese and pig meat). The EU has found important export markets in particular in countries where dietary patterns have changed with economic growth or the adoption of westernised consumption patterns, and where local climatic conditions limit production. This trend has accelerated in the past three decades, during which time the EU increased its production – and its surpluses – of certain primary agricultural products, most significantly dairy products (excluding butter) and pig meat.

The increase in the EU’s agri-food net trade balance in the last decade, is due to significant competitiveness gains, in particular concerning high value added and quality products, and in spite of the higher production costs 20 implied, among others, by higher EU production standards (notably related to food safety), the environment, or animal welfare.

Figure 3. EU structure of agri-food trade with extra-EU, 2011-2020 (in million Euro)

Source: COMEXT

The EU is the world’s leading agri-food exporter, and ranks within the top three world importers, behind the US and China (average 2017-2019). According to the OECD, participating in global value chains generates significant economic gains as it fosters specialisation and productivity gains (OECD, 2021 21 ).

Seafood is among the most traded food commodities. The EU is the largest seafood market in the world. This also makes the seafood system, among others, more vulnerable to systemic shocks that disrupt the flow of products and the livelihoods that depend on this trade. The extra-EU trade balance deficit in fish products in 2019 was worth EUR 21 billion, which was slightly higher than the previous year. In a longer perspective, the deficit in real terms grew by 33% from 2010 to 2019.

In 2019, extra-EU exports of fishery and aquaculture products reached a 5-year peak of 2.21 million tonnes, and showed a growth of 7% with respect to 2015. The EU mainly exports herring, blue whiting, skipjack tuna, mackerel, non-food use products and salmon. Five countries receive 50% of EU exports: Nigeria, Norway, the USA, China and Egypt. Extra-EU imports of fishery and aquaculture products reached a 10-year high of 6.34 million tonnes in 2019. More than one-quarter of extra-EU imports originates from Norway, the main supplier. China is second, but far behind, accounting for less than 10% of the total, while Iceland, Ecuador, Morocco, Vietnam and the United States follow, each covering about 5%.

2.1.3.A limited number of cases where the EU is strongly reliant on imports

The preceding sections included a general discussion of EU self-sufficiency and the net trade position for agricultural, fish, and food products. The present section identifies the main products for which the EU relies on imports to ensure supplies.

2.1.3.1.Agricultural commodities

For some specific products the EU has a significant trade deficit, which, on a first approach, may be considered to increase in the vulnerability of the EU’s food system. In some cases, imported products are difficult to substitute for, be it in terms of volume, import sources, quality or cost. For example, disruptions in oilseeds’ global trade and a consequent price spike for protein imports would result in higher production costs for meat and dairy, with consequences in terms of production. A tight global cereal supply would affect both food and feed costs, with implications for the bio-economy.  A disruption of vegetable oil trade could affect the EU biofuel and food processing sectors. Still, these effects would have to be significant (for example, a combination of being reliant on a few import sources and a high vulnerability to climate change in those regions leading to sudden shortages 22 ) and combined with further supply disruptions elsewhere in the EU to pose a serious challenge from a food security of supply perspective.

The self-sufficiency ratio of the EU in 2019/2020 for oilseeds was 55%. The EU mainly imports soya beans (67% of total EU oilseed imports) to produce soya meals and soya oil (Figure 6). Imports of soya beans are necessary to produce animal feed items (with soya meals) and oil for human consumption or biodiesel (with soya oil). The EU imports mainly from the US (almost 50% of the total trimmed average imports in 2015-2019) and Brazil (around 25%). Rapeseed imports are also on the rise due to reduced domestic output (around 30% of EU domestic demand for rapeseed is met by imported products and close to 50% of EU rapeseed imports are sourced from the Ukraine).

Still, when it comes to feed protein, roughage represents 43% of total EU feed use (in protein content equivalent) according to the feed protein balance sheet 23 . About 32 million tonnes of protein from roughage was fed to animals across the EU in 2020/21. Concerning cereals, 14.2 million tonnes of protein was sourced from domestically produced cereals. Still, the EU is a net importer of maize, which is a significant source of proteins for animal feed. The EU self-sufficiency ratio is 80% and around 17.1 million tonnes are imported annually (2016-2020 average). The EU maize imports are following an upward trend to meet the feed demand. The EU is mainly importing maize from Ukraine and Brazil, which represent around 80% of total maize imports. Nevertheless, EU domestic production is also increasing, and up to 50 million tonnes of domestically produced maize are fed to animals in the EU.

The EU self-sufficiency ratio for oil meals is slightly above the one for oilseeds (at 63% in 2020/2021). Forty percent of EU domestic demand for oilseed meals is met by imports, with soya meals at more than 80% in its total oil meal imports. The EU imports soya meal mainly from South America (Brazil 48%, and Argentina 39%).

The EU is also a net importer of protein crops (pulses with the exception of soya beans: peas, beans, etc.), which are mainly used in animal feed, but also in food. Regarding feed, around 90% of the protein from these crops is sourced domestically (mainly field peas and broad beans). Other protein crops aimed at food consumption, such as lentils and chickpeas, are net-imported to meet increased demand. In 2020, EU chickpeas imports increased by 32%, compared to the 5-year average of the previous years, and lentils imports increased by 16%.

Concerning vegetable oils, the EU imports 40% of its needs, out of which around 70% are palm oil imports. For palm oil, more than 80% come from two countries. The main sources are Indonesia (almost 50% of total EU palm oil imports in 2020/21) and Malaysia (about 33%). In 2020, 2.4 million tonnes of palm oil imports were directed to biodiesel production (34%) while 4.7 million tonnes was used for food production.

Figure 4. share of imports in total EU domestic consumption

In the case of oranges, a distinction should be made between imports of fresh oranges and processed oranges. The EU imports a large majority of the processed oranges it consumes (predominantly in the form of juice) from Brazil (84% of total EU processed oranges imports on average in 2010-2020) 24 .

In 2017, the global organic food and drink market reached EUR 92 billion 25 . The EU accounts for 37% of the global market for organic food and drink (EUR 34.3 billion). Over the last ten years, the EU market doubled its size and it continues to grow at a significant pace (+11% in 2017 compared to 2016), indicating that it has not yet reached its maturity. The EU relies on imports of organic products to meet its demand, but no quantitative analysis has been conducted to date for these products.

2.1.3.2. Fisheries and aquaculture

The EU is a leading trader of fish and aquaculture products. In 2019, imports and exports of fisheries and aquaculture products between the EU and the rest of the world totalled 8.55 million tonnes, with a value of EUR 33 billion, making the EU the second largest trader of these products after China. The EU is a net importer, with a trade deficit of EUR 21 billion in 2019. The majority of products produced, consumed and traded in the EU are wild products whereas farmed products are the majority at global level.

The EU has a low self-sufficiency rate in fisheries and aquaculture products and it is largely dependent on imports to meet internal demand.  Imports dominate for tuna, salmon, cod, Alaska pollock and shrimps – the top 5 species consumed in the EU, for which EU self-sufficiency averaged 14% in 2018. The EU is also partially dependant on processing activities outside its borders. Part of the seafood products, domestic or imported, are processed in third countries (e.g. peeling of shrimps or filleting of white fish). That is, part of EU exports are then reimported after being processed outside the EU.

2.1.3.3. Member State level

Natural conditions and agricultural and seafood production capacities are very diverse across the EU, with implications for food security 26 . The Single Market is of crucial importance to satisfying the demand for food of EU consumers. The Single Market allows food items to move freely from one Member State to another and to reach all regions across the EU. The Single Market also allows necessary inputs to food and agricultural production to reach those in the FSC that need them.

One indicator that can be used to quantify this diverse situation in EU Member States is the self-sufficiency rate. This rate is calculated from production and trade figures to estimate consumption levels 27 . As shown in the graphs below, it is estimated that nine Member States are self-sufficient in arable crops (cereals and oilseeds), while eight are self-sufficient in animal products (meats and dairy products), and no Member State is self-sufficient in seafood. More specifically, data show that fourteen Member States are producing enough cereals for their domestic production (self-sufficiency rate exceeding 100%). Twelve Member States are producing oilseeds to sustain their demand. For some EU Member States, the self-sufficiency ratio exceeds 100%, and they have a surplus to export within the Single Market or to third countries (figure 5).

Figure 5. Arable crops self-sufficiency across the EU

Source: DG AGRI-JRC Balance sheet

Fourteen Member States are self-sufficient on dairy products. For the case of all meats, ten Member States are self-sufficient (figure 6).

Figure 6. Animal products self-sufficiency across the EU

Source DG AGRI_JRC Balance sheet

While the above analysis gives an overview of the situation mainly in terms of aggregated arable and animal products, it is useful to have a more detailed monitoring of the situation at the level of specific commodities.

Member States that are not self-sufficient in a specific commodity typically use the Single Market to satisfy demand. For instance, in Spain, which is not self-sufficient in cereals or oilseeds, more than 80% of wheat and sunflower flows are imports from other EU Member States. Italy is self-sufficient at 53% for cereals, and 67% of their cereal imports come from within the Single Market. External trade (with non-EU countries) is used to satisfy the demand for certain products. In France, the self-sufficiency ratio for soya beans is 46%, and extra-EU trade partners meet around 80% of the remaining demand. Denmark and Portugal, which have a self-sufficiency ratio for soya beans of 0% (meaning no production), trade mostly with extra-EU partners to meet demand for this commodity (60% and 98%, respectively). As for fishery and aquaculture products, for which no Member State is self-sufficient, the EU is able to maintain a high level of fish and seafood apparent consumption (production plus imports minus exports) mainly by sourcing from other regions of the world through imports.

The supply tables give an indication in value of how diverse the situation in the EU is, with regard to the share in value of imports (intra-EU or extra-EU) in the total supply of agricultural products, fish products and food products. For agricultural products and food products 28 , the average share of domestic sourcing is around 75% in the EU (with the remaining 15% sourced within the Single Market and 10% from third countries for agricultural products; and, for food products, 19% from the Single Market and 6% from third countries). A certain number of Member States with a strong agri-food sector source over 80% of both their agricultural and food products nationally (France, Italy, Spain, Poland, Romania). Germany has a high share of national sourcing for food products (76%) but less for agricultural products (60%) and relies on 24% of agricultural products imported from other Member States. Member States in the East and North of Europe rely more on imports to supply their agri-food markets. The supply of fish products is sourced much less from national sources than agri-food products: only 48% in average of fish products are used in the country where they have been produced (in value), while on average 28% is sourced from the Single Market and 24% from third countries. Imports prevail for tuna, salmon, cod, Alaska pollock and shrimps – the top 5 species consumed in the EU and for which EU self-sufficiency averaged only 14% in 2018. 

Figure 7. Share of national and imported sourcing in the supply of agricultural products (2019)

Source : Eurostat, National accounts (some MS unavailable)

Figure 8 Share of national and imported sourcing in the supply of fish products (2019)

Source : Eurostat, National accounts (some MS unavailable)

Figure 9 - Share of national and imported sourcing in the supply of food products (2019)

Source : Eurostat, National accounts (some MS unavailable)

2.1.3.4.Inputs 

The EU is not self-sufficient in certain inputs used in food production. Globally, fertiliser production is rather concentrated in a few countries and, thus, the EU relies on a limited number of sources for its fertiliser needs. The EU imports several types of mineral fertilisers from Eastern neighbourhood countries (such as Belarus, Ukraine and Russia) and North Africa (Algeria and Morocco). On average, in 2010-2020 and depending on the product, the EU relied up to 43% on a single country for fertilisers 29 . In the case of potassic fertilisers, the EU relies on Belarus and Russia for 59% of its imports. For phosphatic fertilisers, one third of the EU imports come from Morocco, while for nitrogen fertilisers (ammonia plus mineral nitrogenous fertilisers), 31% of the EU imports come from Russia.

For plant-protection products and micronutrients for compound feed, although detailed quantitative data are not easily available, the EU imports mainly from a few countries (in particular from China). No accessibility issues were reported during the COVID-19 health crisis for these products.

For feed inputs, the reliance on the global supply chain posed challenges during COVID-19, especially in the beginning of the crisis 30 . Delays in sourcing of raw material for feed additives (chemical precursors or substances themselves) 31 and packaging (paper and cardboard, ink) 32 had a ripple effect on the rest of the food chain, although not to a major extent. 

The seed industry was able to avoid major disruption during COVID-19, thanks in part to a policy of diversification, including of location of research and development, of production and processing, and of packaging. The stability and continuity of policies is an important element to allow companies being better prepared to crises 33 . Still, the limited number of companies operating in the seed industry could be seen as a vulnerability in itself.

While the EU is a net importer of fishmeal, mainly from Peru, major disruption was avoided during the COVID-19 crisis by sourcing from EU production, hence limiting exports thereof in the same period, combined with a global decrease of the demand.

2.1.3.5.Diversity of production and of supply chains 

The EU’s real food security “insurance” is the presence of a diversity of skilled and generally well-organised farmers and fishers throughout the European Union territory, in combination with well-functioning markets, implemented technological progress, and sustainable production. Concerning agriculture, Europe’s temperate climate, with broadly sufficient precipitation throughout the year and moderate temperatures, is an important guarantor of stable yields at a high level, which ensures sufficient production, if policies are in place to ensure that farmers can produce.

There is a large diversity of farming types in the EU 34 . In terms of asset value, on average, Dutch and Danish farms held the highest amounts of assets (around EUR 3,118,000 and EUR 2,689,000, respectively). This reflects the very high land prices and the large share in these Member States of types of farming that typically need considerable investment, such as dairy production, granivores and horticulture. In contrast, farms in Romania had the lowest total asset values (EUR 55 000), as they are characterised by less capital-intensive types of farming and lower land prices. In terms of labour, the average number of workers employed per farm in the EU stood at 1.6 Annual work units (AWU) in 2018. However, the average labour input varies considerably across Member States, ranging from 10.6 AWU per farm in Slovakia to 1 AWU in Greece. The average size of farms studied in this publication (small farms are not well covered in the Farm Accountancy Data Network sample) was 37 ha in 2018. However, this average size varied considerably across Member States, ranging from 445 ha per farm in Slovakia to 3 ha per farm in Malta. The average farm in the EU-28 had 16.1 ha of agricultural land in 2013 35 . Most farms in the EU-28 can be characterised as small in physical terms, since 66% had less than 5 ha of agricultural land, and only 7% more than 50 ha in 2013. Close to half (47%) of the very small farms (<5 ha) are located in Romania, with another 11% in Poland. At the EU level the CR5 (concentration ratio: the market share of the five largest firms) at farm level was 0.19% in 2010 (ranging from 0.4% in Germany to around 9% in Estonia), meaning there is a low level of market concentration in agriculture in the EU 36 .

When looking towards the future, farming is likely to remain highly diversified in the EU. A foresight study on the farmers of the future states that “there will be a more diverse ecosystem of farms responding to […] challenges and opportunities – benefitting from technological and social innovation of the next 20 years. Those famer profiles that reflect the current mainstream of farming are expected to adapt and to still be around in 2040. They will be joined by the profiles that are currently considered to be emerging, but by 2040 are well established (cell farmer, controlled environment farmer, urban farmer, regenerative farmer, social care farmer, lifestyle farmer) 37 .

Fishery and aquaculture producers in the EU benefit from being able to join producer organisations (POs). There are around 220 such POs in the EU, representing roughly 80% of the catches in value and volume. Although the situation varies from one Member State to another for historical or cultural reasons, POs globally play a key role in the collective management of their members' activities and in the promotion of sustainable, efficient and viable activities, aligned with the objectives of the common fisheries policy and taking advantage of the market dynamics. POs played a decisive role in adapting and supporting their member’s activities to face the market disruptions resulting from external chocks, such as the outbreak of the COVID-19 crisis or Brexit.

Downstream in the FSC, the EU food and drink industry is the largest manufacturing sector in terms of turnover in the EU (EUR 1.09 trillion), and the biggest industrial employer (4.4 million employees). 99% of companies are SMEs (representing 60% of employment and 47.5% of turnover), 78% are micro enterprises of 0 to 9 employees (14.5% of employment and 5.7% of turnover) and only 1% are large companies (40% of employment and 52.5% of turnover). The industry is among the top three manufacturing industries in most Member States. This diversity is still the main picture of the EU food industry, despite growing concentration: the top five food processing firms are estimated to represent an overall market share in retail of 15% in a majority of Member States. On a product category basis however, a few food industries are much more concentrated: for example in the biscuits or the confectionery sectors, the CR5 is above 60%.

Food retail is also characterised by the existence of a high number of SMEs involved in food trade (over 99% of the enterprises, representing 54% of turnover and 56% of the total employment), but with important differences across Member States. Large food retail chains account for a varying share of the market (from around 30% in IT to around 90% in FI).

With such a diversity of actors in the FSC, the channels to bring food from the farm to the fork are themselves diverse. The case of tomato supply chain in Spain 38 , offers an illustration of this diversity: a local supply chain represented by a network of small-scale agro-ecological farmers selling directly to consumers; a ‘mixed’ chain from medium-sized semi-diversified farms selling through a cooperative to a network of grocery shops in the same region; and a ‘global’ chain where tomatoes are produced on substrate in average- and large-sized farms of a specialised region (Almeria), and sold to a wholesale cooperative that supplies wholesale markets and, sometimes, directly to retailers throughout Europe. Just for short or for local FSCs the diversity of organisational arrangements is striking, from Community-supported agriculture schemes, to diverse types of on-farm sales, farmers markets or shops, public procurement schemes, e-commerce arrangements, etc. 39  

In terms of policy, favouring a diverse supply chain can contribute to food system resilience. A key characteristic of agriculture production is its dependence on the weather, and trade across regions of agricultural products is a way to hedge against unfavourable weather events in one or more specific regions 40 . The importance of trade for resilience is likely to increase in the face of the climate change 41 . Similarly to the approach of biodiversity offering a buffer for ecosystems against external shocks, it can be demonstrated that diversity of supply chains reinforces the capacity of a city to resist to food shocks, for instance generated by drought events 42 . The existing FSCs system was remarkably resilient during the COVID-19 pandemic, including successfully innovating to respond to a fast changing situation 43 . This illustrates the ability that FSCs have to respond to market-led changes, including to shifts in consumer food demand towards short or local FSCs. The role of short and local FSCs was also the subject of a GREX presentation by Via Campesina 44 : short FSCs can still work in events where vulnerabilities linked to supply flows are at stake. Short FSCs have their role to play in such events, as shown during the COVID-19 pandemic, as alternatives to longer supply chains. But shocks can be of multiple types, and flexibility and options are needed. The literature shows that local food systems are not able to feed the whole world population on their own, and that global FSCs are essential to ensure an adequate and stable food supply 45 . That is, local and global FSCs are complementary, from a resilience perspective. But further: local and global FSCs are also mutually benefitting and reinforcing each other, with positive spill-overs occurring from the operation of global, highly efficient and innovative FSCs contributing to the modernising and the spurring of innovation of local production systems 46 .


2.2.Risks and vulnerabilities

2.2.1.Risks to the food system

The Commission’s Megatrends Hub identifies fourteen global megatrends 47 . These are long-term global driving forces that are observable in the present day and are likely to continue into the future. The JRC in the second GREX meeting (organised in February 2021) looked at how some of these megatrends are likely to affect food supply and food security in the EU, offering a categorisation in three groups (figure 10):

1)Mega-trends with a highly disruptive potential for FSCs, which include: security (attacks on energy or other critical infrastructure); expanding use of technology and IT infrastructure (for example, IT failure, cyber-attacks, disruption to communication channels); climate change (more frequent extreme weather events and natural disasters, newly introduced and expanding pests); health (pandemics, biosecurity and bioterrorism); and social inequalities (social unrest, decreasing social capital).

2)At a lower level of disruptive potential: mega-trends related to work and migration (availability of workforce, organisational structures); education (training, misinformation); resource scarcity (land availability, water, nutrient scarcity); and the growing importance of East and South (geopolitics, international trade). Some of these may both bring risks to food security, as well as opportunities to improve food security (for example, international trade and migration dynamics can have a positive impact on system resilience);

3)Megatrends that reflect structural developments that have to be taken into account, but that have a lower disruptive potential in relation to food security: demographics (aging society, depopulation); the role of cities (city food policies, broader contingency plans at city level); governance (new networks, new actors); consumerism (higher demand, food prices, food innovation).

The World Economic Forum (WEF), based on survey results in its Global Risks Report 48 , identifies the top global risks according to their time horizon (short-, medium-, and long-term), likelihood, and impact (see figure 11). According to WEF, the top short-term risks relate to diseases, livelihood crises, extreme weather events or cybersecurity. Medium-term risks are more structural (asset bubbles, debt crises). Long-term risks relate to the weakening of states or natural resources crises. WEF assesses four of the five most likely risks to be linked to the environment: extreme weather, climate action failure, human environmental damage, and biodiversity loss. Another category of likely risks are related to technology (3 of the top ten risks according to WEF: digital power concentration, digital inequality and cybersecurity failure). Societal risks like diseases (pandemics) and livelihood crises are also seen to be both among the ten most likely and impactful.

Figure 10 - RESULTS OF A MAPPING EXERCISE OF 14 MEGATRENDS IN RELATION TO FOOD SECURITY

Source: JRC, 2021

Figure 11 - WEF survey: perceived impact and likelihood of global risks

Source: WEF, 2021

Beyond this mapping of risks, the WEF also identifies frontier risks (see figure 12). These are seemingly less likely (low probability possibilities), but the impact of which could be large. An example of such frontier risk is that related to large volcanic eruptions, which are known to cause extreme climate and weather variations, depending on numerous factors including the location of the volcanic eruption, its timing, duration, etc. 49 . In 1815, Tambora erupted in Indonesia resulting in severe local and global impacts. 1816 was known as the ‘year without a summer’ in the Northern Hemisphere (America, Europe) and characterised by widespread crop failure 50 .

This illustrates the high degree of uncertainty around the nature of the next crises that could affect food security and food supply in the EU.

Figure 12 - WEF foresight on frontier risks

Source: WEF, 2021

Two examples can be further detailed. Most of the risks among those quoted for food supply and food security are associated to shortages in the supply of food in terms of quantity produced (due to large-scale crop failures or conflicts). Since its inception, the EU has largely been preserved from such risks, but these should be kept in mind as possibilities.

A clear outcome of the Commission’s own consultation process is that climate change-related weather events and environmental degradation are the perceived main source of risk to food security in the EU in the future: 60% of respondents to the Commission’s stakeholder questionnaire considered extreme weather events and global warming as the main threats to EU food security. This result was confirmed by participants in the GREX (Annex 2) and by the answers to the Commission’s “Member States’ questionnaire” (Annex 3). Global warming and climate change affect the phenology of plants and animals, the distribution of agro-climatic zones and fish populations, water availability, the development of pests and diseases, and yields - both in quality and quantity 51 . For any particular crop, the effect of increased temperature will depend: in some areas, warming may benefit the types of crops or allow farmers to shift to crops that are currently grown in warmer areas. Conversely, if the higher temperature exceeds a crop's optimum temperature, yields will decline. The increase of CO2 concentration can result in increased plant growth, but also reduced nutritional value. Animal production is also affected though heat stress, increased exposure to diseases and by the impact of drought and heat for example on pastures and feed grain production. Heat and cold waves, water scarcity and droughts, floods, and wildfires will all directly impact farming, as well as indirectly through increased levels of weeds, pests and fungi that benefit from warmer and wetter climate and of CO2 fertilisation. The impact of climate change on EU agriculture has been modelled and shows that, without adaptation, cereals yields might decrease, in particular in Southern Europe, with expected losses corresponding to 10% to 20% of the current yields, and up to 80% in Southern Europe in non-irrigated systems for maize, a crop that will become unavailable in regions where water is getting scarcer 52 . Illustrating the North-South divide in Europe in relation to climate change, wheat yields could on the contrary slightly increase in Northern Europe (by up to 5%), regions that would benefit from more precipitation, an anticipated growing cycle, and CO2 fertilisation effects. Given the severe climate change impacts on large agricultural producers outside Europe, EU production could slightly increase as Europe is projected to have a comparative advantage. Globally, agricultural production is currently not expected to decline due to climate change before 2050 53 . Other threats to EU food supply often identified by respondents to the questionnaire relate to the environment in general, with resource scarcity or degradation and biodiversity loss (e.g. pollinators), plant or animal health issues (uncontrolled plant or animal pests), and human health (pandemics).

A decrease in the catches of wild fish is also likely to occur under the effect of climate change. Models show global marine life biomass could decrease by 5% to 17% under the sole effect of climate change, primarily driven by increasing seawater temperature and decreasing primary production (with important variations across regions and species) 54 .

Recent extreme weather events such as unusually late cold spells combined with vegetation being in advance (in 2017, 2021), the increased frequency, intensity and length of droughts (2018, 2019), unusual heatwaves (2003, 2019) and floods (2021), show that climate change already affects agricultural and seafood production in the EU today. The probability of occurrence of years that are both warm and dry has doubled compared to the period 1961-90 55 . The IPCC 6th assessment report confirms that “many regions are projected to experience an increase in the probability of compound events with higher global warming. In particular, concurrent heatwaves and droughts are likely to become more frequent. Concurrent extremes at multiple locations become more frequent, including in crop producing areas (...)” 56 . In addition, the joint probability that key crop and pasture regions simultaneously experience severely warm conditions in conjunction with dry years has also increased. This affects the risk for yield shocks for regional and global agricultural markets and has implications for food security, in particular as there is an increase in the probability of climatic extremes hitting several major agricultural regions simultaneously. For example, this increasing risk of simultaneous failure has been illustrated for wheat, soybean crops 57 and maize 58 . A few countries dominate global maize production and trade. Simultaneous production shocks in these countries can have tremendous impacts on global markets. Such synchronous shocks are rare, but will become more likely if the climate continues to warm. The possibility that extreme weather events in different areas of the world happen close to each other in time, as shown in the Northern Hemisphere in association with a meandering jet stream 59 , could further increase the probability of negative effects on crops.

While climate change and related extreme weather events can affect the supply of food, other risks weigh on the capacity of the FSC to bring the food from producers to consumers. Cyber-attacks affecting the IT systems of large companies in the agri-food sector have already resulted in disturbance to the food chain. For instance, food systems are becoming increasingly dependent on information networks - as is the case for every aspect of modern life. This implies considering the potential impact of cyber-insecurity on food systems 60 . Food processing uses increasingly sensors, for example to monitor food product temperature during processing and transportation, ensuring products being processed or transported remain at optimal temperatures. A potential risk is that the sensors could be manipulated, allowing food products to be stored at less than optimal temperatures without being noticed, thereby leading to an enhanced risk of bacterial contamination or loss of shelf-life. Food systems are also reliant on just-in-time transportation: agricultural producers depend on timely transportation of seed, fuel, fertiliser and plant protection products, as well as on the timely transportation of harvested crops to processors to ensure crop quality is maintained. Grocery retailers require the timely delivery of processed agricultural products, along with fresh fruits and vegetables, for ultimate delivery to the consumer. In these systems, inventories are kept light, and much of the “inventory” is in transit at any one time. Cyber-infrastructure breach in just-in-time distribution settings could have seriously disruptive ripple effects across the supply chain. An example occurred in June 2017 when the ‘NotPetya’ malware attack infected the IT networks of the shipping company Maersk. The company, which is responsible for 15% of all global freight, reported $300 million in losses. Ships could not be located at sea, nor could they be unloaded at port. All Maersk operations came to a standstill. It took 10 days for the company to restore all systems. According to Maersk Chairman Jim Snabe, ‘human resilience’ and support from customers made it possible for Maersk eventually to cover 80% of shipping volume through manual systems while IT was down. If the attack had spread more widely across the transport sector and related industries, damage costs could have grown exponentially with spill-overs across multiple sectors and economies.

On the consumer side, the development of the Internet of Things could also imply risks for food—if hackers were able to control the temperature settings on smart refrigerators, consumers could unwittingly be exposed to food spoilage or food poisoning. The capacity for disinformation on social media, and the degradation of trust towards traditional media outlets creates an environment where carefully-crafted rumours could become viral for instance concerning food safety.

This also applies at farming level, with the development of precision farming, threatening potentially also supply, not only distribution: sensors the rate of application of water, pesticides and herbicides, for activating ventilation systems or monitoring health of animals in livestock farms, autonomous robots (i.e. robotic milking machines) deployed in large part to relieve a shortage of labour on farms and driverless tractors are being tested. Attacks on these systems result in short term disruption of availability of information or long term manipulation of one or more of the data inputs. The negative potential effects (such as the over-application of fertilizer, etc.) might not be detected until it is too late in the growing season, causing irreversible damage.

Based on the above, the EU FSC, and its capacity to provide food to EU citizens, is thus facing increasing levels of uncertainty and volatility. Further there may be risks that are unknown and, thus, unanticipated – which pose further challenges.

2.2.2.Potential vulnerabilities of the EU food supply chain

The EU’s FSCs remained resilient during the COVID-19 crisis. The decline in food and drink industry production was much lower than compared to total manufacturing production (-9.1% in Q2 2019) 61 . Similarly, while the employment levels in the food and drink industry decreased, they did so to a lesser extent than for total manufacturing.

As shown in Annex I, some bottlenecks emerged due to closed borders within the Single Market, which distorted the supply for inputs, transport of goods as well as, through confinement and other issues, caused labour shortages. Another problem in supply arose from panic buying and stockpiling by consumers in the first weeks of the pandemic. Nevertheless, , supply chains stabilised quickly and remained resilient.

During the second wave, the food industry was impacted to a lower extent than the first wave, as some producers were able to adapt to new types of demand and outlets (e.g., adjusted packaging, labelling, and production, delivery or take-away services, on-line sales). Additionally, borders remained open, and consumers refrained from panic buying and stockpiling.

Regardless of its remarkable resilience, the food sector faces different sets of challenges compared with other sectors that are not as critical for daily life. These challenges are linked at least to the five following factors: need for workers/labour, changes in consumer demand and habits, business continuity of food production facilities, changing food trade policies, and financial pressures in FSCs (see box 1 for an example from Nestle). The following subsections give an overview of the vulnerabilities by stage in the food system. One noteworthy aspect is the interdependence between the different sectors – from this perspective, a vulnerability in one specific sector can quickly become a vulnerability for the other sectors.



Box 1 - Example from NESTLE 62

Challenges for the food supply chain

Response

Setting up COVID-19 steering committees (24/24h crisis management approach)

- to protect employees, with additional safety measures, programmes to support the mental health of employees, protocols with labour unions on health and safety at work (both at company level and sector level), rewarding frontline employees with benefits, remuneration of employees affected by temporary stoppage for a certain duration;

-to ensure food supply and operative responsiveness, thanks to crisis management processes (increased inventories, early risk identification, strong focus on supply base), business continuity plans, agility (consider all options and procedures) at supply level, transfer and share of contingency volumes and technicians between factories, development of visibility tools (for example, on transport, the online tool “Sixfold” developed with a supplier to ensure visibility of delays at borders), preventive measures to protect drivers, be prepared for ‘plan b’ in transport and distribution;

-to help society where possible through public-private partnerships

Lessons learned

Agricultural producers

During the first wave of the COVID-19 pandemic, farmers in the EU suffered significant economic losses because of supply chain disruptions or the closure of specific trade channels (e.g. food services). These events led in some cases to production surpluses. Farm incomes in 2020 declined 7.9%, corresponding to EUR 7.1 billion, compared to 2019 63 .

Overall, studies show that, despite the pandemic, EU agriculture performed relatively well in 2020-21, with production and trade levels remaining stable. Prices also remained stable across sectors; according to FAO’s Food Price Index, global agri-food prices have even been on an upward trend over the last months. In the animal products sectors in particular (dairy and meats), price levels in 2021 are not only above last year but also clearly above the 5-year average. Still, there seems to be a low level of systematic planning by primary producers for the event of crises: 83% of the primary producers that responded to the Commission’s targeted stakeholder survey stated they did not have a risk management or contingency plan in place before the COVID-19 pandemic.

Some sectors, however, were affected more severely than others. The whole or parts of the wine, beer, frozen/processed potato and meat (beef, poultry) sectors were impacted by the closure of restaurants. The flowers and plants sector experienced significant financial losses. The consumption of sugar also declined.

Importantly, the pandemic significantly affected consumer preferences. It is possible that some of these changes may become structural (or have accelerated structural changes already taking place before the pandemic). Consumers are increasingly interested in buying food online, in convenience shopping, as well as in the consumption of healthy products. However, and especially for low-income groups, price has become a key determinant of food choice, often to the detriment of healthier options, in the face of increase economic uncertainty.

The COVID-19 crisis has not significantly affected the capacity of the farming sector to keep its business. Shortages that could be feared on inputs (fertilisers, seeds, plant protection products and veterinary medicines and feed) did not materialise, thus had virtually no effect on the on-going and subsequent production cycles.

Box 2- Example from Arla Foods 64

The Arla crisis management mechanism includes the following steps:

Report: clear reporting lines; single points of contact in countries; regular training and guidance updates;

Assess: quick 360º assessment and instant approval of assessed crisis level;

Manage: crisis response structures set up ; roles and responsibilities assigned;

Evaluate: ongoing feedback loop; evaluation of situation and link to response.

Experience with COVID-19

COVID-19 combined different crises elements and impacts, and tested the preparedness of the company like never before. Arla is a co-operative, and has the advantage of a close relationship between farmer and company. This means a deep understanding about the functioning of the supply chain. While consumption patterns remained stable for dairy staples, several challenges arose, but dairy industry showed itself to be highly resilient.

Lessons learned

Resilience is not built overnight. There is a need for a strong policy, financial, and cultural environment to support the dairy sector. Supply can’t be quickly turned on and off;

Global integrated supply chains give flexibility to move products to where they are needed, and to source inputs from the global market when needed;

Flexibility and agility is key for decision-making. Speedy responses should be replicated in the political and policy environment;

Data-led decision-making: spend ‘peacetime’ building the processes so they can be quickly executed in a crisis;

Partnerships can increase efficiency and effectiveness, but there concerns around what can be done under competition rules

Fishers and aquaculture producers

Drawing conclusions from the COVID-19 crises, the fisheries sector has been mainly affected by the changes in downstream demand, as well as by restrictions operations. The demand for certain species decreased substantially, in particular for demersal fresh fish fisheries, as sales decreased in the HORECA sector. For some time, exports were also restricted among other due to limited and costly air freight capacities. The working conditions in fishing vessels make it difficult to maintain physical distancing (as also mentioned in Annex 1). Consequently, many fleets had to cease their activity temporarily during the peaks of the pandemic and to change procedures on board. In addition, there was a need to alter control routines, since inspectors and observers were unable to board the vessels.

In the aquaculture sector, farms had problems with decreased demand, which meant fish had to be kept longer in facilities. Consequently, hatcheries and nurseries had problems selling juvenile fish for the next stage of the production cycle. Farmers reported that reduced tourism led to low sales over the summer of 2020. Some MSs reported that the direct sales of some species increased in 2020 (but fewer fish may be available in 2021) 65

In the seafood sector, professional organisations, in particular producer organisations recognised under the Regulation on the Common Organisation of the Market for Fishery and Aquaculture products 66 , have played a crucial role during the health crisis, for the implementation of emergency measures, in particular in adapting their members production and marketing strategies to a suddenly changing and substantially lower demand.

Processors

The COVID-19 pandemic led to disruptions in the food processing industry, which was affected by rules on social distancing, by labour shortages due to sickness, and by lockdown measures to contain the spread of the virus.

In some instances, high levels of concentration in the processing sector may have compounded the negative effects of the pandemic.

In confined spaces, such as packing plants for fruits and vegetables or meat and seafood processing facilities, social distancing measures necessary to ensure adequate employee protection reduced the efficiency of operations. Many firms reported high rates of worker absenteeism (for example, staff availability was reduced by up to 30% in French meat processing facilities in the regions of the country worst hit by COVID-19 67 ). Processors were also impacted by similar sanitary and confinement measures adopted by operators from which they source their raw material.

In some cases, workers live together in overcrowded conditions, which further facilitates the spread of the virus and impacts worker availability. Meat processing appears to be more sensitive than other types of food processing due to the labour intensive nature of operations 68 : multiple outbreaks have been reported in many major meat-producing countries in the EU and in third countries, affecting the meat market, with prices pushed upwards due to the incapacity of processing facilities to supply. By contrast, grain handling and processing is highly automated and less labour intensive, and did not experience the same disruptions as the meat-processing sector.

Retailers

During the COVID-19 pandemic, food retailers experienced increased sales due to a sharp shift in consumer behaviour from out-of-home consumption (at school, at work or in restaurants) towards food consumed at home. Retailers of frozen and packaged foods experienced the steepest increase in sales. In the first weeks of the crisis, sales of frozen foods in France were 63% higher than in 2019. Similarly, packaged food sales in Germany increased by 56%. Later on in the crisis during the summer of 2020, demand stabilised at 15% to 20% higher levels than during the same period in 2019 69 . For the whole year 2020, grocery retail increased by 8% in volume and 10% in value 70 .

Food retailers were able to adjust to the changing demand. This was particularly the case for large retailers. During the pandemic there were significant changes to how consumers buy their food. Online food sales registered a high growth during the first months of the pandemic (a 55% increase in 2020). This corresponds to a shift of market share of 1.5 percentage points. By comparison, brick-and-mortar supermarkets lost ground, accelerating some previous trends. Customers from all demographics, but notably those over 50, shifted to digital and delivery. This has created an environment ripe for innovation, with a need to realign supply chains, redefine what parts of the food workforce are essential, and gain a deeper understanding of how to connect with customers through social media. The potential long-term impact of the pandemic on the grocery and food retail sector includes increased competition in the online sales space 71 and further digitisation, with consumer surveys showing this evolution is likely to continue.

Other challenges for the retail sector relate to a deeper polarisation between consumers going to more expensive products (trade up) and those who focus more on cheaper versions or substitutes due to lower available income (trade down). Such evolution has affected loyalty to retail brands, with a significant share of consumers changing stores or banner. The health and environmental consciousness of consumers is also on the rise, with the number of eco-active consumers rising from 6 to 10 percent in France, Spain or Germany.

Food services

The HORECA sector estimates losses of 60% to 90% in 2020 compared to 2019. The main reasons for the deep impact on the food service sector are related to the repeated targeted national restrictions limiting the functioning of restaurants, canteens, and bars. Food services are to an extent substitutable by physical or online retail food sales. As such, while the issues faced by the sector are linked to regulatory, social or economic factors, they seem limited from a food security of supply contingency planning perspective, unless large-scale disruption of the retail sector would take place.

Labour

COVID-19, and the resulting measures to contain the spread of infections have significantly affected the food-related workforce. Food is an essential sector that needs to keep producing during the crises, and workforce availability is a fundamental part of the sector’s ability to produce.

To alleviate these issues, the Commission published practical guidelines to ensure that, within the EU, mobile workers who qualify as critical in the fight against the coronavirus pandemic can reach their workplace 72 . Farming is by definition a seasonal activity with certain peaks of work along the year. Seasonal workers are critical to the agricultural sector in terms of harvesting, planting and tending functions, especially in some labour-intensive sectors like fruit and vegetables. The Commission adopted guidelines 73 to ensure the protection of seasonal workers in the EU in the context of the coronavirus pandemic. These provide guidance to national authorities, labour inspectorates, and social partners to guarantee the rights, health and safety of seasonal workers, and to ensure that seasonal workers are aware of their rights.

Migrant workers in particular, both from inside the EU and from neighbouring countries, provide critical labour and skills to labour-intensive agriculture in EU Member States, including by filling seasonal jobs for which is often difficult to find suitable local labour. Germany, Italy, France, Spain each receive between 150,000 and 400,000 migrant workers each year 74 . Migrant seasonal workers originate either from the EU (Romania, Bulgaria, and Poland in particular) or from outside the EU (Ukraine, Morocco, Albania, etc.). Between 2011 and 2017, the number of intra-EU migrant farm workers increased by 36%, and the number of extra-EU ones by 31%. Such figures are considered to be underestimates.

It is unlikely that the food sector in several EU Member States would be able to work at normal capacity without the workforce originating from outside the country. This makes labour one of the critical inputs in the food system, in a food security context. During Spring 2020, some estimated that 40 to 50% of the migrant workforce needed was not available. EU governments took a range of actions to compensate for this lack of workers, from organising charter planes to fly in the workers, to extending the work permits of those on-site, facilitating change of status (from student to seasonal worker), allowing asylum-seekers to work, or encouraging local population to step in. Further, seasonal workers’ can face risky working conditions in pandemics, in some cases working in confined spaces with a lack of social distancing, sharing accommodation with poor hygiene conditions, or sharing transport.

Inputs

Fertilisers

Farmers – and therefore the whole food chain - rely on the supply of fertilisers to grow crops. For this reason, the sector can be regarded as essential in a food contingency planning context. To increase the sustainability of agriculture, the Farm-to-Fork Strategy aims to reduce fertiliser use by at least 20%. Excessive nutrients in the soil can contribute to problems such as pollution of drinking water, soil acidification and climate change. Still, an adequate supply of nutrients and micronutrients in the soil is essential to crop growth, as it increases the production of biomass in the plant and, thus, yields.

In consultation, the European fertiliser industry highlighted the following actions as crucial to improve the resilience of the sector 75 : ensure the continuation of transportation and distribution of fertilisers in the Single Market during crises; ensure a safe and healthy environment for the employees of the sector; ensure that agricultural inputs are listed as priority products, so that the transport and delivery of fertilisers would not face delays and disruptions at borders.

Seeds

Seeds can be high-tech, high value-added products, which form an important link in the FSC. 3,500 new varieties are authorized for marketing within the EU each year, and more than 42,000 different varieties of agricultural and vegetable species are available to farmers in Europe 76 . In planning seed security, it should be taken into account that the seed sector is global (more than 25% of commercial seed used worldwide is not locally grown). Moving seeds across borders enables breeders and seed producers to test seeds or breeding lines under specific regional environmental conditions, timing of harvests, and localised expertise. Unimpeded international movement of seeds is key to ensure that all farmers worldwide can access the high quality seeds, ultimately contributing to global agricultural productivity and food security. During consultation the European seeds industry highlighted the need to avoid restrictions to the free movement of seeds and related services in the EU, and to continually align the EU with international developments in the area of seed quality, seed health and market access requirements.

Feed and feed additives

The feed industry provides necessary inputs to the animal farming sector. It includes 3,500 compound feed manufacturing sites located mainly in rural areas. Its main challenges during the COVID-19 pandemic were essentially related to other stages on the FSC: logistical disruptions and uncertainties with regard to possible trade restrictions, worrisome for a sector where import dependency is high, impact on meat markets through reduced demand and meat industry capacities affected, and decreased availability of co-products (among others due to collapse in use of biofuels).

In addition, feed additives are important from a food safety point of view (feed preservation and hygiene is essential in protecting human and animal health), for ensuring nutritional value and optimal digestibility of feed (resource efficiency, animal welfare, reduction of antibiotics), and for reducing emissions and waste. From a contingency planning point of view, the feed and feed additives industry is also important because the sector is globalised, innovative, addressing societal concerns like antimicrobial resistance, and diverse (the sector includes a large number of SMEs). Feed additives are largely imported 77 . A striking example are vitamins for which the share of imports, mostly from China, is extremely high (for instance, in the USA, above 80% of the total use for vitamins C, B1, B6, B12 78 ). The situation is similar for other additives, such as amino acids, trace elements, enzymes and others - markets where strong growth is expected (while overall feed demand is decreasing in the EU). This means that during the COVID-19 pandemic, disruptions in sea transport (shortage of containers) resulted in difficulties to ensure supply. Dependency on a few or single suppliers justified developing alternative sourcing, and delays in flows convinced companies of the need to develop regional stocks to be able to source more quickly.

Box 3  Example: the EU Association of Specialty Feed Ingredients and their Mixtures (FEFANA) 79

Specialty Feed producers occupy an important place in the food chain – they hold only 3.5% of the volume, but 10% of the value of compound feed.

The COVID-19 continuity plan for FEFANA’s production units includes:

1.Local pandemic management teams and the identification of essential functions;

2.    Crisis monitoring, with follow-up of the spread on sites following international (WHO), national and regional authorities’ recommendations;

3.    Hygiene and protection measures, and quarantine rules recommended by the national authorities.

4.    If needed, calls made to retired employees to work as back-up staff;

5.    Increased frequency of office and facilities cleaning;

6.    Strong limitation of inter-sites or plants visits, use of public transport;

7.    Mandatory remote work for European employees in administrative and support functions;

8.    Hygiene and protection measures for external visitors (for example, for raw materials supply and transport of finished goods);

In addition, the early designation of the feed additives industry as essential for the food chain, and the good coordination at national level (authorities and business operators), were key during the pandemic.

Transport and logistics, advisory and consultancy

Some sectors of transport and logistics, such as seaports and storage facilities, have been dealing with pandemics and sanitary issues from the earlies history - the concept of quarantine originated at seaports. Transport and logistics operators already carried out some safety measures that had to be implemented during the COVID-19 pandemic. For example, in bulk cargo shipping masks are customary due to dust, high levels of automation make social distancing the norm with some operations, and there is a naturally high degree of ventilation is storage facilities. Also, the loading and discharging vessels implies a high volatility in daily labour demand and 24/7 availability, so port working systems are by design arranged based on cellular working teams which enables to keep “cells” of workers without contact among them. This provides resilience, if one cell is affected, the rest are not 80 .

In terms of different means of transport, a key bottleneck – at least during the COVID-19 crisis - seemed to be sea transportation, mainly due to insufficient shipping capacity 81 . A global shipping container shortage occurred through a combination of a slowdown in investment in new capacities, changes in consumption modes, with on-line purchases needing quick delivery, and port congestion 82 . With the introduction of the Commission’s ‘Green Lanes’ initiative, intra-EU road and train transportation faced fewer problems. The transport of perishable products by air also saw significant falls in traded volumes for certain goods, such as seafood exported to remote markets, for which air freight was either unavailable or too expensive 83 .

There are also indications that other services related to food production (for example, technical advice to farmers and other food supply chain operators, consultancy services, etc.) have been affected by the COVID-19 pandemic 84 . Often these issues were related to the freedom of movement of workers and the classification (or not) of some business activities as ‘critical’.

Box 4 - Example from Unistock Europe 85

Most storage companies have in place certain procedures, for the safety of workers 86 :

-Strict procedures of disinfection of machinery cabins, before and after each shift/worker;

-Mandatory masking at all times;

-Dressing rooms and showers’ capacity reduced to 30%;

-Eating room capacity reduced to 15%;

-Contactless documentation of trucks and trains;

-Constant and transversal communication about the pandemic, helping to tighten ties among teams;

-Hydrogel easily available;

-Intense signalling with instructions about proper procedure.

Box 5 - Case Study: IATA 87

IATA lists the following elements to improve the distribution and flow of perishable goods, such as food, throughout the supply chain:

·Ensure compliance with international standards, procedures and practices;

·Improve handling and transportation performance (e.g. to address food wastage and loss);

·Embed social responsibility and sustainability practices, and communicate actions taken to customers;

·Apply appropriate quality and risk management processes and increase collaboration;

·Ensure product safety along the supply chain (e.g. food safety);

·Improve industry readiness and preparedness through applying guidelines, regulations, training, certification and registry;

·Apply a broader supply chain approach: a concerted effort to meet industry concerns and improve the level of competency, infrastructure, quality and training needed to ensure compliant handling and transportation of perishables throughout the supply chain.

Packaging

The packaging industry plays a key role in preventing food contamination, spoilage and food waste. Packaging shortages at times of crisis could worsen food availability issues. In the initial stages of the COVID-19 pandemic, the packaging supply chain faced several instances of disruption 88 . The switch from food services to home cooking made it necessary to solve the mismatch of packaging: large quantities packages, usual at wholesale to foodservices, had to be repacked in end-consumer packages. The closure of raw material suppliers during the COVID-19 pandemic in 2020 led to a shortage of some materials in 2021, while demand resumed with on-line sales, notably concerning paper-based packaging. For example, some egg suppliers in the UK had to switch from cardboard packages to plastic ones 89 .



Box 6 – Example from the European Organisation for Packaging and the Environment

  (EUROPEN) 90

Lessons learned from COVID pandemic