Speech by Commissioner McGuinness at the Agribusiness Finance Forum hosted by the Polish Bank Association

Agribusiness Finance Forum, Polish Bank Association

Really delighted to take part in your Agribusiness Finance Forum this afternoon.

Financing our businesses – whether they're SMEs, farms, the food processing sector – is core to my work as EU Commissioner for financial services, financial stability and Capital Markets Union.

Addressing the themes of this conference – the future of agriculture, technology, climate change and biodiversity loss – requires investment at all levels of the food supply chain.

So where will this finance come from; is there a willingness to borrow; is finance affordable and the big question: can we all work together to achieve a more sustainable economy and society?

Let me begin by addressing the state of agriculture in the EU today and how geopolitical tensions impact inside and outside the farm gate.

Farmers are price takers, unless there is an acute shortage.

Commodity markets are easily disrupted.

In the early days of the illegal Russian invasion of Ukraine, commodity prices rose significantly; so too did fertiliser prices due to supply disruptions and uncertainty.

And high fertiliser prices has resulted in a decline in fertiliser use by farmers across the EU.

Production of fertiliser in Europe declined because of high gas prices.

Now, imports from reliable partners helped to fill the gap, as did temporary suspension of duties on urea and ammonia.

Russia is still the main supplier of nitrogen fertilisers in EU, supplying between 20 to 25% of our imports – presenting a strategic vulnerability for the EU farm sector.

Today the EU fertiliser market situation is normalising and prices are stabilising.

Technology is already playing a big part on farms and in the agribusiness sector.

Digitalisation is advancing in finance and in farming.

New technologies are revolutionising the way we produce, process and market agricultural produce.

Today's tractor is a computer on wheels – and an expensive one!

Digital technologies like precision farming allow for more efficient use of inputs and also prevent overuse and pollution, as well as helping to keep costs down.

Data can be used to improve the efficiency of livestock production, provide timely disease alerts and guide the optimum timing of application of plant protection products.

So ensuring access to broadband in rural areas is therefore vital, as is training and upskilling.

Agriculture research and innovation are key to finding solutions to problems, including those posed by climate change.

We need research to help farmers manage the transition towards more sustainable production systems and to adapt to the climate challenge.

I believe we need more investment in agriculture research and innovation.

Support from farm advisory services is essential in this process of transition.

Because advisors can help farmers put change into practice.

They can help our farmers adopt new technologies and the latest research, so that farmers can participate fully in the transition.

Let me turn in more detail to the issue of climate change and biodiversity loss.

Farmers are at the forefront of climate change.

Farmers are at the mercy of dramatically changing weather patterns.

We have droughts, floods, storms and hurricanes.

Heavy rainfall in the country I know best – Ireland – is testing the resilience of farmers.

It is almost impossible to put animals out on the land because of the heavy rain and saturated soils.

This is adding to costs on farms and to concerns about manure storage capacity.

Bad weather is a huge stress for farming families across the European Union.

Meanwhile, in other parts of Europe, water is in short supply, resulting in land abandonment, competition for water and concerns for the viability of some sectors.

Instead of farmers seeing action to tackle climate change as a threat, I hope and believe that our farmers will lead the change, because their very future is at stake.

Already there are many good examples of farmers taking action to address both biodiversity loss and climate change, and we need to hear more of their stories.

It's also True to say that across the EU, farmers are fearful for the future.

Farmers have taken to the streets, in France, in Poland, Latvia and Spain, expressing their frustration over many things, including regulation, production costs and income concerns.

As agriculture ministers met in Brussels yesterday to address these concerns, so too did farmers, venting their anger on the street.

Europe is listening.

The Commission is listening and responding.

A number of very important proposals have been made by the Commission, simplifying certain aspects of the Common Agricultural Policy and reducing administrative burden; including:

• A partial derogation on land lying fallow;
• Exempting small farmers of less than 10 hectares from on-farm inspections – these farms account for some 65% of farms in the EU – so Polish farmers will also benefit;
• Broadening the concept of “force majeure”, which will allow farmers who cannot fulfill their CAP commitments – due to no fault of their own – to avoid penalties.

We can agree on the need for action on climate change and biodiversity loss, and action is more urgent than ever.

As I said, technology is helping.

Innovation will too.

Helping farmers farm in a more sustainable way is in all our interests – our farmers provide us with food, quality food and plenty of it.

Now I want to turn to the topic of money.

For the farming and food industry, access to finance is important, as is the cost of finance.

In the last two years, interest rates have increased.

As inflation comes under control, interest rates are stable.

In the Eurozone, the ECB is cautious on if or when interest rates might come down.

The EU is driving the ‘sustainable finance agenda': ensuring that investments are future proofed to deal with the transition towards sustainability.

There is greater awareness and concern about the environment and climate among our consumers.

Some choose more sustainable products.

The agri-food sector is working to address sustainability issues – including energy, packaging, and waste reduction.

The CSRD, Corporate Sustainability Reporting Directive, requires large and listed companies – including food companies – to report on their sustainability.

This information is used by investors to guide their investment decisions.

Billions of euros are needed to finance the transition to a more sustainable economy.

Because the public purse cannot provide this level of investment, so private capital is vital.

In the EU we rely on bank finance mainly and this needs to change as we in the Commission advocate and legislate for Capital Markets Union.

This would see a single market for capital, allowing money to flow across the single market.

This would give companies access to capital to allow them start-up or scale-up or invest in a more sustainable future.

While there is political support for Capital Markets Union, we need Member States to do more to make free movement of capital a reality.

The Common Agricultural Policy, the CAP, has served us well in the EU.

We enjoy an abundance of high-quality food; we have regional diversity.

A supply of affordable food to consumers is important, especially to vulnerable households.

Higher food prices have resulted in concerns about food affordability.

We need to look at how to produce food that is affordable and provides a decent income for farming families.

CAP payments are a direct support to farmers and will continue.

The market must also deliver.

President von der Leyen addressed the reality faced by some farmers forced to sell their products below production cost, describing this as unacceptable.

And the President stressed the need to strengthen the negotiating power of farmers.

The President announced the establishment of an observatory to create more transparency on issues like production costs, the margins across the food value chain and all the steps in between, and where the increase of renumeration or benefits is to be found.

Another clear signal that the Commission is listening to the concerns of farmers and, more importantly, responding.

A strategic dialogue on the future of agriculture is underway since January.

This initiative brings together many stakeholders, farmers, environmentalists, financial institutions, academia and others who can shape our farming and food future.

The group will report in the summer on the future orientation of agriculture policy.

And the report will help shape and inform the future of policy for the next European Commission.

Today, we have too much polarisation – between stakeholders – about the future of the farm and food sector.

It is time to come together to tackle the many challenges in the farming and agribusiness sector.

We need to build resilience, we need to address sustainability and to invest in our farming future.

This will ensure that we – consumers – continue to eat well.

It will also ensure that our rural regions, where farming is the backbone, not only survive but thrive.

So, my thanks for this invitation to join you today, to share some thoughts about agriculture and agribusiness.

And I wish you well for the forthcoming panel discussion.

Thank you.