Agriculture prices have begun to ease, as European supply chains have adjusted to the 2022 shock, but the easing of existing subsidies add to the sector's woes

The drop in European agriculture output may add to underlying inflationary pressures

Ongoing farmers protests will likely negatively affect output in the industry and may add to the stickiness of food prices across Europe and, by extension, headline inflation. Logistical disruptions, especially around port infrastructure and border crossings, are likely to add to the short-term operational challenges that multinationals are experiencing and may add to existing transport costs. The intensity of the protests is likely to dramatically weaken by May, and farmers are eventually likely to force the hand of individual governments to increase subsidies for the sector, which will require notable fiscal amendments. The protests have also affected tourism and turnover in the HORECA sector, resulting in notable volatility in performance and posing disruptions to both B2B demand and channel access to consumers. Finally, for FMCG B2C multinationals that rely on local agricultural suppliers, the protest may see supply disruptions, and companies should monitor upcoming changes to existing European regulations that may have direct operational implications for their existing supply chains.


  • Since November, European markets have seen a massive surge in public discontent by the agricultural industry, manifesting in wide farmers protests across almost all European markets.
  • The protests are particularly acute in Germany, France, and Poland, where they have managed to cause significant disruptions to public traffic and logistical supply chains.
  • The protests have been sparked by a mix of factors, including the proposed subsidy cuts and tax exemption removals in Germany, surging business costs, red tape, and the tariff exemption for Ukrainian grain.
  • The attacks have caused significant cargo delays and congestion at major European ports, while also increasing insurance premiums for ships still using the Red Sea to 1.0% of the value of the ship from 0.05% prior to the crisis.
  • Pressures have been exacerbated by tightening of environmental regulations that threaten to further exacerbate business costs for the sector, prompting farmers to increase calls for government support for the sector.
  • In the most recent instance, farmers tried to break through police barriers in Brussels, aimed at disrupting a meeting between EU agriculture ministers, which was to discuss subsidies for the sector and the planned Mercosur trade deal with South American markets.

Our View

The farmers’ protests are hardly surprising, given the considerable pressures that the industry is experiencing, but their intensity and rapid surge across most European markets has taken European policymakers by surprise. Much of the farmers’ grievances stem from the rapid increase in business costs, ongoing attempts to reduce fiscal expenditures that have affected subsidies for the sector, and the persistent threat of cheaper imports, stemming from both existing Ukrainian agriculture imports and the potential inflow of Mercosur goods. European policymakers remain in a bind despite attempts to appease farmers. In France, the government has promised to ease regulation and to strengthen existing subsidies, while in Germany the government found itself forced to introduce the gradual phasing out of support measures that will run through 2024 and 2025. The European Commission has also simplified existing regulations under the Common Agricultural Policy, which will remove the requirement to reconvert arable areas for pastures and, among others, reduce the number of farm visits by 50%.

These, however, fall notably short of the farmers’ demands, and European policymakers will need to introduce more ambitious reforms and concrete subsidy schemes to alleviate pressures. Additionally, the Mercosur deal will come under increased threat, with French President Emmanuel Macron effectively requesting a pause in the negotiations over concerns of lack of regulatory coordination between Mercosur markets and the EU. The protests are also likely to put significant pressures on governments and the European Parliament, given the upcoming European elections, and will increase the likelihood of substantial revisions to the EU’s environmental legislation and regulation in the aftermath of the vote. Additionally, governments across Europe are likely to increasingly rely on unilateral policy measures to address farmers’ demands, which may necessitate considerable fiscal policy revisions, increasing policy unpredictability in the medium term.

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