Germany has a highly industrialized Western economy, and agriculture accounts for only a small percentage of economic output. Yet, more than 80% of Germany’s surface area is used by agriculture and forestry, a characteristic that shapes the landscape and exerts a major influence on German society and political life.
As a member of the European Union, Germany adheres to the principles and programs of the E.U.’s Common Agricultural Policy. Through much of the 1990s, Germany’s domestic agriculture policy centered on integrating the large, state-owned farms of the former East Germany into the West’s capitalist economic system.
With the election in 1998 of a new political coalition, the Social Democrats and the "Greens," agriculture policy began a shift toward food safety, animal welfare and environmental conservation. But the defining moment for German agriculture in recent years was the November 2000 discovery of BSE, or "mad cow disease," in some German cattle.
Although the outbreak was relatively confined — 124 cases in the first year, mostly in Bavaria — the development pummeled consumer confidence in food safety, cast doubt on agricultural practices in general, and encouraged an even stronger move toward the Green agenda. During the first months after the detection of BSE, German beef consumption dropped by as much as 70%, and in the first half of 2001, consumption was down by 45% from the same period in 2000.
By September 2001, however, beef consumption was off by only about 14% from the previous September, primarily based on actions taken by the government to restore confidence.
In addition to the slaughter of infected animals and those thought prone to infection, government actions included adopting a risk management system. The system employs three pillars: the prohibition of meat and bonemeal in feed, the removal and destruction of specific offal material at slaughter and extensive BSE research.
The BSE situation served as a catalyst to changes in Germany’s broader agricultural policy and goals, beginning with the establishment in early 2001 of the Ministry of Consumer Protection, Food and Agriculture, which replaced the Ministry of Food, Agriculture and Forestry. Under the new policies, preventive consumer health protection takes precedence over economic interests, a shift also reflected in the establishment-of the Office of Consumer Protection and Food Safety and the Institute for Risk Assessment.
In a newly titled "Agri-Food Policy Report" released earlier this year, the government further outlined the major components of its agriculture policy: production of high-quality food meeting consumer expectations regarding quality and safety as well as animal welfare and environmental conservation; production of renewable resources which, when used as sources of energy and as environmentally-friendly raw materials for industry, will act to safeguard the climate; conservation of landscapes rich in diversity and of high ecological value and the safeguarding of a broad range of industrial and commercial activities and jobs with promising futures in rural areas.
"The former approach designed to maintain the status quo with increasing state aids has failed. It could solve neither the problems related to markets or caused by structural changes in agriculture, nor environmental problems or deficits in animal welfare," the report said.
Basically, the new policy is designed to shift German agriculture away from the goal of low-cost producer to high quality producer. This redirection is expected to satisfy both domestic demand for food safety and to enhance German agriculture’s competitiveness.
"Facing up to the world market means for our chiefly small- and medium-sized agri-food enterprises to convince through good quality, whilst improving productivity," the report said. "Here exist greater opportunities for the German agri-food enterprises than in the drive towards global cost leadership."
The government plans to shift more of its CAP resources to rural development from a market and crop price emphasis. Beginning in 2003, funds provided for direct payments in the market sector will be cut and will be channeled into agri-environmental measures.
Support will be directed to investment promotion for land-related livestock farming that meets animal welfare requirements. Subsidies also will be raised to convert and maintain organic farming, coupled with improved promotion of organic processing and marketing.
WHEAT, RYE AND FLOUR MILLING
About half of the German grain crop is wheat, which is usually above the average E.U. quality. The 2002 wheat harvest is expected to be at about 23 million tonnes, about 10 million of which consists of elite or A-quality varieties.
Because German wheats have a reputation for high quality, they are able to compete with lower-priced French offers. The most important destinations for German wheat exports are Algeria and the Benelux countries, while Italy and the U.K. are chiefly buyers of high-quality blending wheat varieties. In 2000-2001 total exports of German wheat amounted to 5.196 million tonnes versus 4.969 million the previous season.
Another important German crop is rye, production of which is highly controversial within the EU because 1.5 million to 1.9 million tonnes, or 35% to 40% of total production, has ended up in E.U. intervention storage during the most recent four years. Also, customers for rye are hard to find on the world market.
Germany has a mature, modern milling industry consisting of approximately 800 flour mills, with 361 mills grinding at least 500 tonnes a year. Of the 361 mills, 290 are located in the western part of Germany, with 71 mills in the east.
Milling output is concentrated among 64 large mills, which each grind 25,000 tonnes or more annually and enjoy a total market share of 83.8%. In contrast, 224 small mills, each with a yearly grind of between 500 and 25,000 tonnes, have a total market share of 5.2%.
Total annual grind is 6.5 million tonnes of bread wheat, 940,000 tonnes of durum and 800,000 of rye, with millfeed output about 1.4 million tonnes. Some 90% of domestic flour sales go to bakeries, with the remainder for industrial use, while about 500,000 to 850,000 tonnes of total bread wheat grind is exported.
German per-capita flour consumption is 63 kilograms. Of the total, about 53 kg is wheat flour, with an estimated 10 kg of rye flour. While rye per-capita consumption has been sinking nearly continuously since the 1950s, wheat consumption, especially since the 1970s, has been rising.
The compound feed industry in Germany is characterized by commercial production. But a significant quantity of feed is mixed on the farm, by farmers, to be used in their livestock operations. These farm operations use their own harvested grain and purchase premixtures of minerals and additional feed and feed concentrates to mix their own feed formulations.
The commercial industry comprised 510 companies in 1999, but persistent overcapacity, running at 15% to 20% in 2000, has resulted in more consolidation.
Large companies, although small in number, account for the bulk of production. For example, in 1991-92, companies with an annual production of more than 200,000 tonnes accounted for less than 30% of total production. By 1998-99, this share had risen to 36%. Small companies tend to specialize whereas big market players supply the full range of mixed feeds for major animal varieties.
The BSE outbreak and subsequent ban on the use of animal and fish meal products in feed for all animals has increased the use of soybean meal and grains in feed. While the percentage of grains used in compound feed increased by about 1% annually between 1997 and 2000, the increase from 2000-01 to 2001-02 was forecast at more than 4%.
In 2000-01, compound feed contained 37.7 % of grains, but for 2001-02 the proportion is estimated at 42%. Changes in consumer preferences after the BSE crisis favored poultry and hog over beef production, which could further increase the uses of grains on compound feed as hog and poultry feed is especially rich in grains.
Although panic over the 2000 BSE outbreak has subsided, concerns about food safety issues are never far from the surface, which affects the livestock and feed industries. Earlier this year, for example, the government closed down several private BSE-testing laboratories after inspections showed inappropriate compliance with licensing requirements and BSE-testing procedures. For precautionary reasons, about 8,000 tonnes of beef were recalled and destroyed.
Currently, BSE tests are carried out either by government or private laboratories that are licensed and checked by the states. But pressure is building to have BSE-tests carried out by government labs only, as private labs compete on the basis of price and speed, which may result in less accuracy. Private labs were originally licensed because of insufficient capacity at government labs, when BSE tests became mandatory in Germany for all cattle above 30 months of age on Dec. 6, 2000, and for those above 24 months after Feb. 1, 2001.