Required Report - public distribution

**Date:** 5/11/2005

**GAIN Report Number:** DA5005

DA5005

**Denmark**

**Planting Seeds**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)Roger A. Wentzel

U.S. Embassy

**Prepared by:**

Hasse Kristensen

**Report Highlights:**

Danish grass seed production decreased in 2004 to 87,932 tons, slightly
down from the record 2003 harvest of 90,000 tons. Ninety-three percent
of the production was exported, primarily to other EU member states.
Grass seed area in 2005 is forecast to reach a record of 85,000
hectares.

Decoupling of EU production support is expected to increase Danish
production by up to 50 percent during the coming five to ten years.

Includes PSD Changes: No

Includes Trade Matrix: Yes

Annual Report

The Hague \[NL1\]

\[DA\]

Table of Contents

[**Executive Summary 3**](#executive-summary)

[Production 4](#production)

[Marketing 4](#marketing)

[Market Development Opportunities 4](#market-development-opportunities)

[Marketing Channels 4](#marketing-channels)

[U.S. Market opportunities. 4](#u.s.-market-opportunities.)

[Competitor Activities 5](#competitor-activities)

[Prices 5](#prices)

[Outlook 5](#outlook)

[Policy 5](#policy)

[General Agricultural Policy 5](#general-agricultural-policy)

[Planting Seed Production Policy 6](#planting-seed-production-policy)

[Plant Health 6](#plant-health)

[Seed Certification 6](#seed-certification)

[Plant Variety Protection 6](#plant-variety-protection)

[Biotechnology 7](#biotechnology)

[Organic Seeds 7](#organic-seeds)

[Export Subsidies 8](#export-subsidies)

[Export Restrictions 8](#export-restrictions)

[Quality, Safety and Health 8](#quality-safety-and-health)

[Consumption 8](#consumption)

[Trade 8](#trade)

[Trade Matrices 9](#trade-matrices)

[Table 1: Production, Domestic Consumption, Exports, and Domestic Stocks
(July 1) of Field grasses. Metric Tons.
11](#table-1-production-domestic-consumption-exports-and-domestic-stocks-july-1-of-field-grasses.-metric-tons.)

[Table 2. EU support to certified planting seeds. EURO per hundred kilo.
12](#table-2.-eu-support-to-certified-planting-seeds.-euro-per-hundred-kilo.)

# Executive Summary

Denmark accounts for more than 45 percent of EU grass seed production
and exports about 93 percent of its production - 90 percent of this to
EU member countries. Exports to the U.S. and Canada increased slightly
to 1,026 tons in 2003/04, which is one-fifth of the level in 1999/2000.
The same declining pattern is seen for exports to South America, with
2003/04 exports of 800 tons. Exports to Asia, mainly China, seem to
remain at a level of 1,500 tons. Imports from the US are minimal and
confined to small amounts of bent grass and red fescue.

In spite of increased area, Danish grass seed output in 2004 decreased
slightly to 88,000 tons compared to the previous year of 90,000 tons.
Total grass seed area for 2005 is estimated to increase to 85,000
hectares, 2,000 hectares more than the record year of 2004.

Denmark has consolidated its position as the world's largest exporter of
grass seeds and exports are expected to continue increasing. Total
2003/04 exports reached 87,000 tons, up from 78,771 in 2002/03 and
significantly higher than the average level of about 80,000 tons in
1999-03.

While the country\'s surpluses limit the demand for imported grass seed,
small but lucrative quantities of bent grass seed for lawns and golf
greens are imported with a decreasing share of this market coming from
U.S. suppliers.

Of the total average grass seed price received by farmers, EU production
support accounted for about 30 percent. In total, this support amounted
to \$41.5 million in 2004 corresponding to 48 cents per kilo.

With the implementation of EC CAP reform in Denmark by January 1, 2005,
all seed production was decoupled. The hitherto per kilo support is
discontinued, and producers will receive the same single farm payment
rights (about \$390 per hectare) as other crop producers. As a result of
the reform, producers of the high yielding grass seed varieties will
suffer a bit financially, while the producers of the lower yielding
varieties will gain.

Given the relatively free market access for planting seeds, economic
competition will determine whether future EU demand will be supplied by
seed producers in the EU (mainly Denmark, the Netherlands and Germany)
or from Canada, New Zealand and the U.S.

The average exchange rate in 2003: U.S. \$1.00 = DKK 6.59

2004: U.S. \$1.00 = DKK 5.99

May 2005: U.S. \$1.00 = DKK 5.75

# Production

Denmark's production area for grass seed has expanded 60 percent over
the last 10 years. Grass seed area for 2004 increased by 3,700 hectares
to a record of 83,175 hectares. The area for harvesting in 2005 is
estimated to increase to 85,000 hectares and may reach 95,000 hectares
in 2006. The area with Red Fescue is forecast to increase most. Area
sowed with Perennial Rye Grass, which accounts for 44 percent of the
total grass seed area, is forecast to increase slightly in 2005.

Total Danish grass seed production for 2004 amounted to 87,932 tons, a
decrease of 2,500 tons compared to 2003 due suboptimal weather
conditions during growing and harvest seasons.

Areas with perennial rye grass increased slightly to 36,562 hectares and
accounted in 2004 for 50 percent of the total seed grass production. Red
fescue accounted for another 27 percent of production. Kentucky blue
grass decreased slightly to 9,335 hectares and yielded 7,392 tons,
accounting for 8 percent of total grass seed production.

# Marketing

## Market Development Opportunities

Denmark\'s status as a major exporter of grass seeds limits
opportunities for U.S. exports. Nonetheless, market niches exist \--
primarily for seeds not grown in Denmark such as corn varieties for
silage and bent grass used for golf greens and lawns. In 2004, Denmark
imported 20 tons of bent grass from the U.S. at a value of \$56,900.
Imports of corn seed are difficult to ascertain as these are imported
through Germany and not recorded as U.S. origin. More than half of total
corn seed imports are brought in through Germany.

With EU production below self-sufficiency, market opportunities exist
for seed grasses, such as the most demanded rye grasses. In spite of low
stocks, Danish import prospects are very limited.

## Marketing Channels

The largest seed company in Denmark, DLF-Trifoleum has expanded its
activities by buying the Dutch Cebeco Seeds Group. In addition, its
subsidiary, Hundsballe Fro, bought together with Deutsche Saatveredelung
(DSV) Dutch Zelder in January 1, 2003. In February 2004, Hunsballe Fro,
DSV and Zelder established a cooperative venture named Euro Grass. The
intention of Euro Grass is to contract production in Denmark, propagate
the seeds in The Netherlands and sell the production in Germany. Out of
four Danish seed trading companies, DLF-Trifoleum now has a Danish
market share of about 85 percent, Hundsbale 10 percent and Avanta
(formerly Dutch owned and now sold to French Lima Grain) 5 percent. The
German company Barenbrug with a market share of 1 percent is trying to
establish contracts with the largest Danish producers by paying a
premium of 10 percent. Its EU market share is about 50 percent. Central
and East Europe is a fast growing market (increasing by more than 50
percent during the last three years) and DLF-Trifoleum has now
established a sales office in Moscow.

## U.S. Market opportunities.

The Danish trade maintains that U.S. seed traders are not sincerely
interested in expanding their activities within the EU, partly due to
the difficulty in obtaining the certification of seeds for the EU
market. Exporters should remember, however, that, when certified in one
EU member state, seeds could be exported to any other member countries.

## Competitor Activities

EU(25) grass seed area seems to continue growing. Grass areas have
increased from 185,000 hectares in 2002 (this year was down from
previous year's 218,000 hectares) to 227,585 hectares in 2004. Denmark
seems able to maintain its share of 45 percent of the EU production for
2005. DLF-Trifolium has established grass seed production in the Czech
Republic for export to other Central European countries and Russia.

# Prices

Average prices paid to growers increased by 5 percent in the marketing
year 2003/04 compared to 2002/03. Prices (excluding EU support) paid to
growers for perennial rye grass, accounting for 44 percent of all grass
production, increased in 2004 to DKK 685 (\$114) per 100 kg, up DKK 63
or 10 percent. Red Fescue increased from DKK 489 (\$82) per 100 kg in
2002/03 to DKK 610 (\$102) for 2003/04 but still far from the record
level of DKK 727 in 1997/98. In addition to the above prices comes the
EC production support of average DKK 273 (\$46) per 100 kilo. This
amount has been almost unchanged from year to year but will from January
1, 2005 be replaced with the CAP reform's Single Farm Payment.

# Outlook

Danish production area is expected to increase in 2005 by a few thousand
hectares to 85,000 hectares, another record. The increase is almost
exclusively in perennial rye grass and red fescue areas.

Decoupling of the EC production support (which at present is fixed under
the Budget Stabilization Agreement with a total national support not to
exceed DKK 223 million (\$37 million) will benefit Danish producers and
production is expected to increase by 50 percent to about 120,000
hectares over the coming five to ten years. Under the new support system
grass production for fodder will also receive decoupled payments. The
previous support payments did not cover grass area while corn production
for fodder was supported.

# Policy

## General Agricultural Policy

Denmark implemented the EU Common Agricultural Policy (CAP) reform
effective January 1, 2005. The reform decouples more than 95 percent of
the EU agricultural support to Denmark. All crop (except dried fodder),
dairy and cattle (except 75% of male animal support and 50 % of ewe
premiums) supports are decoupled and the amount of former coupled
support will be paid as a per hectare support.

All traditional area support will be allocated evenly to all
agricultural land with the same amount (Euro 310) per hectare, called
Singe Farm Payment (SFP). Permanent grassland, which has not hitherto
received any support, is also included into the SFP. It will initially
be supported at a lower level (Euro 67) that increases to Euro 310 by
2012. Areas with sugar beets (not previously supported) will also
receive SFP in addition to the (still artificially high) sugar prices.
Allocation of SFP will be based on land farmed by April 21, 2005. The
payment rights are payable to the farmers irrespective of whether they
are cultivating the areas or not.

For further details on CAP reform implementation see DA5003.

## Planting Seed Production Policy

The EU\'s per kilogram production premiums for grass seeds and its
acreage supports for major field crops within CAP reform legislation has
had the effect of making grass seed production relatively more
attractive vis-a-vis other domestic crop alternatives and made it more
competitive against other EU grass seed producers. The latter is due to
higher Danish grass seed yields and a reference period for CAP reform
supports established prior to a widespread switch to higher yielding
winter varieties.

Total production support was fixed under the Budgets Stabilization
Agreement with total national support not to exceed the reference period
support plus five percent. The reference period is 1996 to 2000 minus
the highest and the lowest years, which fix total support to Denmark at
DKK 223 million (\$33.8 million). With fixed per kilo support prices
this meant in practice that production exceeding a certain level was
unsupported up to January 2005.

EU production support paid to producers in 2003/04 (covering the 2003
harvest) amounted to DKK 248 million (\$41.4 million). The bulk of the
production support is normally paid in January/February in the year
following the harvest.

Danish interest in sugar beet seed production for fodder stems from the
fact that the major Danish seed company, DLF-Trifolium, is by far the
largest EU producer of this seed. The seed is produced in Italy, as the
climate there is the most advantageous.

## Plant Health

According to EU equality directives, a third country may freely
propagate and export seeds to the EU if it complies with regulations
contained in EU seed directives.

## Seed Certification

According to EU regulations, trade is only permitted for certified
seeds. Furthermore, growers are not allowed to use their own grass seeds
if they are not certified.

## Plant Variety Protection

EU plant variety protections were established in 1995. A plant breeder
may have his variety protected within all EU member countries by one
application and one decision. The EU regulation is based on
international convention on protection of new plant varieties (UPOV).
The EU approving authority is temporarily based in Brussels.

Tariff Changes.

Under the WTO agreement for reductions of minimum duties, tariffs were
reduced to 2 percent at the beginning of the adjustment period (July 1,
1995) followed by a complete elimination in 2000. EU tariffs on planting
seeds are now zero.

Non-Tariff Barriers.

The harmonization of EU member state seed directives was introduced in
December 1998. The Management Committee agreed to all 34 points
concerning the trade aspects. According to these, planting seeds can be
traded within EU, only if they are certified according to minimum
quality requirements determined in the directives. France maintained
certain reservations, which expired February 1, 2004, and EU single
market for planting seeds exists from this date. This seems to have no
impact on trade with third countries.

# Biotechnology

With the GM moratorium, which stopped all EU GM product approvals
between 1998 and 2004, Danish research in genetically engineered plant
varieties has been almost completely discontinued. In general, the
Danish Ministry of Food, Agriculture and Fisheries and the agricultural
organizations view biotech as a useful technology, which can benefit
farmers, the food industry, and consumers.

In August 2004, the Parliament legislated on regulations on growing
genetically modified crops (co-existence) presented by the Minister of
Food, Agriculture and Fisheries. The government's intention was to
define the specific requirements for the cultivation and production of
GM crops in Denmark now that the EU labeling and traceability
requirements for GM products are in place. The legislation aims to
assure co-existence between GM, conventional and organic crops and offer
equal possibilities for the development of all three kinds of farming.
It provides for specific requirements for distances between GMO and
non-GM crops, the cleaning of machinery, refuge areas, etc. The
legislation authorizes the Minister of Agriculture to set the specific
requirements.

Under the legislation, growers of GM crops are responsible for
maintaining the proper distances vis-à-vis conventional or organic
producers. **Such distances have not been determined for planting seeds,
and genetically modified planting seeds can thus not be grown in
Denmark**

# Organic Seeds

As of 2001, all organic production must be based on products of organic
origin, if available on the market. This means for example, that organic
beef from grass fed cows must originate from cows that ate organically
produced forage.

In Denmark, production of organic seeds has developed rapidly since the
start in 1998 and the production exceeded the domestic demand. In 2004
the total organic grass seed area was 2,297 hectares, slightly above the
previous year. However, organic seed production, like the production of
conventional grass seeds, declined compared to 2003 due to weather
conditions during the growing and harvesting season. 2004 production
amounted to 1,841 tons of which 77 percent (1,425 tons) were perennial
rye grass.

With Denmark being the sole producer of organic grass seeds in Europe,
there is opportunity for organic grass seed from all suppliers including
imported grass seed. The EU keeps track of organic seeds available on
the market and publicizes this to organic producers.

# Export Subsidies

Neither the EU nor nationally based export subsidies exist. All support
is decoupled under the Single Farm Payment scheme.

# Export Restrictions

There are no restrictions on grass seed exports.

# Quality, Safety and Health

The use of plant protection herbicides has been substantially restricted
during recent years due to Danish environmental protection measures and
legislation. Since 1987, a number of products essential for seed
production have been or will be forbidden. The costs of getting new
products approved by the government agencies often exceed the rather
modest economic gains that chemical producers can hope to garner in this
rather small and limited market. Adding to this view is a pattern
whereby a product which has not received Danish Government approval is
allowed in another EU member state or third country.

# Consumption

Danish consumption of field grass seeds has steadily decreased slightly
since 1996 (6,500 tons) to 6,089 tons in 2003/04. Danish consumption of
perennial rye grass constituted more than 50 percent of total grass seed
consumption. Red fescue grass seed accounted for another 19 percent and
Italian rye grass seeds for 15 percent.

# Trade

Total Danish exports of field grass seeds in 2003/04 amounted to 87,008
tons -- up 8,237 tons compared with the previous season. Over a span of
years, exports of red fescue have increased the most and almost doubled
during the last decade. Exports of perennial rye grass accounted for 42
percent of total exports. With about 85 percent of Denmark\'s grass seed
exports going to other EU Member States, Germany alone accounts for 36
percent of such trade with the EU.

The total export value of planting seeds excluding EU production support
of DKK 248 million (\$41.4 million) amounted in 2003/04 to DKK 1.6
billion (\$272 million).

# Trade Matrices

  ---------------------- -- ----------- ----------- ----------- -----------
  **Red Fescue                                                  
  (1209.23.15)**                                                

                                                                

  Imports, tons             2001        2002        2003        2004

  EU 15                     62          165         392         1,057

  EU 10                     0           0           0           70

  US                        2           0           0           20

  Other non-EU              10          0           0           90

  Total                     74          165         392         1,237

                                                                

                                                                

                                                                

  Exports, tons             2001        2002        2003        2004

  EU 15                     18,906      26,259      24,367      22,729

  EU 10                     926         1,000       1,083       1,877

  US                        1,146       322         51          0

  Other non-EU              4,691       5,689       2,758       601

  Total                     25,832      33,270      28,259      25,207

                                                                

                                                                

                                                                

  **Kentucky blue grass                                         
  (1209.24.00)**                                                

                                                                

  Imports, tons             2001        2002        2003        2004

  EU 15                     197         136         199         136

  EU 10                     0           0           0           0

  US                        1           2           10          0

  Other non-EU              1           0           0           0

  Total                     199         138         209         136

                                                                

                                                                

                                                                

  Exports, tons             2001        2002        2003        2004

  EU 15                     4,590       4,677       5,599       5,386

  EU 10                     244         307         298         284

  US                        36          30          54          1

  Other non-EU              1,162       1,463       1,434       904

  Total                     6,032       6,477       7,336       6,575

                                                                

                                                                

                                                                

  **Italian rye grass                                           
  (1209.25.10)**                                                

                                                                

  Imports, tons             2001        2002        2003        2004

  EU 15                     300         99          75          81

  EU 10                     0           262         90          345

  US                        0           13          0           0

  Other non-EU              18          214         61          0

  Total                     318         588         226         426

                                                                

                                                                

  Exports, tons             2001        2002        2003        2004

  EU 15                     3,387       3,916       4,034       3,607

  EU 10                     0           0           0           108

  US                        149         122         34          36

  Other non-EU              595         436         884         205

  Total                     4,131       4,474       4,952       3,952

                                                                

  **Perennial rye grass                                         
  (1209.25.90)**                                                

                                                                

  Imports, tons             2001        2002        2003        2004

  EU 15                     365         3,662       728         686

  EU 10                     0           0           0           26

  US                        0           40          64          0

  Other non-EU              0           23          57          0

  Total                     365         3,325       842         712

                                                                

                                                                

                                                                

  Exports, tons             2001        2002        2003        2004

  EU 15                     26,952      26,583      22,856      28,874

  EU 10                     1,893       1,346       1,143       1,792

  US                        39          137         126         629

  Other non-EU              3,847       2,770       2,376       1,616

  Total                     32,731      30,836      26,501      32,911

                                                                

                                                                

                                                                

  **Vetch seed, cock's                                          
  foot, bent grass                                              
  (1209.29.10)**                                                

                                                                

  Imports, tons             2001        2002        2003        2004

  EU 15                     15          30          57          45

  EU 10                     19          0           0           1

  US                        28          33          46          20

  Other non-EU              20          2           0           0

  Total                     82          65          103         66

                                                                

                                                                

                                                                

  Exports, tons             2001        2002        2003        2004

  EU 15                     1,750       2,446       1,685       2,005

  EU 10                     117         24          0           292

  US                        937         791         306         476

  Other non-EU              1,209       459         995         954

  Total                     4,023       3,720       2,986       3,727

                                                                
  ---------------------- -- ----------- ----------- ----------- -----------

# Table 1: Production, Domestic Consumption, Exports, and Domestic Stocks (July 1) of Field grasses. Metric Tons.

  ------------- ----------- --------- --------- ---------- --------- ---------
  2003/04       Perennial   Italian   Red       Kentucky   Others    Total
                rye grass   rye grass fescue    blue grass           

  Production    43,730      3,047     23,701    7,392      10,062    87,972

  Domestic      3,090       903       1,132     414        550       6,089
  consumption                                                        

  Exports       36,530      3,484     27,139    8,241      11,614    87,008

  Domestic      7,978       1,347     4,539     1,588      4,172     19,624
  stocks                                                             
  ------------- ----------- --------- --------- ---------- --------- ---------

Source: Industry statistics

Note: 2003/04 exports are mainly based on 2003 harvest.

# Table 2. EU support to certified planting seeds. EURO per hundred kilo.

+----------------------+----------------------+-----------------------+
|                      | Marketing years      | Marketing years       |
|                      |                      |                       |
|                      | 1998/1999 -2001/2002 | 2002/2003 + 2003/2004 |
+----------------------+----------------------+-----------------------+
| Cock's foot grass    | 52.77                | 52.77                 |
+----------------------+----------------------+-----------------------+
| Meadow fescue        | 43.59                | 43.59                 |
+----------------------+----------------------+-----------------------+
| Red fescue           | 36.83                | 36.83                 |
+----------------------+----------------------+-----------------------+
| Italian rye grass    | 21.13                | 21.13                 |
+----------------------+----------------------+-----------------------+
| Perennial rye grass, | 34.50                | 30.99                 |
| late                 |                      |                       |
+----------------------+----------------------+-----------------------+
| Perennial rye grass, | 19.20                | 30.99                 |
| early                |                      |                       |
+----------------------+----------------------+-----------------------+
| Perennial rye grass, | 25.96                | 30.99                 |
| ne sorts             |                      |                       |
+----------------------+----------------------+-----------------------+
| Hybrid rye grass     | 21.13                | 21.13                 |
+----------------------+----------------------+-----------------------+
| Low timothy          | 50.96                | 50.96                 |
+----------------------+----------------------+-----------------------+
| Timothy              | 83.56                | 83.56                 |
+----------------------+----------------------+-----------------------+
| Perennial rye grass  | 38.88                | 38.88                 |
+----------------------+----------------------+-----------------------+
| Kentucky Blue Grass  | 38.52                | 38.52                 |
+----------------------+----------------------+-----------------------+

#