Opinion on possible developments in the policy of arable land set-aside - Reflection paper of the Commission (94/C 148/05)

On 1 June 1993, the Commission decided to consult the Economic and Social Committee, under Articles 43 and 198 of the EEC Treaty, on the document entitled: Possible developments in the policy for arable land set-aside - Reflection paper of the Commission.

The Section for Agriculture and Fisheries, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 3 March 1994. (The Rapporteur was Mr Charles Pelletier).

At its 314th Plenary Session held on 23 and 24 March 1994 (meeting of 23 March), the Economic and Social Committee adopted the following Opinion with no votes against and one abstention.

1. The various set-aside schemes existing as of 15 January 1994

1.1. The five-year set-aside scheme (the ARTA scheme) has ceased to be an option since the 1992 harvest. This scheme came into effect in the 1988-1989 marketing year (1) and involved a five-year contract which could be terminated after three years. The scheme was based on non-rotational set-aside over a five-year period or annually rotating set-aside with different rates of compensation payments. The set-aside land could also be used for pasture or afforestation or industrial crops could be grown under contract. The amount of land set aside had to be between 20 % and 100 % of the arable land of the holding (arable land: utilized agricultural area (UAA) excluding permanent and temporary grassland, perennial crops and crops not subject to common organization of the market, such as potatoes). The compensation was funded partly by the EC and partly by the Member State concerned. The level of compensation varied very considerably between the Member States (see table in Appendix 3), as did the level of appeal to producers who compared the revenue yielded by the prices paid to producers in their region with the payments they would receive from set-aside compensation before deciding whether or not to take part in the set-aside scheme.

1.2. The five-year set-aside scheme was not a great success (see table in Appendix 1). Only a rather marginal amount of land was set aside - between 350 000 ha and 500 000 ha per year for the whole of the EC (out of a total arable area of 67,4 million ha in 1988).

1.3. In the periods 1988-1989 and 1991-1992, Italy accounted for by far the greatest proportion (almost half) of the total amount of land set aside, followed by Germany, France and the UK; the other Member States each set aside less than 25 000 ha. Quite naturally, producers tended to set aside land with the lowest agricultural potential. The reduction brought about by the five-year set-aside scheme in the volume of cereals produced is very difficult to assess (it is put at 3,3 Mt in 1991, or 2 % of overall EC production) but it was too small to have a noticeable beneficial effect on the market.

1.4. Under the Regulation stipulating that in order to qualify for arable crop support, producers had to take part in a new set-aside scheme (2), 1992 was to be the final year in which new applications for aid under the five-year set-aside scheme could be submitted (Article 14 of the Regulation). From 1992 to 1996, producers who had joined the new set-aside scheme can, without incurring any penalty, withdraw from it each year between 1 September and 15 December (this does not, however, apply to 'small producers' producing less than 92 t of cereals, oilseeds and proteins since they are not subject to compulsory set-aside).

2. Provisions under the reform of the CAP

2.1. Six-year rotational set-aside, covering 15 % of the area planted to cereal, oilseed and protein crops (Regulation (EEC) No 1765/92). Holdings having an annual production of less than 92 t of cereals, oilseeds and proteins, which accounted for 80 % of holdings benefitting from support for arable crops in the period 1992-1993, were not subject to compulsory set-aside in order to qualify for support.

2.2. Set-aside other than 'six-year rotational set aside' or 'optional set-aside', irrespective of the form of the set-aside, covering 20 % of the area given over to cereals, oilseeds and proteins (18 % in the case of the UK and Denmark) (3). This type of set-aside includes 'mixed' set-aside (a combination of non-rotational and rotational set-aside on the same holding) and rotational set-aside covering a period other than six years; its procedures have recently been clarified by Regulation (EC) No 231/94.

2.3. The possibility of cultivating non-food crops (selected from a specific list) (Regulation (EEC) No 334/93); this entitles the producer to receive the full set-aside payments, except in the case of beet, for which compensation is not paid (1).

3. Amendments to the support scheme for producers of certain arable crops - These amendments were decided upon at the Agriculture Council on 17 December 1993 in the light of proposals put forward by the Commission on 6 September 1993 [COM(93) 417 final]:

3.1. possible under the regionalization plans to differentiate 'maize' yields, whilst retaining the possibility to set a base area for 'other cereals' at national level (proposed by the Commission and called for by the Economic and Social Committee);

3.2. possible to make a distinction between 'irrigated' yields of particular oilseed crops at regional level (Council Decision);

3.3. Member States can set a ceiling in respect of such irrigated areas. This ceiling is not coupled with specific set-aside provisions for irrigated land (Council Decision which was contrary to the proposal put forward by the Commission but which was recommended by the ESC);

3.4. the application of a yield-stabilizer, based on 'historic national average yield', in the case of regionalization plans involving differentiated regional yields and payments (Commission proposal). The stabilizer is not, however, to be applied in the event of an increase in national average yield, if the ratio of this average national yield to the area eligible for compensation does not increase (Council Decision);

3.5. increase of the set-aside compensation payment to ECU 57/t, i.e. 27 % above the level set in 1992 (Commission proposal);

3.6. producers may opt for voluntary set-aside i.e. they may set aside an area larger than the 15 % or 20 % needed to qualify for support for arable crops (Commission proposal). The total percentage of set-aside (obligatory + voluntary) must not, however, exceed 50 % of the area given over to cereals, oilseeds and proteins (Council Decision). Furthermore, Member States may set a maximum percentage of less than 50 %;

3.7. producers who, under the five-year set-aside scheme, have set aside more than 50 % of their area given over to cereals, oilseeds and proteins, may continue to apply this same percentage for a new period of 60 months. However, the set-aside payment is only ECU 40/t for land set-aside over and above 50 % of the land given over the cereals, oilseeds and proteins (Council Decision);

3.8. Member States will be given the choice as to whether or not to authorize the transfer of set-aside obligations (Commission proposal), subject to a maximum distance limit of 20 km (Council Decision). They may also set a maximum limit below 20 km, or only authorize such transfers in regions in which environmental objectives are being pursued (Commission proposal);

3.9. Member States may make new land eligible for compensation, provided that the total national area which is eligible does not increase significantly (Commission proposal, subsequently made more flexible by the Council).

4. Date when the Regulation comes into effect

The Regulation is scheduled to come into effect in the current marketing year (1993-1994). As the above amendments have been adopted very recently, however, a number of the measures may only come into force in the following marketing year (e.g. in the case of the transfer of set-aside obligations). The Regulation implementing the Council Decisions of 17 December 1993 was published recently [Regulation (EC) No 231/94].

5. Status report on the application of the set-aside provisions in the Member States

6. Areas set-aside

An analysis of the data with regard to the implementation of the various set-aside schemes currently in force prompts a number of observations:

6.1. The areas set aside under the five-year set-aside scheme are less than that set aside under the compulsory set-aside scheme (December 1993), except in the case of Italy where they are three times larger, and the Netherlands where they are twice as large (though it should be noted that very little land has been set aside in the Netherlands). The area subject to compulsory set-aside in the Community as a whole in the period 1992-1993 was three times larger than that covered by the five-year set-aside scheme; this imbalance will go on increasing until 1997 by which time the area covered by the five-year set-aside scheme will be reduced to zero.

6.2. Compulsory set-aside: three Member States - France, Germany and Spain - account for 70 % of the base areas and 75 % of the set-aside.

6.3. In almost all the Member States the base areas were not achieved as a result of which there was an under-utilization at EC level of 2,4 million h. (i.e. 5 % of the area given over to cereals, oilseeds and proteins). Italy is the Member State which seems to be furthest from fully utilizing its base area ( P20 %), followed by Spain ( P7 %) and Greece ( P13 %). Germany constitutes a notable exception as it has exceeded its base area by 310 000 ha (3 %) in the new Länder (it should be noted here that the special base area for oil seeds in Germany was increased by 150 000 ha at the Agriculture Council of 17 December 1993; to off-set this increase, the special base areas of several other Member States were reduced).

6.4. If we compare each Member State's contribution to compulsory Community set-aside in the period 1992-1993 with its proportion of the total area under cultivation in the Community, it emerges that a number of Member States, such as France, UK and Denmark, are accepting 'more than their share'. Italy is special case in that it still has considerable areas set aside under the five-year scheme.

7. Levels of production

7.1. The obvious way of assessing the effectiveness of compulsory set-aside is to compare Community production levels before set-aside (1991 to 1992) and after set-aside (1992-1993).

7.2. The figures in respect of individual Member States made available by the Commission are, however, provisional figures for the period to 16 December 1993.

7.3. It is also clear that any assessment of the impact of set-aside based on just one year of application would in no way give a balanced picture: during the first year of set-aside, producers naturally tend to set aside their worst land. The impact of set-aside on production will only become fully apparent once the best land is set aside.

7.4. Furthermore, any comparison based on just one farming year is distorted by the influence on production levels of a large number of factors other than set-aside. In particular the very severe drought in Spain and Italy in 1991/1992 led to a fall in yields and production levels. Weather conditions were more favourable to yields (if not to quality) in the period 1992-1993.

7.4.1. Cereals

7.4.1.1. Provisional data supplied by the Commission for the period to 30 November 1993 (see table in Appendix 5) shows that the reduction in Community cereal production after the first year of application of compulsory set-aside was 2 % (3,3 Mt), whilst the average rate of set-aside in the Community was 10 %. The 1992 harvest was particularly low. The drop from the production in 1990-1991 was more marked ( P9 % or 16 Mt).

7.4.1.2. According to the more accurate estimates of 16 December 1993 (see table in Appendix 2), the area under cereals in the EC fell by 8,46 % and production dropped by 1,71 % when compared with the figures for the 1991/92 crop year. The Member States which recorded the highest reduction in the area under cereals are not necessarily those which achieved the greatest cut-back in production: Spain, the UK, France and Denmark reduced their areas under cereals by more than the average figure for the Community. The Member States recording the highest reduction in production levels are: Ireland, the UK, France and Greece. In contrast, Spain (which suffered a severe drought in 1991-1992) and Denmark increased their cereal production by approximately 20 %, whilst Portugal and the Netherlands recorded production increases of around 10 %. Spain, Denmark, Portugal, Germany and the Netherlands reduced their areas under cereals, but increased cereal production, sometimes to a considerable extent. Ireland, Greece and the Benelux States recorded a proportionately higher reduction in production than in the area under cereals. France and Italy reduced their production in proportion to the reduction in the area under cereals.

7.4.1.3. These national variants provide the explanation for the overall result: a considerable reduction in the areas under cereals but a small reduction in production. (A further factor to be taken into account here is the difference between the area in respect of which applications were made for support and the total area under cultivation).

7.4.2. Oilseeds (see table in Appendix 6)

7.4.2.1. The area under oilseeds fell perceptibly in seven of the twelve Member States, but increased strongly in Spain, Portugal (sunflowers) and Germany (rape seed). In the EU as a whole the area under oilseed increased by 2 % between 1991/92 and 1992/93.

7.4.2.2. Production increased sharply in Germany and Spain. Production was also higher in the United Kingdom and Denmark, despite a fall in the area under oilseeds. Production fell perceptibly in Italy, Greece, France, and Ireland. In the EU as a whole, oilseed production fell by 10 % between 1991/92 and 1992/93.

7.4.3. Protein crops (peas and field beans) (see table in Appendix 7)

7.4.3.1. As regards protein crops, the area under cultivation and production rose in practically all the Member States between 1991/92 and 1992/93, except in Italy and the Netherlands. In the EU as a whole the area under protein crop grew by 5 %, whilst production rose by 20 %.

7.4.3.2. For the reasons outlined above, it is at all events too early to make a firm assessment of the results of compulsory set-aside.

8. Concluding comments

8.1. The Committee refers to its Opinion of 20 October 1993 on Commission Proposal No COM(93) 417 final.

8.2. The Committee draws attention to the main points made in this Opinion:

8.2.1. Set-aside must not establish a permanent strait jacket for European production levels; it must allow production to be adjusted in line with demand on Community and world markets. This is particularly true for the markets for animal feed and biofuels.

8.2.2. There should be an increase in the non-food crops.

8.2.3. Community set-aside policy must be determined in full independence.

8.2.4. The purpose of the proposed reform is to simplify the support system for certain arable crops and make it more flexible.

8.2.5. The Committee was opposed to turning irrigated regional ceiling areas into specific base irrigated areas, subject to specific set-aside.

8.2.6. The Proposal should make clear, distinct mention of the possibility for Member States having regional 'maize' areas to adopt a national-level 'other crops' area.

8.2.7. Article 3(6) introducing a new stabilizer linked to yield should be deleted.

8.2.8. The Committee was in favour of a 'mixed' set-aside rate lying between the rotational and non-rotational rates, adjusted by a weighting.

8.2.9. In connection with voluntary set-aside (i.e. more set-aside than required to qualify for support), the Committee drew attention to the potential danger of 100 % set-aside.

8.2.10. The Committee opposed the general principle of transfer. It did, however, endorse the Commission's proposal to subject transfers to a 10 km restriction and called for Member States to be given the possibility of setting a limit of less than 10 km.

8.2.11. The Committee also asked that the proposal clearly specify several sets of circumstances under which application could be made for support in respect of new land. To avoid land being 'taken' from certain regions or farmers and allotted to others, transfers between 'additional eligible land' and 'ineligible land' should take place within individual holdings.

8.2.12. The Committee asked that the set-aside rate for three-year rotation be the same as that for six-year rotation, subject to verification after three years of operation. It also said that farmers who opted for an increased set-aside rate (i.e. 20 % at current rates), be free to choose the duration of set-aside and the land to which it should apply.

8.3. The Regulation implementing the decisions on the reform of the support system for arable crops (Regulation (EC) 231/94) was adopted by the Council on 17 December 1993. The Committee welcomes the fact that a number of its recommendations have been taken into account by the Council. In the Committee's view, it is essential that the Commission make an in-depth appraisal of: the impact of the set-aside policy on the stability of farms and on employment in the various types of farms and in upstream and downstream services; the overall social impact of the policy on the farming and rural communities; and its impact on the environment and investment in the countryside.

8.4. The Committee stresses that the main aim of the reform of support for arable crops is to simplify and introduce greater flexibility into the rules and their implementation in the Member States and that the current arrangements make it more difficult to achieve this goal.

8.5. Finally, the Committee urges that it be given the opportunity to resume its appraisal of the impact of the support for arable crops in the light of the results of the current marketing year, i.e. after two years of operation of the support policy for arable crops.

Done at Brussels, 23 March 1994.

The Chairman

of the Economic and Social Committee

Susanne TIEMANN

(1) Regulation (EEC) No 1094/88, 25. 4. 1988, OJ No L 106, 27. 4. 1988.

(2) Regulation No 1765/92, 30. 6. 1992, OJ No L 181, 1. 7. 1992.

(3) Regulation No 1541/93, 14. 6. 1993, OJ No L 154, 25. 6. 1993.

(4) Regulation No 231/94, OJ No L 30, 3. 2. 1994.

APPENDIX 1 to the Opinion of the Economic and Social Committee

Marketing years

Results of arable land set-aside (5 year set-aside scheme)

>TABLE>

APPENDIX 2 to the Opinion of the Economic and Social Committee

Estimates of cereal production in 1993/1994 and 1992/1993

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APPENDIX 3 to the Opinion of the Economic and Social Committee

Level of payments made under the ARTA scheme EC

and national total 1990/91 marketing year

(Source: Commission)

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APPENDIX 4 to the Opinion of the Economic and Social Committee

Application of the various set-aside systems currently in operation

>TABLE>

APPENDIX 5 to the Opinion of the Economic and Social Committee

Cereals

>TABLE>

APPENDIX 6 to the Opinion of the Economic and Social Committee

Oilseeds

>TABLE>

APPENDIX 7 to the Opinion of the Economic and Social Committee

Protein crops (peas and field beans)

>TABLE>