Opinion of the Economic and Social Committee on 'Stocktaking of the first three years of the CAP reform` (97/C 89/14)

On 26 October 1995 the Economic and Social Committee, acting under Rule 23(3) of its Rules of Procedure, decided to draw up an opinion on 'Stocktaking of the first three years of the CAP reform`.

The Section for Agriculture and Fisheries, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 9 January 1997. The rapporteur was Mr de Paul de Barchifontaine.

At its 342nd Plenary Session (meeting of 29 January 1997), the Economic and Social Committee adopted the following opinion by 39 votes to five, with 16 abstentions.

'If one does not know to which port one is sailing, no wind is favourable.`

(Seneca)

1. Reasons for the reform

1.1. Until 1992, a fullscale reform of the CAP had not been considered. The Commission had concentrated its efforts on a prudent price policy and a sectoral adjustment strategy. This had led in turn to the framing of measures to limit wine production in 1984, the introduction of milk quotas in 1984, restrictions on cereal intervention levels in 1986 and 1987, and the adoption of a new budgetary discipline in 1988 accompanied by the introduction of financial stabilizers in virtually all the common market organizations and measures to encourage farmers to take land out of production.

1.2. The problems which made the 1992 CAP reform necessary were thus essentially:

- the increase in production beyond the limits compatible with resource conservation;

- the accumulation of structural surpluses;

- the resultant burden on the Community budget;

- regional imbalances and imbalances in the distribution of the available financial resources among the different categories of farmer;

- the strain on international relations caused by export refunds.

1.3. Reform was thus made necessary by the increasingly ineffective nature of CAP expenditure and the need to end the build-up of unsaleable surpluses.

1.3.1 Within the Community, the main beneficiaries of this situation were the persons holding the surplus stocks; outside the Community, the benefits were mainly felt by consumers in countries where the surpluses were sold.

1.4. Output of the products in structural surplus which weighed most heavily on the agriculture budget was cut back. This concerned cereals, oilseeds, beef and veal, and milk products (butter, milk powder).

1.5. Hence the 1992 reform did not cover all sectors. Above all, a number of southern European products were omitted. This was bound to pose problems of coherence, notwithstanding the joint declaration made by the Council of Ministers and the Commission on 20 September 1993:

'For those sectors in which the common market organization arrangements have not yet been amended, the Council and the Commission undertake to adopt such provisions as are necessary to maintain farm incomes and Community preference. The conditions and agricultural and financial principles which have been applied throughout the agricultural sector will be taken into account in those sectors. Account will also be taken of the context of the Uruguay Round.`

2. The objectives of the reform

2.1. These objectives follow on from the Commission's reflection paper on the development and future of the CAP (COM(91) 100 final of 1 February 1991):

- continued employment of a sufficient number of farmers to conserve the rural environment, and a family-farm system;

- control of production to restore market balance and to avoid the build-up of surpluses and excessive increases in spending;

- introduction of extensive farming techniques;

- a more competitive, effective sector, in order to help EU agriculture retain its international role;

- a fairer distribution of support, which had previously been tied exclusively to production volumes rather than to the economic position of the farm.

3. The main areas of reform

3.1. To tackle the problems, the CAP reform of the arable sector focused on four main areas:

- closer alignment of domestic and international prices;

- introduction of aid per hectare to offset the cut in institutional prices;

- temporary set-aside, afforestation of farmland, or a switch to non-food crops;

- accompanying measures: environmental, early retirement, and afforestation (see above).

4. The results of the reform

4.1. Production has been reduced, chiefly thanks to the setting aside (on farms over a certain size) of land previously under cereals, oilseeds and protein crops (initially 15 % of such land, but later 12 % and then 10 % - accounting for a total of 7,2 million hectares in 1993/1994, 7,4 million hectares in 1994/1995 and 7 million hectares in 1995/1996). As a result, in the 1994/1995 marketing year the EU's arable area was 8 % smaller than its average in the years preceding set-aside.

4.2. In 1994, EU cereal output returned to its 1986 level - an 11 % fall compared with the peak year of 1991. It was partly as a result of this reduction that cereal prices rose in 1995.

4.3. In the livestock sector, the introduction of limits on intervention and on the granting of premiums had contradictory effects. The immediate effect was to stimulate suckler cow production as farmers sought to take advantage of the period granted them. Over the medium term, however, the new system should stabilize production, albeit at a relatively high level.

4.4. The reduction in cereal prices has enabled greater use to be made of feed grains in the manufacture of feedingstuffs and in animal nutrition, as the reform had intended. It is difficult to put figures on this, as sources differ. However, production in the EU increased by between five and seven million tonnes for 1993/94 and anything up to five million for 1994/95, although Member States' situations vary. Over the same period, the price of cereal substitutes rose on world markets.

4.5. The impact on imports has been even more marked because the CAP reform has coincided with a reduction in US cereal production and a rise in world prices, caused by climatic conditions.

4.5.1. Equally, the scheduled reduction in cereal and oilseed prices has led the relevant public and private parties (politicians, farmers, oil producers, engine manufacturers) to give more thought to the production of ethanol (from cereals) and ester (from oilseeds). Set-aside has encouraged this trend, since demand for agro-industrial set-aside - mainly to produce rape for ester - rose from 264 000 ha in 1993 to 686 000 ha in 1994. As a result, various investments are being made in the production of ethanol and ester from rape, and the new CAP appears to have been a contributory factor here, despite a lack of consistency in this sector.

4.6. The administrative impact of the reform has been considerable, bringing high administrative and control costs which have been unpopular with farmers and authorities alike. Certain definitions have also been vigorously contested (e.g. small farmers, reference periods, regional demarcations, penalties). Some provisions have now been simplified or corrected in the wake of national memoranda. The CAP must grasp the nettle of greater simplification and minimizing the handicaps related to competitiveness and efficiency, while not calling into question the long-term survival and reliability of the reform.

5. Environmental protection

5.1. Prior to the 1992 reform, the system of common market organizations, backed by generally guaranteed prices and outlets, was one of the main reasons for the intensification of production in key sectors. This caused a significant rise in expenditure on the management of surpluses and had an adverse impact on the environment.

5.1.1. The 1992 reform brought important measures which helped to reduce production and encourage more extensive farming. The measures introduced under Regulation 2078/92, which were applied in virtually all Member States, played a major part in this and helped to make farming methods a little more environment-friendly.

5.1.2. Environmental benefits have been brought by less intensive farming of arable crops and by the use of headage quotas in livestock rearing.

5.1.3. The agri-environmental measures are unable to counter the burdens imposed on agriculture by the distortion of the prices for feed (grass-based fodder or concentrates). This has a dramatic effect on farm organization and land occupation, and thus works against the EU's attempt to revamp agriculture. By keeping land occupied, limiting livestock premiums, and providing other incentives, the reform seeks to play an active part in environmental policy.

5.1.4. The extensification brought by the reform, together with certain income transfers in the less favoured regions, has helped agriculture to survive throughout the EU.

6. Social consequences of the reform

6.1. At a time when the EU faces mass unemployment and burgeoning poverty, which have not spared rural areas, any stocktaking of large-scale economic reforms - and the CAP reform clearly falls into this category - must also consider:

- the impact on employment and the incomes of the farmers and farmworkers concerned;

- whether the disparities between farmers and between EU regions have lessened or worsened.

6.2. While large agricultural production and distribution enterprises are developing rapidly, many small farms face worsening economic and financial problems and some are even on the verge of bankruptcy.

6.2.1. The problems faced by these farms are reflected in job losses, especially among small family-farmers and on farms employing farmworkers.

6.2.2. The CAP reform has not halted this trend. In 1990, employment in agriculture - the total number of people in paid employment or self-employed, and unpaid family helpers - accounted for 6,5 % of total civilian employment (Eur-12). In 1993, just after the reform, the figure stood at 5,7 %. In 1994 it fell to 5,5 % and in 1995 to 5,3 % (Eur-15), representing the loss of 205 000 full-time jobs from 1994 to 1995.

6.3. Community legislation largely overlooks farmworkers, and this clearly has consequences for them.

6.3.1. In recent years, paid employment in agriculture has continued to fall sharply in the Mediterranean regions (especially in Italy), in Sweden and, partly as a result of reunification, in the new German Länder. Moreover, employment has become much more unstable (part-time seasonal work) and has seen worrying developments, some of them very dubious (illegal labour).

6.4. The position of the EU's farmworkers has worsened in terms both of incomes (amongst the lowest and most precarious in the EU) and working conditions. Furthermore, farmworkers were largely overlooked by the early retirement scheme introduced under the 1992 reform.

6.5. Structural reconversion and flanking measures have been unable to stem the decline of many rural areas. The result is a fall in population, high unemployment and/or rural exodus, and a 'desertification` which has serious economic, social and environmental consequences.

6.5.1. Revitalization of the rural fabric and maintenance of a minimum population in areas at risk of desertification do not depend solely on the CAP, but also on the coordinated, integrated application of other policies (regional, social, transport, crafts, small and medium-sized businesses, etc.); in other words, on exploitation and integrated development of all the resources of the regions concerned.

6.5.2. In order to stem the decline of these areas, an active policy is needed to help young farmers to set up, backed by solid support for schemes to create agricultural and rural jobs.

6.5.2.1. It is worth considering whether the reform has helped to motivate young farmers and improve their position. Here the Committee would recall its opinion on young farmers and the problem of succession in agriculture (). The Committee is sorry that two years elapsed before the publication of the Commission report on the subject.

6.6. Whilst it would be going too far to blame the reform for the fall in the number of farmers and farmworkers, the fact remains that the 1992 reform has failed to stem job losses in agriculture.

7. Incomes

7.1. The reform measures (significant cut in institutional product prices and compensation in the form of aid per hectare and headage premiums) brought a sharp rise in direct income support. After several years of (sometimes considerable) income losses, the reform and a favourable international situation have on the whole helped to stabilize or even increase farm incomes. However, monetary fluctuations have undermined the benefits for incomes in some Member States, and the BSE crisis has now jeopardized them for beef farmers.

7.1.1. It is clear that the CAP reform in the arable sector has brought the cereals and oilseed markets into better balance without eroding farmers' incomes.

7.1.1.1. While institutional prices have fallen, compensatory payments have brought an improvement in farm incomes.

7.1.1.2. In the cereals sector, for instance, average income at market prices fell from around ECU 500 per hectare in 1992 to ECU 330 in 1995. If compensatory payments are added to this, average income rises to ECU 570 - a 14 % increase in real terms.

8. Conclusions

8.1. A number of comments may be made about the impact of the CAP reform so far:

- the reform seeks to control supply by curbing the Community's production capacity, for both domestic and external reasons; the time has come to promote a more market-oriented policy and to make farmers more aware of the increasingly international nature of agriculture;

- the policy has aggravated the imbalance between support for different products, because the move from market support to direct income support has only concerned 50 % of EU production;

- the implementation of the 1992 reform package has brought new administrative constraints, placing an excessive burden on farmers;

- the decoupling of support (where undertaken) has not yet been totally effective because, at least in part, direct aid still has some effect on the level of production and - what is more important in the eyes of some analysts - it should be targeted more on the farmers who face the worst income problems;

- three years after its implementation, the first effects of the CAP reform are generally beginning to be felt;

- stocks of cereals and milk products have fallen sharply, as had beef stocks until the BSE crisis;

- farm incomes have stabilized if not actually risen; but the effect of monetary fluctuations and changes on world markets must not be overlooked, particularly in the cereals sector;

- the growing concentration of farm production has not been curbed, so job losses have also continued;

- price reductions, in tandem with compensatory payments under the flanking measures (e.g. Regulation 2078/92), have already made production less intensive;

- budgetary expenditure has been stabilized, excepting the costs of the BSE crisis;

- the premiums introduced in order to offset the fall in institutional prices have brought a more even distribution of the agriculture budget, and the proportion allocated to direct income support has risen markedly;

- the package of measures introduced under the 1992 reform has been costly in terms of administration and controls; progress is still needed on simplification;

- consumers have benefited considerably from the reform, thanks inter alia to the fall in cereal and beef prices.

8.2. However, it must be noted here that the Commission, aside from declarations of principle, has always been aware of the difficulty of applying targeted price compensation. For this reason, it decided from the outset not to use direct aid as an instrument for restoring balance to farm incomes.

8.2.1. The 1992 reform radically altered the composition of farm income and the way it is distributed between different economic operators. Direct payments are becoming a major component of farm incomes. This is almost sure to discourage efforts towards more independent farm management, even on professionally-run farms.

8.3. Despite its imperfections, the present policy - a blend of instruments to control supply, institutional price cuts, export subsidies, direct compensatory payments and processing aid - must be continued, but modified in such a way as to do more to boost the economic and social cohesion of the whole EU, safeguard jobs for both farmers and farmworkers, and protect consumers' interests.

8.3.1. One may therefore question the attractiveness of a profession which relies increasingly on being 'allowed` to produce, and whose income depends on public support, the legitimacy of which is not clearly evident.

8.3.2. From a strictly economic standpoint, however, it must be added that the current policy stage might have been shorter, and many regional imbalances and income imbalances might have disappeared by now, if firmer action had been taken as regards financial commitments and the promotion and development of structural policies, and if greater attention had been paid to restoring balance between the support given to different production sectors.

8.3.3. At the same time, because of the limit imposed on the volume of subsidized exports, an instrument is needed to regulate subsidized production. Without such an instrument, surpluses would inevitably build up again, given that EU producers are often unable to export without subsidies. The choice of CAP instruments will thus in future depend to a large extent on the possibilities and constraints arising from the GATT agreement.

8.3.4. In short, the GATT agreement submits agriculture to the normal rules of international trade. However, the present commitments do not oblige the EU to alter policy in the short term, although they do highlight the limits and disadvantages of today's CAP when it comes to taking advantage of the greater freedom of trade. In other words, any further reform of the CAP will be largely determined by the EU's room for manoeuvre in trade policy. This margin will in turn depend to a crucial extent on the results of a future GATT/WTO round.

8.3.5. Lastly, agriculture is a 'living` sector. Trade rules which suit the industrial or manufacturing sector may prove completely unsuitable for agriculture.

8.3.6. Agriculture is an activity which requires large-scale investment and thus faces heavy financial costs. It will never be comfortable with a policy that is constantly changing and that discourages long-term investment.

8.3.6.1. The fact that the premiums introduced in 1992 to offset the fall in prices have partially been called into question has prompted new fears among many farmers in the Member States. It must not be forgotten that one of the Commission's justifications for the 1992 reform was the need to make agricultural policy more predictable for farmers.

8.3.7. The CAP reform as envisaged in 1992 appears an extremely transitory policy that has to juggle with the setting of farm prices and the choices to be made as regards public spending on income support, and has to address rural and environmental policy issues. Is the purpose of a coherent CAP still to support and develop the farm economy?

8.4. It can be concluded from the above that the 1992 CAP reform of the arable sector has brought major changes and adjustments on at least three fronts - production, trade and expenditure on agriculture.

8.4.1. A definitive assessment of the scale and direction of these processes has yet to be made. However, production has been reined in so successfully that the EU is sometimes obliged to tax its cereal exports. Cereal production in 1995 stood at around 176 million tonnes, with set-aside land at 7,3 million hectares.

8.4.2. Public stocks, which at the start of the reform stood at 33,3 million tonnes, have fallen to 22,5 million tonnes (2,5 million tonnes on 30 June 1996).

8.4.3. Spending on export refunds has fallen considerably, and this has obviously also reduced the EU's presence on international markets.

8.4.4. Arable land will account for more than 42 % of overall EAGGF-Guarantee expenditure in 1996, with an increase of around 23 % on the 1995 figure.

8.4.5. This is not surprising as the reform always envisaged that arable-related expenditure would increase in 1994/95/96 (because of the compensatory payments), and that a reduction in spending would not be possible until 1997.

8.4.6. In short, the objectives of the CAP reform - principally that of ensuring a transparent market policy while taking account of the need for better regulated international trade in agricultural products - now seem to have been achieved. In financial terms, however, there are still obvious imbalances in the appropriations granted to the different Member States and between the different categories of farmer.

8.4.7. However, it is worth asking whether reducing EU production capacity is still an acceptable strategy, given the changes in the general economic context, both in Europe and worldwide.

8.4.8. The present signs of recession bring a need for caution, or at least for flexible management of production control mechanisms, in order both to safeguard employment possibilities in agriculture and to meet the serious food emergency in third world countries, regarding whom the FAO world conference made some precise commitments.

9. Stocktaking of the first three years of the reform

9.1. Whilst it is rather early to assess the results of the 1992 reform, one may already note a series of complicating factors. Weather conditions, monetary and social factors, and more recently the BSE crisis, have all had a definite influence on the conclusions to be drawn.

9.1.1. However, with regard to the fundamental objectives and areas of the reform, the Committee feels that the following observations can already be made.

9.1.2. Three years after the adoption of the reform, one may judge its results to be semi-satisfactory or semi-unsatisfactory, depending on one's viewpoint. However, by copying aspects of US agricultural policy such as the setting of price guarantees that are lower than the production costs of most farmers in the developed world, thereby necessitating direct state aid, the reform may not be best placed to remedy the high cost which has always been one of the CAP's main problems.

9.1.3. In fact, until the major producer countries - and especially the United States and the EU - agree on proper international rules for phasing out state aid which distorts competition and sends world prices tumbling, public spending will continue and the disruption caused will make it difficult for the developing countries to increase their agricultural output.

9.2. The objective of controlling expenditure

9.2.1. Spending may have been controlled, but it remains high. The only way of gradually reducing the agriculture spending of developed countries which wish to safeguard farm incomes is to increase US and world prices (one is not possible without the other) in order to reduce the public support which is currently needed in both the United States and the EU. In the EU prior to the CAP reform, such support took the form of border protection, market support and export refunds. It now involves much greater direct support to offset the cut in guaranteed prices.

9.2.2. The CAP reform partly aligns EU agricultural policy on US policy, which is based on the premise that the taxpayer, rather than the consumer, foots the bill (and the GATT agreements take a similar line). Hence it is not surprising that EAGGF expenditure has not fallen very much; it would have been surprising if it had.

Brussels, 29 January 1997.

The President of the Economic and Social Committee

Tom JENKINS

() OJ No C 195, 18. 7. 1994.

APPENDIX I to the opinion of the Economic and Social Committee

1. INTRODUCTION

1.1. Complexity of the agricultural system

1.1.1. With the exception of specialist sectors often producing for export, farming throughout the world involves a set of independent products and methods.

1.1.2. The complex production system ensuing from the linkages between products and from natural constraints is normally fully integrated and adapted to local conditions. Progress and foreign trade also influence the overall balance of the system, and the decisions of one economic agent are affected by those of other agents.

1.1.3. The need for a sustainable agriculture sector is no longer questioned, and is supported by international institutions. But the conditions for achieving it are poorly understood. The flagged objective of sustainable agriculture is hard to reconcile with the frequent destruction of domestic production systems resulting from exposure to international economic upheavals.

1.2. Imponderables which fetter the CAP

1.2.1. The monetary factor

1.2.1.1. The last 25 years have shown that it is difficult to unify a sector such as agriculture as long as major economic and financial divergences between Member States lead to sharp fluctuations in exchange rates.

1.2.1.2. The monetary factor plays an important role in the interplay between European agriculture and the world market. After the imbalance in frontier protection rates (which has distorted the EU's foreign trade and production system), the monetary factor is undoubtedly the chief cause of the problems facing the CAP. In the absence of a single currency, the single market produces systematic increases in farm prices and incomes in Member States with weak currencies, and systematic falls in strong-currency Member States.

1.2.1.3. The exchange rate that is used when establishing the euro will also have an effect on agricultural markets and incomes.

1.2.2. Budgetary discipline

1.2.2.1. The Edinburgh European Council of 11 and 12 December 1992 extended the coverage of the financial guideline (i.e. the 74 % of GNP-growth ceiling on increased spending) beyond market support to virtually all agriculture-related expenditure. The guideline would thus also cover the cost of the measures accompanying the CAP reform (early retirement, environment), the set-aside expenditure financed by the EAGGF-Guidance Section, fisheries market support, and support for farm incomes. The European Council also reinforced budgetary discipline by seeking to divide it according to sector of production: if budgetary problems arise in a given sector for reasons internal to that sector (increase in production, fall in consumption), the Commission must first attempt remedial measures within the sector concerned, and can no longer simply transfer funds from one sector to another.

1.2.3. The funding of the CAP

1.2.3.1. Three main types of factor influence CAP funding requirements. The first depends directly on political decision-makers while the other two do not:

- political factors: price levels, size of premiums, etc. The impact, from the 1996 budget onwards, of the expenditure caused by the crisis on the beef market as a result of BSE (intervention buying, culling, income support, promotion campaign) should also be included under this heading. This concerns the whole payments policy;

- internal factors: increase in yields as a result of technical advances, fall in consumption due to changing consumer tastes, etc.;

- external factors: these can affect expenditure (changes in world prices or the value of the dollar, European currency realignments, etc.) or EAGGF revenue (slowdown in GNP growth which lowers or raises the guideline).

1.2.3.2. It is mainly the third category which is a source of uncertainty. The following recent examples may be cited:

- monetary upheavals, particularly the European currency realignment of 1995; without a further adjustment of the agri-monetary rules in June 1995, these would have meant - according to the Commission's financial perspective for 1995 to 1997 - an additional expenditure of ECU 1 700 million per year, at a time when the monetary reserve was to be cut from ECU 1 000 million to ECU 500 million;

- the slowdown in economic growth, compared with the 1992 forecasts; this means a fall in the guideline, so that between ECU 1 500 million and ECU 2 000 million less revenue is available for agriculture than was initially forecast;

- the accession of the three new Member States which, unlike the possible accession of the CEEC, does nothing to alter the final balance between income and expenditure;

- the improvement in the world cereal market in 1995, reducing expenditure as a result of the general fall in stocks.

1.2.3.3. The basically uncertain financial position of the CAP is clear from the 1996 budget. On 24 July 1995, the Council approved a draft budget with ECU 86 000 million in commitments (ECU 81 400 million in payments). ECU 40 800 million of this was earmarked for the CAP (38 500 for market management and 2 300 for the measures accompanying the reform), while the monetary reserve was cut to ECU 500 million. These appropriations are just in keeping with the guideline. A few months earlier, when presenting its preliminary draft budget on 27 April, the Commission stated that it anticipated a shortfall of some ECU 900 million (appropriation requirements: 41 700 million; guideline: 40 800 million). The intervening months have seen a rise in world prices, a rundown of European stocks, and the adoption of more stringent agri-monetary provisions on 22 June 1995 (ending of mini-switchover, coming after the ending of switchover decided in December 1994).

2. HISTORICAL BACKGROUND

2.1. The CAP and its reform

2.1.1. Article 39 of the Treaty establishing the European Community defines the objectives of the CAP as follows:

2.1.1.1.

'a) to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilization of the factors of production, in particular labour;

b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture;

c) to stabilize markets;

d) to assure the availability of supplies;

e) to ensure that supplies reach consumers at reasonable prices.`

2.1.1.2. To achieve these objectives, the CAP must respect three basic principles;

a) unity of the market;

b) Community preference;

c) financial solidarity.

2.1.1.3. The CAP has three instruments for applying these principles:

a) common prices within the EU to ensure market unity;

b) a common customs tariff, entry prices, import levies, import schedules and quotas, and enforcement of a safeguard clause to guarantee Community preference;

c) The European Agricultural Guidance and Guarantee Fund (EAGGF) to support agricultural markets and structures and as an instrument of financial solidarity.

2.2. The GATT

2.2.1. The reform undoubtedly facilitated the conclusion of the GATT negotiations in 1993. However, it would be wrong to say that the reform was carried out solely with a view to reaching an agreement in GATT.

2.2.2. Before the conclusion of the Uruguay Round in 1994, trade in farm products was subject to very few constraints. Not only were countries not prepared to accept customs tariff ceilings in this sector, but they were also free to grant export subsidies.

2.2.3. The GATT agreements put an end to this:

- market access: conversion of all (variable) import levies into fixed customs duties, to be reduced by 36 % over six years;

- export subsidies: 21 % reduction, over six years, in the volume of subsidized exports and 36 % reduction in the export subsidies budget;

- domestic support: 20 % reduction in aggregate domestic support, except in the forms authorized under agricultural policy.

2.2.4. Aside from their direct policy implications, these agreements mean that the EU can no longer manage its domestic market in isolation from the world markets. The conversion of levies into customs tariffs limits the possible gap between domestic and world prices. The further reduction agreed for these tariffs guarantees the further convergence of EU and world prices.

APPENDIX II

>TABLE>

CEREAL YIELDS, AREA AND PRODUCTION

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EU 15 arable crop scheme

Total arable base area: 53,56/000 ha

Oilseed reference area: 5,484/000 ha

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>TABLE>

Market commentary

Wheat harvest results to date exceeded earlier expectations in many parts of the Northern Hemisphere, and export business was generally subdued. Rising production estimates and a further reduction in the forecast level of trade brought pronounced declines on futures markets in the United States. However a large reduction in the USDA's estimate for the US maize (corn) crop resulted in a sharp, but temporary, recovery in prices for most grains. News of possible record harvests of both wheat and coarse grains in China were further depressing factors. Tight supplies of old crop underpinned prices for maize (corn). New crop contracts were gripped by weather reports, especially the possibility of early frosts in the US Corn Belt. Speculative intervention was less prominent in grain futures, but still a strong feature is soyabeans. Concern over the late development of the US crop became the dominant influence on the grain/oilseeds complex. Export prices (fob) for wheat for nearby shipment were mostly weaker, with some returning to levels of a year earlier. These for maize (corn) are still some 30 % up on those seen at the same time last season.

For a more complete picture of the economic and social situation of agriculture in the EU, it is helpful to refer to the key EU agricultural statistics set out in tables T22 and T23 of the Commission's 1995 report on the agricultural situation in the European Union, and to tables T111, T112 and T113 on employment in agriculture and in the other sectors.