COMMISSION OF THE EUROPEAN COMMUNITIES 
'COM (9 5.) 3 5 > final 
Brussels, 01.03.1995 
95/ 0061(CNS) 
Report on the operation of the 
system of aid for cotton 
(pursuant to Article 5of Council Regulation (EEC) No 
2052/92 .) 
Proposal for a 
; COUNCIL DECISION 
adjusting, for the fifth time, the system of aid for cotton 
' - introduced by Protocol 4 annexed to the Act of Accession of Greece 
... ' Proposal for a 
COUNCIL DECISION 
laying down the general rules for the system of aid for cotton 
and repealing Regulation (EEC) No 2169/81 
(presented by the Coa«1ss1on) 
Report on the operation of the 
system of aid for cotton 
(pursuant to Article 5 of Council Regulation (EEC) No 
2052/92 ) 
Ax. 
CONTENTS 
1. THE COTTON MARKET 
1.1. Background 
1.2. World market 
1.3. Community production 
1.4. Community trade 
2. SOCIO-ECONOMIC ASPECTS 
2.1. Economic importance and production regions 
2.2. Production structures 
2.3. Costs and margins 
2.4. Cotton and the environment 
2.5. Operators in the sector 
3. OPERATION OF THE AID SYSTEM 
3.1. Production aid and the minimum price 
3.2. The stabilizer mechanism 
3.3. Aid to small producers 
3.4. Problems of control 
3.5. Budgetary expenditure 
4. CONCLUSION/PROPOSALS 
/'b 
1. THE COTTON MARKET AND PRODUCTION STRUCTURES 
1.1. Background 
The cotton plant ("Gossypium") is grown as an annual 
plant in sufficiently hot regions. Its fruit is a 
capsule containing oilseeds surrounded by textile 
fibre. Ginning separates the seeds and fibres. The seed 
can then be pressed to extract the oil (edible) and to 
produce cake (for animal feed). The fibre (ginned 
cotton) is processed essentially by the textile 
industry. 
1.2. The world market 
Since the principal use of cotton is as textile fibre 
and there is no international trade in unginned cotton 
and that in cotton seed is insignificant; any analysis 
of the world market must concentrate on fibre (ginned 
. cotton). 
World area under cotton has varied between 30 and 34 
million hectares since the beginning of the 1960s. 
World production of ginned cotton, on the other hand, 
has almost doubled in thirty years, reaching an average 
for the 1991/93 to 1993/94. marketing years of 
18,5 million t. In September 1994, the USDA forecast 
that production in 1994/95 would be 18,8 million t. 
The principal producer countries are China, the United 
States, India, Pakistan, and Ouzbékistan as can be 
seen from the following table (Community production is 
given for comparison). 
Principal producer countries 
Average 
91/92-93/94 
(mio t) World 
share 
(%) 1994/95 
forecast 
(mio t) 
China 
United States 
India 
Pakistan 
Ouzbékistan 
European Union 
Total of above 
World total 4.6 
3.6 
2.2 
1.7 
1.4 
0.3 
13.8 
18.5 25 
20 
12 
9 
7 
1.7 
75 
100 4.4 
4.1 
2.3 
1.6 
1.3 
0.4 
14.1 
18.8 
(Sources : USDA, DG VI for EU) 
In the United States, the cotton belt extends from 
South Carolina to California. Cotton production is 
covered by a programme in the same way as wheat and 
maize. The figure fixed in the ARP ("Acreage 
Reduction Programme") for cotton in 1994 was 11%. 
International trade in cotton is considerable, 
reaching 5,8 million t or 32% of world production 
(average 1991/92 to 1993/94). The principal exporters 
are the United States (23 % of the world market), 
Ouzbékistan (21 %), the countries of the African 
franc area (8 %), Australia (7 %) and Pakistan (4 %) 
and the main importers are the European Union, 
southeast Asia, Russia and Japan. China, the world's 
largest producer,, alternates between being an 
importer and an exporter nation. 
There is only one forward market for cotton and that, 
characteristically for the American situation, is in 
New York. However, the most widely used indicator of 
world prices is the Cotlook A index (Cotlook is a 
specialized information agency based in Liverpool). 
The index, expressed in US cents/pound is the average 
of the five lowest spot prices from a range of very 
varied, representative locations, CIF North Europe. 
It refers to a fibre 28 mm (1-3/32") long of grade 
no 5 - "white middling" (grade is an index of 
overall visual quality). 
The world price for cotton is very volatile over any 
timescale. For example, the weekly average Cotlook A 
index varied between 52 and 86 cents /pound over the 
period from August 1992 to July 1994. 
This volatility, more marked for cotton than for 
other agricultural raw materials, is explained by the 
hazards of trade but principally by the hazards of 
production: water supply (too much or too little), 
temperature, attacks by parasites are to a great 
extent matters of chance in many production regions. 
Ï 
1.3.Community production 
1.3.1.Areas 
Following the cessation of the very limited 
production in Italy, Greece and Spain are currently 
the only Member States producing cotton. Cotton is 
produced in those countries almost solely on 
irrigated land. 
Changes in areas in those two Member States and total 
areas are shown in the graph on the following page 
(page i). Planting at Community level appeared to be 
under control during 1989 to 1991 after a peak in 
1988, but began to grow again from 1992. The area 
under cotton in 1994 is estimated at 423 000 ha. 
Developments in Greece and Spain diverge, at least 
from 1988. The area is growing in Greece, reaching 
383 000 ha in 1994, although in Spain developments 
are irregular: a maximum of 135 000 ha in 1988, a 
minimum of 32 000 ha in 1993 and a slight increase to 
40 000 ha in 1994. In the years 1993 and 1994, Spain 
suffered from water shortages during the sowing 
period, and irrigated crops were prohibited in 
certain areas. The basic trend, however, is a 
relative fall in the under cotton in Spain compared 
with that in Greece. Before accession, the average 
area in Spain was 54 700 ha (1983-85 average). 
1.3.2. Yields 
Unginned cotton yields show neither an upward nor a 
downward trend at national or community level. This can 
' be seen in the graph given on the following page 
(page ii), showing developments since 1982. The average 
yields are given in the following table: clipped average 
- 1989 to 1993 (lowest and highest figures excluded)• 
Average per hectare yields 1989-1993 
(t/ha, unginned standard quality cotton) 
Greece 2.72 
Spain 3.06 
E.U. 2.80 
N.B. The standard quality used for calculation is 
that used since 1992/93: 3% impurities, 10% humidity. 
The unginned cotton fibre and seed yields are very 
stable and are around 32 % and 54 % respectively both 
in Greece and Spain. The standard quality is based on 
these yields (see 3.1. on the price arrangements and 
aid). 
h 
COTTON.XLS 
EU cotton area 
«Spain 
O Greece 
1983/84 1984/85 1985/83 ' "198678/ ' 1987/88 1988/89 - 1989/90 199051 1991/92 1992/93 1993/94 1994/95 
^f 
14/09/94 
COTTON.XLS 
EU cotton yield (standard quality) 
4000 
A Qreect 
••-!—Spain 
EU • •-.«•• 
1982/83 1983/84 1984V85 1985/86 1989/9fr 1990/91 1991/92 1992/93 1993/94 1994795 
(Tv 
1.3.3. Production (unginned cotton) 
The remarks made regarding changes in areas apply 
mutatis mutandis to production as shown in the 
table given below: 
- apparent control of community production during 
the years 1989 to 1991 after a peak in 1988, 
^ then a sharp increase in 1994 to a record level 
of 1 170 000 t ; 
- developments diverge in Greece and Spain: 
almost continual increase in Greece, reaching 
1 050 000 t in 1994, the decline in Spain being 
particularly marked over the last two years, 
with production of only 120 000 t in 1994 (it 
should be noted that yields were normal in 1993 
and 1994 in Spain but areas were reduced owing 
to water shortages at the time of sowing - see 
1.3.1.). 
COMMUNITY COTTON PRODUCTION ( t ) 
on the basis of the quantities eligible for aid in terms of 
standard quality 
(10% humidity, 3% impurities) 
MARKET-ING YEAR 
1986/87 
1987/88 
1988/89 
1989/90 
1990/91 
1991/92 
1992/93 
1993/94 
1994/95 (e) PRODUCT. GREECE 
622754 
559963 
751521 
827118 
662008 
670940 
760685 
985676 
1050000 PRODUCT. SPAIN 
265364 
256523 
357753 
197332 
262835 
260725 
223932 
98883 
120070 PRODUCT. ITALIAN 
0 
0 
92 
27 
32 
0 
0 
0 
0 TOTAL PRODUCT, 
888118 
816486 
1109367 
1024477 
924875 
931665 
984617 
1084559 
1170070 
1.3.4. Production - short-term forecasts 
Short-^erm production forecasts were based on the following hypotheses, assuming no change to the current support system: 
stabilization of area in Spain at 80 000 ha 
(normal water supply situation); 
- continuation of the upward trend in areas in 
Greece (trend over the period 1986-94 under the 
stabilizer) ; 
- use of the average historical yield over the 
period 1989-93 of 2,8 t/ha in the absence of any 
clear trend. 
7 
The relevance of these hypotheses will be explained 
later in the report, particularly . in--the; microeconomics . 
analysis and the analysis of the stabilizer system with 
cut-off. 
Under these conditions, the community area down to 
cotton could increase from 423 000 ha in 1994 to 
540 000 ha in 2000, an increase of 28 % ; production 
would increase from 1170 000 t in 1994 to 1 520 000 t 
in 2000, an increase of 30 %. That would also mean an 
increase of 30 % in budgetary expenditure to almost ECU 
1 billion (see 3.5.). 
Leaving aside environmental problems (see 2.4.), such 
an increase, although large, is not impossible from the 
point of view of land use, since the main competing 
irrigated crops are on a downward trend: particularly 
maize, but also tpbacco, fruit (particularly peaches) 
and vegetables. It also assumes adequate ginning 
capacity which would appear possible, even if only 
through extending the period of operation. 
1.4. Community trade (ginned cotton) 
The ,European Union has a significant shortfall in 
ginned cotton (fibre). Average imports over the period 
1991-93 were 925 000 t and exports 107 000 t (source 
EUI^Siy^T-COMEXT/). As production increases, however, the 
external trade " balance is improving• at the rate bf 
45 000 t' per year, as shown in the graph on the, next 
page (page iii). 
The supply balance for the period 1991-93 (1990 
production has been included in 1991^ etc. ) is giifren 
below. 
Supply balance for ginned cotton 1991-93 average 
(000 t) 
Production 296 
Imports 925 
Exports 107 
Apparent consumption 1114 
The average rate of self-sufficiency was therefore 
27 % during the period 1991-93• ït is increasing and 
should reach 45 % by 2ÔO0 ir the production forecast 
(and budgetary expenditure) made above (see 1.3.4.) 
are accurate and per capita apparent consumption 
remains stable at 3 kg. 
i 
For reference, ginned cotton (CN code 5201 00, cotton, 
not carded or combed) is imported free from customs 
duties. 
The European Union's principal external suppliers are 
the former Soviet Union (Ouzbékistan), from which 
supplies are increasing, the United States and the 
franc zone in Africa (see graph on next page, page 
iv) • The principal export markets are Brazil and 
eastern Europe. 
The average value of imports into the Union is 
ECU 1244/t (1991-93 average) while the average value 
of exports from the Union is ECU 1163/t. This slight 
difference reflects an absolutely correct valuation of 
community production. The detailed study of these unit 
values, by origin and destination, gives other 
information, in particular: 
- American cotton exported to the European Union 
has a high unit value, reflecting its high 
, quality; 
- recently the poorest quality Community cotton 
has been exported to Brazil. 
Within the Community, Greece is naturally the main 
supplier, while Italy, Germany and Portugal are the 
main purchaser Member States. 
7 
t 0001 
•1200 EXTERNAL TRADE 
COTTON (OOOt) 
1000 
IMPORTS 
^ 32000t/year 
600 
400 I 
200 EXPORTS 
0*-
1986 >•••• -:\. :;. - I A 
J 
1988 1990 1992 1994 1996 1998 2000 
ORIGIN OF COTTON IMPORTS INTO THE COMMUNITY OF TWELVE 
(average of 925 000 t in 1991-93) 
ORMER SOVIET UNION 
FRICAN FRANC ZONE 
USA 
SYRIA 
TURKEY 
ARGENTINA 
PARAGUAY 
AUSTRALIA 
PAKISTAN 
OTHERS 
0 10 15 20 25 30 35 
% TOTAL 
TV 
-if 
2. SOCIO-ECONOMIC ASPECTS 
2.1. Economic importance and production regions 
Although textile fibres (principally cotton, but also 
flax fibre) account for pnly à small percentage of 
final agricultual community production ( 0.5 % ), they 
are of greater importance in the Member States and 
regions in which they are grown. , 
In Greece, cotton accounted for 9.3 % of final 
agricultural production in 199 2, a figure comparable 
to that of olive oil. The figure is higher in the 
three large production régions (NUTS 2) : 
- Thessaly ; 
- Macedonia-Thrace (three NUTS 2 regions) ; 
. ••- Sterea Ellada 
In Spain, the percentage is 0,9 % (1989-91 average) 
but rises to 3,9 % in Andalusia (NUTS 2), the main 
production region, while above Murcia and Valencia. 
Within Andalusia, production is mainly concentrated in 
the provinces (NUTS 3) of Seville (11,6 % of 
agricultural production) and Cordoba (5,6 %)• 
2.2. Production structures 
The regular inquiry into structures does not provide 
specific information on cotton which is included in 
industrial crops* There are, however^ two sources. 
They both pose certain problems but have the advantage 
of being to a certain extent complementary. ft 
- statistics on the system of aid in favour of small 
producers : additional aid per hectare is paid to 
producers sowing less than 2,5 ha with cotton (see 
3.3.); this special system has created, however, 
particularly in Greece, a growth of small producers 
which throws doubt on the statistical conclusions 
which can be drawn; 
^ - FADN ( Farm Accountancy Data Network ) statistics, 
these only cover farms exceeding a minimum economic 
size, which reduces their scope as regards cotton. 
There is also a considerable contrast in structures in 
Greece and Spain. 
In Greece: there are said to be around 100 000 small 
cotton producers in thé 1993/94 marketing ;yeâr, 
accounting for 53 % of the area. It is highly 
probablethat this -figure is too high owing to a 
division of applications for aid for small producers 
given that the area farmed by "small producers" has 
tripled in four years. *Phe FADN (lSt89-91 average) 
shows 45 000 farms producing cotton, with an average 
arable area of 4,3 ha and an average area under cotton 
of 2,5 ha, but this includes only 44% of Greek areas 
under cotton because of the minimum economic size 
criterion. Curiously, despite the fact that the 
figures refer to different years, the two sources 
cover almost the total area. 
Ai 
Structures in Greece are very small and highly 
specialized in cotton production. 
FADN figures permit a more profound regional analysis 
in Greece. In the Sterea Ellada region^ holdings 
producing cotton produce little else: cotton 
represents around five sixths of the arable land. In 
Thessaly there is also a trend towards single crop 
farming, with cotton representing an average of two 
thirds of the arable area of the holdings concerned. 
This trend is much less marked in Macedonia-Thrace, a 
large cotton production region but where maize 
dominates. 
In Spain, more precisely, in Andalusia, the growth in 
the number of small producers remains small: 3 800 in 
1993/94, accounting for 16 % of the area (as against 
13 % on the introduction of the system). FADN figures 
(1989-91 average) show 11 000 holdings producing 
cotton, with an average arable area of 14 ha and an 
average area under cotton of 8,6 ha. FADN figures here 
include almost all the area under cotton. Structures 
are therefore significantly larger in Spain than in 
Greece, but specialization in cotton is also very 
strong. 
2.3 Costs and margins 
FADN figures up to 1991, permit a comparative analysis 
of competing regions and crops. The figures are given 
in the table on the next page (page v) • An initial 
analysis has been made of the criterion - costs/cash 
margin, with cash costs covering specific costs and 
overheads, in particular harvest costs, but not 
depreciation or labour costs, whether waged or not. 
The figures given are 1989-91 averages and are 
expressed in trade ecus. 
The margin is highest in Thessaly, at ECU 2200/ha. 
Cotton .production in the region is much more 
profitable than that of maize, the main competing 
crop, for which the margin is around ECU 1700/ha. In 
Macedonia-Thrace, the margins for cotton and maize 
are ECU 1600/ha and ECU 1500 /ha respectively, and 
therefore much closer. This explains the structural 
differences between these two large production 
regions: specialization in cotton in Thessaly, 
dominance of maize in Macedonia-Thrace. 
In Andalusia, cash margins are lower than in Greece at 
ECU 1400/ha for cotton and ECU 1100/ha for maize. 
Despite slightly higher yields, cotton, in absolute 
terms, is less profitable in Andalusia than in 
Thessaly and Macedonia-Thrace. This is due to higher 
production costs and a more favourable agromonetary 
situation in Greece than in Spain during the period 
examined. The relative level of cotton/maize margins, 
as in Greece, makes cotton more attractive and 
explains the preference of farmers for cotton when the 
water supply situation is suitable. 
rt 
08.09.1994 (D:\DATA\123\C0*F0N\RICA) 
COMPARAISON OF CASH MARGIN OF COTTON AND MAIZE IN THE MAIN { 
REGIONS OF COTTON'S PRODUCTION moyenne 1989-1990-1991 
FARMS •:, 
REPRESENTED fSAMPLES 
FARMS' AVERAGE AREA .._ 
(hâ)'" AREA PRODUCT 
(ha) ÈTOTAL TOTAL AVERAGE I OUT IT AREA , PRQDUCTIONyiELD 
(ha) C) ' (t) (t/ha) ;/na [ TOTAL .CASH COSTS CASH 
MARGIN 
ECU/ha 
GREECE ., cotton maize 
MACED-THRACE 
cotton maize 
THESSALIE 
cotton maize 
STEREAELLADA 
cotton maize 45402 
116541 
21638 
54393 
15651 
13335 
7052 1152 
1537 
.498 
818 
425 
162 
213 7.8 
7.0 
7.9 
7.2 
6.3 
7.5 
11.2 2.5 
.1Ï9 
2.1 
2.1 
2.5 
2.1 
4.0 4.3 
3.5 
4.5 
2.9 
3.8 
3.0 
4.7 6.18 
19.82 
4.54 
22.90 
7.05 
23.47 
9>86 2.50 
10.62 
2.19 
11.04 
2.90 
11.13 
2.51 2330.8 
2039;7 
2228.2 
2066.4 
2902.0 
2262.7 
1744.4 597.7 
494.7 
586.7 
546.3 
674.7 
Ç46.5 
492,0 1733.1 
•1545.0 
1641.5 
1520.1 
2227.3 
1716.2 
1252.4 
SPAIN- -.'; 
cotton 
ma£ze_ 
ANDALOUSIE" 
cotton maize 11355 
90522 
11070 
4070 135 
812 
129 
32 1-7.-1 
14.2 
17.4 
18.2 8,6 
3.0 
8.7 
5.6 14.0 
8.3 
14.3 
15.8 26.02 
23.47 
26.56 
50.73 3.04 
7.77 
3.04 
8.96 2722;6 
1517.2 
2724.9 
1766.6 1287.3 
577.5 
1290.7 
643.5 1435.3 
939.7 
1434.2 
1123.2 
Source : RICA t*»)TOTAL AREAS » 
+ SUNFLOWER + CERALES AREA + COTTON 
NO PERENNES PLANTS ' + POTATOES + SUGAR BEET 
There is no reason to think that the profitability of 
cotton fell significantly after 1991, since yields 
were normal. The fall in areas was probably due to 
water supplies being less than expected and to the 
attraction of sunflower seed under the new 
arrangements for oilseeds, particularly in 1993. 
This analysis shows the microeconomic bases for the 
rapid development of cotton in Greece. It also shows 
its reduced attractiveness in Spain, although if 
normal water supply conditions return, there is no 
reason to expect structural decline. 
2.4. Cotton and the environment 
The relationship between cotton and the environment is 
extremely varied. On the one hand, cotton is the main 
plant textile fibre. It has a better image than 
competing synthetic fibres, particularly thanks to its 
being a "natural" product. On the other hand, 
production of cotton does pose certain environmental 
problems, as is the case with many intensive crops. 
The most important effect of the trend towards single 
crop farming of cotton, described above, in certain 
production regions, the fact that cotton is an 
irrigated crop, and the lack of crop rotation in 
certain areas is the risk, over the long term, of 
exhausting the soil and increasing the danger of plant 
health problems. Irrigation, whilst not solely for 
cotton, causes problems of water management, both in 
Greece and in Spain. 
There is also the question of inputs, fertilizer and 
pesticides, which cotton is reputed to consume in 
large quantities. In fact, on the basis of cost 
statistics supplied by the FADN, the levels of these 
two inputs are at comparable levels for cotton and for 
other intensive crops (such as irrigated maize, wheat 
in the cereal producing regions in the north, etc). 
The use of a defoliant on mature cotton plants to 
facilitate mechanical harvesting is the most obvious 
use of inputs. 
At the ginning stage, there can also be problems with 
the disposal of byproducts, which are often simply 
burned in the open air, thus resulting in pollution. 
The chemical treatment applied to cotton fibres in the 
textile industry can also pose environmental problems. 
Following successful experiments with organic 
production of cotton in several countries, 
particularly in the United States, Paraguay, Egypt and 
India, interest has grown for this type of production 
in Greece where producers have requested the right to 
market "organic" cotton. This type of production, 
however, requires considerably more manpower than 
traditional methods. 
h 
There, have also been experiments in the United States on the 
production of naturally coloured cotton, of value in the 
high-quality clothing industry: this avoids the need for 
polluting treatments in the industry itsel£. 
2.5... Operators in the sector •••• ;.-,-; . 
Downstream from agricultural production proper, thé 
principal operators are ; the producers•'? organizations 
and the ginning undertakings. A brief outline of these 
two groups will be given; passing oyer the textile 
sector further downstream^ principally spinning and 
weaving* 
Producer groups 
During the 1980s, the Community encouraged the 
establishment of producer groups in the cotton sector. 
Start-up aid was provided as was investment aid, 
mainly for the purchase of harvesting machinery. 
Most producers now have harvesting machinery, both in 
Greece and Spain. Producer groups still have a role in 
managing the pool of equipment. On the other hand, 
they do not appear very active in concentrating and 
adjusting supply from producers. It must be 
recognized, however, that this role can be played by 
industry downstream (cooperative or otherwise) more 
' ...;..».,,,,;-..easily:;.;,inthis sector than in others, such as the 
fruit and vegetable sector, since prices are stable, 
the product relatively uniform and producers are 
competitive. 
Ginning undertakings 
Ginning is an industrial activity with a very low 
level of value added and is largely dependent on 
community support. Cooperative undertakings account 
for around one third of capacity in both producer 
Countries. 
Generally speaking, there are no particular 
difficulties for the sixty odd undertakings in Greece, 
given the growth in production. In Spain, on the other 
hand, competition is cufrrently fierce owing; to the 
small harvests in 1993 and 1994. There are s£ill 32 
undertakings, with considerable overcapacity. Working 
at the average rate, all Spanish production could have 
been ginned in 15 days in 1994, although operations 
can easily be spread over three to four months, and 
'.' more if ' necessary... .•:•; . . . w'-:-; 
u 
3. OPERATION OF THE SYSTEM OF AID 
3.1. Production aid and the minimum price 
Although cotton does not figure in Annex II to the 
Treaty, Protocol No 4 of the Act of Accession of 
Greece explicitly recognizes the agricultural 
character of cotton production and introduces 
production aid. This was supplemented by Protocol 
No 14 to the Act of Accession of Spain and Portugal. 
The aid is intended to support producer incomes but 
its operation is based on the ginning enterprises. Aid 
is paid to such undertakings provided that the 
producer has been paid at least the minimum price 
(fixed by the Council). 
Productionn aid, fixed at least monthly by the 
Commission, is the difference between the guide price 
for unginned cotton, fixed annually by the Council, 
and the price recorded on the world market. In the 
absence of quotations for unginned cotton, the 
Commission must "reconstitute" a world price on the 
basis, per 100 kg: 
- of 32 kg of ginned cotton (fibres) ; 
- of 54 kg of cotton seed, calculated on the basis of 
other oilseeds; 
- of standard ginning cost calculated at 
A ECU 14.25/100 kg . 
It should be noted that fibres generally represent 
more than 90 % of the total value of fibres and 
seeds. 
The world price used for fixing the aid is a spot 
price, i.e., forward prices are not used in view of 
the technical difficulties in establishing them ( see 
1.2.). Nevertheless, the aid can be fixed in advance 
of or even after cotton is placed under control in the 
. ginning plants. Advanced fixing enables operators to 
sell for future delivery knowing in advance the amount 
of aid they will receive, and if they can sell for 
future delivery at a higher price than the spot price, 
they gain because of the fixed nature of the aid. 
Fixing after delivery is a further facility, although, 
curiously, ginners who have so far made use of it have 
generally misread market trends, which has been to the 
benefit of the Community budget. For cotton, the 
problem with these operating facilities is not so much 
their existence as the lack of speedy information 
about them on which the Commission could take any 
measures necessary (Commission staff examine changes 
in world prices on a daily basis). 
il 
THE STABILIZER MECHANISM SINCE THÉ ACCESSION OF SPAfN 
Marketing year MGQ 
1986/87 
1987/88 
1988/89 
1989/90 
1990/91 
1991/92 
1992/93 
1993/94 
1994/95 
1995/96 (tonnes) 
752000 
752000 
752000 
752000 
752000 
752000 
701000(1) 
701000 
701000 
701000 REDUCTION OF GUIDE PRICE , MAXIMUM LIMIT 
(Est; Prod. .-* iMQQy»0'.S''•;; ^ 
. 15000 r ••?•,:''••;:;:.. 
(Est. Etod. - HSQ)*0.5 15% cut-off 
isooo 
(Est.Prod.-MOQ)*0.5 20% cd>qff 
15000 .•/•,.'.': !".';••.•.• 
(Est.Prod.- MGQ)»6.S 
15000 
(Est.Prod. - MQQ)»0.5 
15000, 
(Est. Prod. - MQQ)*0.5 
15000 DIFFERENCE at end ADJUSTED MGQ 
of narketingyear V 
(tonnes) 
25% cut-off 
25% cut-off 
(Est. Prod. - MGQ)»0.5 
15000 
(Est.Prod. - MGQ)»0.5 
15000 
(Est. Prod. - MQQV»0.5 
MGQ 
(Est. Prod. - MBQ»0.5 
MGQ Max. redaction of 
15% X 
(all penalties) +5% 
carryover 
3% threshold of X 
(2) 
15% cut4xff^ :: 
5% carry-over X 
3% threshold of X 
18.5% cut-off 
7% carry-over X 
3% threshold of X 
. <?) > ••/• >'.;• 
20% cut-off 
7% carry-over X 
3% threshold of X 
m (tonnes) 
*GQ (+ or -) 
•••Je/ 
MGQ (+ or -) 
•*•- •• • 
MGQ(+ or -) X 
>GQ (+ or -) 
X'- • 
MGQ (+ or -) 
•!x 
MGQ (+ or -) 
lx-v 
(1) : Adjustment of the MGQ following adjustment of the 
standard quality. 
(2): The threshold only applies to production below the cut­
off../; •'•'•/:.:v ' .'/•:••-';.• *;?,>:::^ ; ' 
Est. prod, s production estimated at beginning of marketing 
year .:.;:v,;/,.;r .••' ..;'; •'••'•., 
Actual production: production recognized as eligible for aid 
at end of marketing year 
Xt actual production less estimated production 
MGQ: adjusted MGQ 
/* 

COTTON.XLS 
Cotton Nominal Producer Price Index (1986/87=100} 
300 
•Greece (Ora) 
•Spain (Pta) 
•EU (gECU) 
1986V87 1987/88 1989/90 199CV91 1991/92 1992/93 1993/94 1994/95 (e) 
0 30/09/94 
Compliance with a minimum price is monitored for all 
deliveries from an individual producer to a given 
plant on leaving the farm. It is adjusted, not only on 
the basis of the water and impurity content, but also 
on the basis of the fibre quality (length and grade), 
which requires sampling and the application of a 
(Community) scale of increases and reductions for 
cotton above and below the standard quality. 
Official prices for the 1994/95 marketing year before 
application of the stabilizer (see next paragraph) are 
as follows : 
- guide price: A ECU 101,46/100 kg 
- minimum price: A ECU 96,39 /100 kg 
3.2. The stabilizer mechanism 
Since its introduction in 1981, the production aid 
for cotton has been covered by a stabilizer mechanism 
based on a community maximum guaranteed quantity 
(MGQ). Since the accession of Spain (1986/87 
marketing year, the rules of these arrangements have 
been amended almost every year. A description of 
those changes is given on the next page (page vi). 
The arrangements are currently as follows: 
MGQ of 701 000 t ; 
reduction in the guide price corresponding to 
50 % of the overrun of estimated production of 
the MGQ ; 
- reduction in the minimum price by the same 
amount; 
- correction possible the following year on the 
basis of actual production; with a threshold of 
3 % of the gap; 
- maximum reduction (cutoff) of 18,5 % of the 
guide price for the current marketing year and 
7 % for next year. 
The system is similar in certain respects to that 
used for oilseeds between 1988/89 and 1991/92 but has 
the fundamental difference of having a cutoff, which 
is now regularly reached. This has meant that 
production has not fallen (see 1.3. above) and 
budgetary expenditure has continued to increase (see 
3.5. below)• 
The MGQ of 752 000 t fixed for 1986/87 resulted from 
the addition of the quantities for two Member States: 
567 000 t for Greece, the previous MGQ; 
- 185 000 t for Spain, the quantity referred to 
in the Act of Accession, as a form of "right 
to produce" for Spain. 
Subsequently, the standard quality having changed, 
the MGQ was adjusted to 701 000 t from 1992/93. 
The table on the next page (page vii) shows changes 
in actual official prices, i.e. the prices after 
application of the stabilizer, from 1986/87 and the 
reconstituted world price. It shows the importance of 
the world price and of aid in producers' incomes. 
They currently account for around 1/3 (around A ECU 
250/t and 2/3 (A ECU 500/t) of income respectively. 
To show the impact of monetary and agrimonetary 
effects, the following page (page viii) shows changes 
in the actual minimum price in national currency at 
current prices• The stabilizer did not prevent the 
minimim price in Greece increasing by a factor of 2.7 
between 1986/87 and 1994/95 and the same price in 
Spain from remaining at the same level. If account is 
J taken of the difference in inflation rates, however, 
the gap is reduced. 
It should not be forgotten that the monetary effects 
are the same for all products covered by a market 
organization and are not therefore specific to 
cotton. Neither do they explain the relative decline 
of cotton production in Spain to that in Greece. In 
both countries, it is the relative levels of support 
for crops which explain changes in production. 
The current level of aid is around A ECU 1400/ha. 
3.3. Aid to small producers 
A special aid scheme for small cotton producers was 
introduced in the 1989/90 marketing year in order to 
partly offset the effects of the stabilizer for those 
producers and following the introduction of the 
system of aid for small olive oil producers • Small 
producers were assumed to be unable to benefit from 
the economies resulting from mechanization. 
Cotton producers eligible for a particular marketing 
year for aid for small cotton producers are those 
with an area of not more than 2,5 ha under cotton. 
The basic additional aid is ECU 250/ha up to a 
maximum guaranteed area of 73 000 ha, calculated on a 
historical basis, in order to , ensure absolute 
budgetary neutrality. 
Over the years, this aid has resulted in an increase 
in the number of small producers by producing a 
division in applications, particularly in Greece, and 
therefore an increase in the area concerned, which 
has increased from 21 % in 1989/90 to 50 % in 
1993/94. The position during the latest year of 
application was as follows: 
\7. 
System of aid for small producers in 1993/94 
Number of Area % of area 
producers concerned under 
cotton 
Greece 99 000 187 000 3.2 
Spain 3 800 5 200 16.5 
E.U. 102 800 192 200 50.1 
This development of the system brought actual aid to A ECU 94/ha in 1993/94, representing only around 4 % of the income of the producers concerned. 
The argument "that,small producers lack mechanization is no longer valid since producers use harvesting machines in common through producer groups. 
3.4. Problems of control 
The keys to management of the cotton arrangements are: the area declaration submitted by producters ; the contract between the producer and the ginner, with tfye undertaking, to respect the minimum price; the bringing of unginned cotton under control in the ginning plant, with determination of quality ; goods in/gooas out records at the ginning plant. 
In theory, this system of management should ensure adequate control. It enables the origin of each batch of unginned cotton to be traced and the plausibility of quantities to be checked given the areas concerned. 
The Commission takes the, view that the operation of the system is generally satisfactory in Spain. This is not the case for Greece however, where attention has been drawn, particularly since the 1991/92 marketinc year, to an increase, in the quantities eligq-b^e for aig. which appears excessive when compared with initial estimates. The Commission's principal criticisms of management of the system in Greece are: 
- the almost total absence of checks on individual areas ; . - the lack of checks on implausible yields; the existence of intermediaries between producers and ginners, with numerous cases of falsification of crop declarations; shortcomings in the procedures for bringing cotton under control, wh,ich can lead to falsification of the quantities eligible ; management of the system by a body (the Cotton Board) whose status is unclear and which, furthermore, takes 1 % of aid ; . , - lack of cooperation from the Greek authorities. 
The situation was considered sufficiently alarming for the Commission to announce its intention of refusing.to clear the 1991 accounts for Greece for cotton, refusing 25 % of expenditure and 100 % if cooperation was not forthcoming• 
There have been no complaints from producers regarding lack of compliance with the minimum price. 
^ 
3-5- Budgetary expenditure 
Budgetary expenditure on cotton is accounted for by production aid (paid per tonne) and the special aid for small producers (paid per hectare). The former, included in Chapter 1-14 - Fibre Plants, is by far ^.he largest, amounting to an average of B ECU 68T7 million over the period 1991-93. The latter, which comes under Chapter 1-38 - Rural Development, is only B EcU 21 million per year, thanks to the maximum 
guaranteed area mechanism which ensures absolute udgetary neutrality. 
The following table shows expenditure on production aid since 1986. 
Expenditure on production aid 
(B ECU Mio) 1986 1987 1988 1989 1990 1991 1992 1993 1994 (budget) 
532 479 472 571 540 488 742 831 760 
(Source DG VI) 
The existence of the maximum guaranteed quantity has not permitted stabilization of expenditure because of the cutoff for reductions applicable to official prices and aid. 
As was seen in 1.3.4. on medium-term production forecasts, if the support system remains unchangedf 
budgetary expenditure will be almost ECU 1 billion in 
it, 
4. CONCLUSION/PROPOSALS 
It emerges from this analysis that the existing aid system on the maximum guaranteed 
quantity has not succeeded in its objective of limiting support to the quantity foreseen 
because of the limit on the aid reductions and yet that the system is perceived to be unfair 
because expansion in one producing member state has led to aid reductions in both 
member states. Against this background it is not surprising that the Council in December 
1993 noted that the Commission intended to reflect "on the specific problems of the cotton 
sector in the spirit of fair management". 
Possible solutions 
One solution which has been examined by the Commission would be to integrate cotton 
into the compensation scheme for arable producers alongside cereals, proteins and oilseeds. 
The Commission does not, however, consider that this solution would be appropriate. The 
level of aid for cotton expressed in terms of aid per hectare far exceeds that of other arable 
crops - around 1700 ECU/ha compared with 540 ECU/ha(*} for irrigated maize. Thus the 
discipline of the base area would not, of itself, provide a sufficient budgetary protection and 
it would be necessary to apply a separate Maximum guaranteed area for cotton. 
Furthermore, given the high proportion which labour and other inputs represent in the total 
value of the cotton, there would be a strong temptation for producers to claim the area aid 
on the basis of low or minimum cultivation, in other words, to cultivate the aid. 
The Commission, therefore, has concluded that the basic structure of the aid system should 
be retained, subject to a number of adaptations as explained in the following paragraphs. 
PROPOSALS 
Level of support 
The volume of aid provided in 1992, which was the point of departure for the reform of other 
sectors, should be regarded as the basis for future support in this sector. 
Small producers scheme 
As small producers are able to benefit from mechanisation by working collectively and as it 
is evident that the effect of the scheme has been to distort production structures in Greece, 
this scheme should be ended and the budgetary cost of this scheme should be integrated into 
the total value of support for the sector. The total support for the sector, for large and small 
producers combined, was 762.9 MECU in 1992. 
n respectively 1400 and 450 in "old" green ECU. 
17 IS 
Revised MGQ and distribution between producing member states 
The MGQ should be split between the two producing member states, in accordance with 
their average production in the last period of three consecutive years in which climatic 
conditions can be regarded as having been normal, i.e. the years 1990/91 - 1992/93. Average 
Community production in this period was 947,000 tonnes, of which 698,000 tonnes were in 
Greece and 249,000 in Spain. 
Revised target price 
To ensure compatibility between the revised MGQ and the level of support in 1992, the 
level of the guide price should henceforth be set at 110.73 ECU/100 kg. This level of target 
price has been calculated taking account of an estimated normal world price of 30 
ECU/100 kg (the middle of the observed range of 18-42 ECU/100 kg and the average for 
the years 1986/87 - 1991/92)(*}. Hence under normal world market conditions and with the 
continuance of recent average production levels, expenditure will equal the budget limit( ]. 
Equitable management 
The aid penalties to be applied should the increased MGQ be exceeded would be partly 
applied at a Community level and partly at a member state level. Thus the first 10% of any 
excess (le 5% penalty) could be applied equally to producers in both of the member states 
concerned. Beyond that any further penalty would be shared in proportion to the extent to 
which either or both member states'production had exceeded their national guaranteed 
quantity (NGQ) by more than 10%. With the rebased MGQ and with the equitable sharing of 
any potential penalties, which would enable each member state to encourage producers to 
respect their national guaranteed quantities and thus avoid large aid reductions, a limit on 
potential aid reductions is no longer necessary nor is it compatible with the objective of the 
revised system. Similarly it will no longer be appropriate to continue the existing provisions 
which provides for part of the aid penalty to be carried forward from one season to the next. 
Aid reduction will, therefore, fall equitably on the producers in the year where any excess 
occurs. 
Enhanced control 
Although, from the reasons explained above, an aid per hectare system would not be 
appropriate for cotton, it is nevertheless desirable for control reasons to establish a link 
between the hectares planted with cotton and the quantity of unginned cotton delivered to 
the ginners.This link, to be established on the basis of appropriate yield coefficients will 
reinforce existing controls on the volume of ginned cotton produced by the ginners. This 
additional control will protect the Community budget from the risk of aid being paid on 
(*) respectively 91.7, 25 and 15-35 in "old" green ECU. 
("y (110.73 ECU - 30.2 ECU)x 10 x 947,000. 
74 
cotton not actually produced by Community producers and avoid the risk that genuine 
producers could be penalised because of the MGQ being exceeded as a result of fraudulent 
production. 
Establishment of the world price 
At present the world price for unginned cotton is fixed on the basis of the value of ginned 
cotton and cotton seed, after taking account of ginning costs. This system is, however, 
subject to serious weaknesses. Ginning costs cannot be accurately established and reliable 
quotations for the value of cotton seed are lacking. It is, therefore, proposed to establish in 
friture the price of unginned cotton on the basis of quotations for ginned cotton adjusted 
by a coefficient based on the past relationship between the ginned cotton price and the price 
for unginned cotton, as it was calculated by the Commission. 
Marketing year and payment of aid 
In order to establish forecast production more accurately, it is proposed to delay the start 
of the marketing year from 1st September to 1st October, that is to say, to a date which 
corresponds better with the time when the ginning period begins. The final level of payment 
will, of course, depend in part on whether and to which extent the MGQ has been exceeded 
which cannot be established until near to the end of the campaign. However, an advance of 
not more than 40% will be available to ginners. The level of the advance within that 
maximum will be determined each year by the Commission after consulting the 
management committee, in the light of provisional information on the level of production 
and the expected world market price. 
Conclusion 
The Commission considers that this system will offer producers greater security and a better 
basis on which to plan. It will ensure that production will remain within the new MGQ and 
NGQs if the proposed aid level proves to provide a reasonable level of return by comparison 
with competing crops. If expansion takes place until an equilibrium is reached, this will 
reflect equitable management of cotton by comparison with other crops. At the same time 
the division of the MGQ between producing member states can be regarded as equitable 
treatment of producers in the two Community production zones. 
19 H 
ANNEX 
;'£.;. GUARANTEED NATIONAL QUANTITY (GNOJ 
Spain : 
Greece : 249 000 (1) 
698 000 (2) 
: Spain (1) Average 
1990/91 1991/92 1992/93 
Quantities eligible for 
previous standard quality aid 
(14-3) 281 838 279^75 
Quantities eligible for _ 
current standard quality aid 
(10-3) (*) 262 835 260 725 223 932 * 249 164 
: Greece (1) : Average 
1990/91 1991/92 1992/93 
Quantities eligible for v 
previous standard quality aid 
.<i4-3): •;•' 709 871 719 44* 
Quantities eligible for 
current standard quality aid 
(10-3) (*) £62 008 670 940 760 685 : 697 878 
(.*.) The standard quality for unginned cotton was adjusted during the 3.9.92/93 
<tfr 
marketing year: the conversion of the quantities eligible for the aid 
(relating to marketing years before the abovementioned adjustment in 
standard quality) expressed in terms of the current standard quality is 
obtained using a reduction coefficient of 0.9325748. 
i*\ 
it CALCULATION OF /THE GUIDE PRICE 
assuming a world market price for Unginned cotton of ECU 25/100 kg 
(average 1986/87 - 1991/92) 
Total expenditure (without a change in the system)* x 106 p 
•'GMQ-
762.9 x 106 budget ecus 
947 000 tonnes 
= 66.7 green ecus/100 kg ** 
Guide price for unginned cotton = 
66.7 green ecus/100 kg + 25 green ecus/100 leg 
=91.7 green ecus/100 kg, or ECU 110.73/100 kg *** 
* : relating to the 1992/93 marketing year and broken down as follows: 
-general system: 742 million budget ecus 
- small producers' scheme: 20.9 million budget ecus. 
** : converting budget ecus into green ecus is done by dividing by 1.207 
*** : From 1 February 1995 all the prices and amounts expressed in green 
ecus must be converted into financial ecus by multiplying by a factor 
of 1 207509 
.1*,' 
Proposal for à 
COUNCIL I^GULATIÔN (EC) No 
; ' :J9S/:. 0061(CNS) 
; of V:;.. 
adjusting, for the fifth time, the system of aid for cotton 
introduced by Protocol 4 annexed to the Act of Accession of Greece 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty establishing me European Community, 
Having regard to the Act of Accession of Greece, and in particular paragraph 11 of Protocol 4 
on cotton, as last amended by Regulation (EEC) No 2052/921, 
Having regard to Council Regulation (EEC) No 2052/9? of 30 June 1992 adjusting, for the 
second time, the system of aicj. for cotton introduced by Protocol 4 annexed to the Act of 
Accession of Greece, and'in particular Article 5 thereof, 
Having regard to the proposal from the Commission, 
Having regard to the opinion of the European Parliament, 
Having regard to the opinion of me Economic and Social Committee, 
OJNo L 215, ^0.7.1992, p. 10. 
•^ 
Whereas a review of the operation of the system established by Protocol 4 as referred to in 
Article 5 of Regulation (EEC) No 2052/92 has shown that the system needs to be adjusted; 
Whereas a study on the impact of cotton growing in the regions where it is practised points 
to a potential for increasing production in those areas of the Community most suitable for this 
crop, taking into account the Community's demand for cotton fibre; whereas the guaranteed 
maximum quantity should accordingly be increased; 
Whereas, on the other hand, to ensure that production of this crop does not expand in those 
regions less suited to it and to avoid an increase in expenditure, the guide price should be 
reduced in proportion to the increase in the guaranteed maximum quantity and no limit should 
be placed on the reduction in aid should the guaranteed maximum quantity be exceeded; 
whereas, in fixing the guide price, account must be taken of the adjustment to the price in 
ecus laid down in Council Regulation (EC) No 150/95 of 23 January 1995 amending 
Regulation (EEC) No 3813/92 on the unit of account and the conversion rates to be applied 
for the purposes of the common agricultural policy2; 
Whereas, with a view to facilitating budgetary arithmetic and fairness among operators, any 
deferral of the reduction in aid should be disallowed; 
OJNoL22, 31.1.1995, p. 1. 
Whereas the diverging production trends in the producer Member States have produced 
inequitable effects in the operation of the system of stabilizers; whereas, with a View to 
establishing a fairer system, provision should be made so that, where the guaranteed 
maximum quantity is exceeded by no more than 10%, the aid should be reduced equally in 
the producer Member States and, where the guaranteed maximum quantity is exceeded by 
more than 10%, the Member States responsible should be subjected to a further reduction; 
whereas, however, provision should be made whereby Member States which are potential 
cotton producers can start to grow cotton by setting production at a level at which the system 
of stabilizers does not apply; 
Whereas, to enable operators to run longer production and processing programmes, the; guide 
price and the minimum price payable to the producer to ensure the benefits from the aid 
should no longer be fixed annually; 
Whereas experience may show that other adjustments to the system provided for in the 
abovementioned Protpcol are necessary; whereas a procedure allowing the: Council to adjust 
the system shouldaccordingly be laid down, 
HAS ADOPTED THIS REGULATION: 
Article 1 
This Regulation provides for adjustments to the system of aid for the production of cotton 
provided for in paragraphs 3, 8, 9 and 11 of Protocol 4 annexed to the Act of Accession of 
Greece and adjusted by Council Regulation (EEC) No 1964/873, as last amended by 
Regulation (EC) No 2760/944. 
Article 2 
Article 2 of Regulation (EEC) No 1964/87 is replaced by the following: 
"Article 2 
1. A guaranteed maximum quantity (GMQ) is hereby established for which the aid referred 
to in point 3 of Protocol 4 on cotton shall be granted. 
This quantity shall be fixed for each marketing year at 947 000 tonnes of unginned 
cotton. 
2. The GMQ shall be allocated as follows among the Member States (guaranteed national 
quantity - GNQ): 
Spain: 249 000 tonnes 
Greece: 698 000 tonnes. 
3. Paragraph 4 notwithstanding, if during a marketing year actual production exceeds the 
GMQ, the guide price for that year shall be adjusted as follows: 
OJNoL 184, 3.7.1987, p. 14. 
OJ No L 294, 15.11.1994, p. 17. 
- where the GMQ is exceeded by up to 10%, me gu^ be reduced by 
a percentage çquâl to half the percentage excess; 
- where t^e GMQIfeexœededby reduction shall be* 
made to me ^i^ 
GNQ plus 10%/The adbUtional reduction shaU 
extent to which the GMQ was exceeded andshall be proportional to me difference 
between the actual quantity produced by each Member State and its GNQ. 
The reductions applicable shall be fixed m accordai with the procedure laid down in 
Article 12 of Council Regulation (EEC) No 1308/705, as last amended by the Act of 
Accession of Norway, Austria, Finland and Sweden, to the European Union. 
4. Paragraph 3 shall not apply to Member States in which the actual quantity of unginned 
cotton produced does not exceed 1 500 tonnes in the marketing year." 
Article 3 \. '.;.. • 
Paragraph 8 of Protocol N6 4 is replaced by me followir^ 
"8. The guide price shall be set at ECU 110.73/100 kg of unginned cotton. 
OJ No L 146, 4.7.1970; p. 1. 
This price shall relate to cotton: 
of fair, sound and merchantable quality, 
having a 10% moisture content and 3% impurity content, 
having the necessary characteristics to produce, after ginning, 32% grade 5 fibres 
(white middling) of 28 mm length (1-3/32")." 
Article 4 
The following paragraph is inserted in Protocol 4: 
"8a. Production aid shall be granted only to those undertakings which buy unginned cotton 
at a price at least equal to a minimum price. The minimum price shall be set at 
ECU 105.19/100 kg of unginned cotton for the quality selected for the guide price at 
the farm gate." 
Article 5 
Point (a) in the second subparagraph of paragraph 9 of Protocol 4 is deleted. 
['••: Article 6 
Paragraph 11 of Protocol No 4 is replaced by the following: 
'"11.. Before the start of the1999/2000 marketing year at the latest, the Commission shall 
send the Council a report on the operation of the system of aid for cotton. 
If the report shows it to be neeessarVj the Council, acting by qualified majority on a 
proposal from the Commission and having consulted Parliament, shall decide on any 
adjustments to the system, account being taken of the experience acquired in operating 
both this system and the system of support for arable crops." 
; Article 7 '."',. 
This Regulation shall enter into force on the third day folio wing its publication in the Official 
Journal of the European Communities. 
It shaU apply from the 1995/96 marketing year. 
This Regulation shall be binding in its entirety àMdirectiy applicable in all Member States. 
Done at .'•* For the Council 
Proposal for a 
COUNCIL REGULATION (EC) No 
• :•-;'"•' ' ' •;'."••'•••;.. • of ; ;""V\: 
laying down the general rules for the system of aid for cotton 
and repealing Regulation (EEC) No 2169/81 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Union, 
Having regard to the Act of Accession of Greece,and in particular paragraph 9-of Protocol 4 
on cotton, as last amended by Regulation (EC) No /951, 
Having regard to the proposal by the Commission, 
Whereas Potocol 4 of the Act of Accession of <3reece and Council Regulation (EEC) 
No 1964Z872 have been amended by Regulation (EC) No /95; whereas Council Regulation 
(EEC) No 2169/813, as last amended by Regulation (EEC) No 1554/934, should accordingly 
be amended; whereas the significance of the adjustments that need to be made to Regulation 
(EEC) No 2169/81 and the large number of amendments already made to it make it 
appropriate to recast this Regulation for the purposes of clarity and transparence; whereas 
Regulation (EEC) No 2169/81 should therefore be repealed; 
Whereas, pursuant to paragraph 9 of the Protocolitis necessary to lay down the rules ofi 
procedure and sound management for its application, the general rules of the system of 
production aid, me criteria for determining the world market price and the rules concerning 
the financing of me measures envisaged; 
See page of this Official Journal 
OJNoL 184, 3.7.1987, p. 14. 
OJ No L 211, 31.7.1981, p. 2. 
OJ No L 154, 25.6.1993, p. 23. 
Whereas, in order to facilitate the management and control of the aid system, provision should 
be made for a procedure establishing close cooperation between the Member States and the 
Commission within a Management Committee; whereas it is advisable to use the Management 
Committee for Flax and Hemp as provided for in Regulation (EEC) No 1308/70 on the 
common organization of the market in flax and hemp5; 
Whereas, in accordance with Article 2 of Regulation (EEC) No 1964/87, the aid shall be 
reduced by a coefficient yet to be determined where Community production exceeds a 
quantity fixed in advance; whereas, in consequence, the amount of aid to be granted cannot 
be determined until the actual quantity produced is itself known; whereas, to offset the adverse 
effects of late payment of aid for the parties involved, provision should be made for the part 
of the aid to be paid in advance; 
Whereas, pursuant to the third subparagraph of paragraph 3 of the Protocol, the aid is 
determined on the basis of the difference between a guide price for unginned cotton and the 
world market price; whereas, since there is no international trade in unginned cotton, and there 
are therefore no offers or quotations, provision should be made to enable a world market price 
for this product to be determined; whereas this price may be established on the basis of the 
historical relationship between the price agreed for ginned cotton and that calculated for 
unginned cotton; 
WTiereas, when calculating the price of ginned cotton, account should be taken of the offers 
made on the world market and of the quotations on those exchanges that are important for 
international trade; whereas the price on the world market must be calculated using the lowest 
offers and quotations on that market among those that are considered representative of the real 
market trend; 
OJNo L 146, 4.7.1970, p. 1. 
Whereas, for the aid system to operate correctly,-the world market price must be recorded for 
à Community frontier crossing point; whereas, in fixing this point, account should be taken 
of the extent to which it is representative for imports of the products in question; whereas, 
therefore, in the case of multiple origins the ports of Northern Europe should be chosen and 
in the case of a limited number of origins, offers or quotations recorded on an exchange 
outside Europe the port of Piraeus should be chosen; whereas, in the latter case the offers and 
quotations adopted will need to be adjured if they relate to some other frontier crossing point; 
Whereas such adjustments should also be made to the offers and quotations adopted in order 
to compensate for any variation from the presentation and quality taken as a basis for fixing 
the guide, price; 
Whereas me producer Member States should be required to set up the control arrangements 
necessary to ensure that the aid system operates correctly; 
Whereas, with a view to subjecting the Community expenditure on applying me planned 
measure to financial and monetary rules and appropriate procedures, Council Regulation 
(EEC) No 729/70 of 21 April 1970 on the financing of the common agricultural policy*, as 
last amended by Regulation (EEC) No 2048/887, should apply mutatis mutandis to the matters 
dealt with herein, as should the Regulations relating to the value of the unit of account and 
the exchange rates to be applied within the framework of me common agricultural policy; 
Whereas the adjustments to me system as laid down in this Regulation must be implemented 
«as smoothly as possible; whereas provisional measures may therefore be necessary, 
HAS ADOPTED THIS REGULATION: 
6 OJNoL 94, 28.4.1970, p. 13. 
7 OJ No L 185, 15.7.1988, p. 1. 
Article 1 
For the purposes of this Regulation: 
(a) "unginned cotton" means the fruit of the cotton plant (Gossypium) which has reached 
maturity and has been harvested, and which contains pod waste, leaves and earthy 
matter; 
(b) "ginned cotton" means the cotton fibres (other than linters and waste), neither carded nor 
combed, from which the seeds and most of the pod waste, leaves and earthy matter have 
been removed. 
Article 2 
The guide price for unginned cotton of a specified quality shall remain applicable throughout 
a given marketing year; the marketing year shall run from 1 October to 30 September. 
Article 3 
1. The world market price for unginned cotton shall be determined by taking account of 
the historical relationship between the world market price for ginned cotton and that 
calculated for unginned cotton. It shall be determined periodically on the basis of the 
world market price recorded for ginned cotton. 
2. If the world market price for unginned cotton cannot be determined in accordance with 
paragraph 1, this price shall be established on the basis of the most recent price 
determined. 
Article 4 v. 
1. The world market price for ginned cotton shall be determined on the basis of a jgràde 
5 (white middling) productwith a fibre length of 28 mm ( 1-3/32"), acçou^ 
of the offers made on this market and of the quotations on one or more European 
exchanges that are important for international trade. The price shall be determined using 
the lowest offers and quotations among those that are considered representative of the 
red market trend. 
2. For the purposes of the above calculation, an average shall be established of the offers 
and quotations on one or more European exchanges for a product delivered cif at a port 
in Northern Europe and corning from the various supplier countries considered the most 
representive in terms of international trade. 
However, where the wdrîd market price cannot be détermmed m 
preceding subparagraph; it shall be determined: 
on the basis of a limited number of the most representative offers and quotations 
for a product delivered cif at Piraeus recorded on the Liverpool exchange, or on 
another European exchange, or 
- on the basis of the offers and quotations on a non-European exchange either by 
calculating an average of the offers and quotations for a product delivered cif at 
Piraeus coming from various supplier countries that are^^ considered the most 
representative in terms of mternationaltradej orby usmgalimited 
most represehtauve? offers and quotations for a product delivered cif at Pfraeus. 
3. Where the offers and quotations recorded do not satisfy the requirements referred to in 
the preceding paragraphs, the necessary adjustments shall be made. 
Article 5 
1. Without prejudice to Article 2(3) of Regulation (EEC) No 1964/87, when the world 
market price determined in accordance with Article 3 is below the guide price, aid equal 
to the difference between these two prices shall be granted for unginned cotton harvested 
in the Community. 
2. The amount of the aid to be paid shall be the amount applicable on the day the 
application for aid is made. However, the amount of the aid applicable on the day the 
application is made shall be adjusted on the basis of the difference between the guide 
price applying on that day and that applying on the day when the cotton is placed under 
control. 
Should the application for aid be lodged before the application for supervised storage, 
the application for aid shall not be valid unless an adequate security is lodged to 
guarantee submission of the application for supervised storage within the time limit set. 
3. Entitlement to the aid shall be acquired when the cotton is ginned. However, aid may 
be paid in advance from 16 October following the start of the marketing year when the 
unginned cotton enters the cotton ginning undertaking, provided that an adequate 
security has been lodged. The amount of the advance shall be calculated using 'the 
procedure laid down in Article 10(1), account being taken of the estimated production 
of unginned cotton and of the anticipated amount of the aid. The advance may not 
exceed 40% of the guide price. Any aid balance outstanding shall be paid once the 
actual quantity produced has been determined and the amount of the aid has been 
revised downwards, where appropriate. It shall be paid before the end of the marketing 
year, at the latest. 
4. The aid shall be paid by the producer Member State on whose territory ginning takes 
place. 
5. The aid shall only be paid for a product of sound, fair and merchantable quality. 
6. The aid shall be paid for the quantity of unginned cotton that has entered the cotton 
ginning undertaking. 
However, if the quantity of ginned cotton is less than or equal to 33% of the quantity 
of unginned cotton that has entered the cotton ginning undertaking, aid shall be granted 
for the quantity of cotton ginned, multiplied by 100 and divided by 32. 
The quantity of ginned cotton eligible for the aid shall be calculated on the basis of its 
weight, reduced where necessary for any difference between: 
the representative percentage of recorded impurities compared to the representative 
percentage for grade 5, and 
the percentage moisture content recorded compared to that representative of 
- , Community ginning. 
The representative percentages referred to in the above indents shall be determined in 
accordance with the procedure referred to in Article 11(1). 
Article 6 
The additional reduction in the guide price referred to in the second indent of Article 2(3) of 
Regulation (EEC) No 1964/87 shall be established as follows: 
(a) if the actual production in Spain or Greece exceeds the guaranteed national quantity 
(GNQ) plus 10%, the excess in each Member State shall be calculated as a percentage 
of the GNQ and the guide price shall be reduced by a percentage equal to half the 
percentage excess; 
(b) in other cases, the actual production in excess of the guaranteed maximum quantity 
(GMQ) plus 10% shall be calculated as a percentage of the GNQ of the Member State 
concerned, and the guide price shall be reduced by a percentage equal to half the 
percentage excess. 
Article 7 
Aid shall be granted only to those cotton ginning undertakings which apply for it and which 
1. have submitted either: 
(a) a contract stipulating payment to the producer of a price at least equal to the 
minimum price referred to in Article 8a of Protocol 4 and containing a clause 
specifying that: 
in the event of application of Article 2(3) of Regulation (EEC) No 1964/87, 
the agreed price shall be reduced by the amount by which the aid is reduced 
following application of that Article, 
in the event of a difference between the quality of the cotton delivered and 
the standard quality, the price agreed will be adjusted proportionally by 
common consent between the contracting parties; or 
(b) a statement giving details of the conditions under which the ginning is carried out 
and how the aid is passed on to the producers where the undertaking gins cotton 
on behalf of an individual producer or a producer associated with that undertaking. 
2. keep stock accounts on ginned and unginned cotton that satisfy requirements to be laid 
down, with a view to enabling entitlement to the aid to be checked. 
3. provide the other supporting documents needed for checking entitlement to the aid. 
4., ftirnish proof that the cotton delivered under the contra^ or under the statement referred 
to in point 1(b) has been the subject of the decjaratibn^of area sown referred to in, 
Article 8. ' x 
Article 8 _ 
* 
Before the start of each marketing year, the estimated production of cotton referred to in 
Article 5(3) shall be drawn up using the procedure referred to in Article 11(1), account being 
taken of crop estimates. ^ > 
In order to draw up these estimates, a system of declarations of the areas sown shall be 
established. 
V 
\ 
Article 9 
Actual production in each marketing year shall be determined before the end of June pf that 
same year using the procedure referred to in Article 11(1), account being taken in particular 
of the quantities for which aid has been requested. . v . 
Article 10 
The producer Member States shall set up a system of c6ritrols,to: 
ascertain the quantity of unginned Community cotton which has entered each cotton 
ginning undertaking, ; - ~ 
ascertain the quantity of unginned Community cotton which has .been ginned, 
. 9 
ascertain the quantity of ginned cotton obtained in each cotton ginning undertaking from 
the quantity referred to in the first indent, 
ensure that the minimum price is complied with. 
Article 11 
1. Detailed rules for the application of this Regulation shall be determined in accordance 
with the procedure laid down in Article 12 of Regulation (EEC) No 1308/70. 
2. If it proves necessary to introduce transitional mesures in order to facilitate 
implementation of the adjustments to the system as laid down by this Regulation, such 
measures shall be adopted in accordance with the procedure provided for in paragraph 
1. They shall apply until the end of the 1995/96 marketing year at the latest. 
Article 12 
1. Regulation (EEC) No 2169/81 is hereby repealed. 
2. References made to the repealed Regulation or to any Articles thereof shall be constued 
as being made to this Regulation or to the corresponding Articles hereof. 
10 
Article 13 
The provisions of the Regulations relating to the value of the unit of account and the 
exchange rates to be applied in connection with the common agricultural policy, and those of 
Regulation (EEC) No 729/70 shall apply mutatis mutandis to the matters dealt with in this 
Regulation. 
Article 14 
This Regulation shall enter into force on the third day following its publication in the Official 
Journal of the European Communities. - . 
It shall apply from the 1995/96 marketing year. ^ 
This Regulation shall be binding in its entirety and directly applicable in all Member States. 
Done at, For the Council 
^M. 
'•.V-.v#!>V?.'':£r"'.;'j£' 
FINANCIAL STATEMENT ;PGRA\EN\0017.wpd) 
Date: 26 January 1995 
BUDGET HEADING: 141 aid for cotton production APPROPRIATIONS: ECU 723 million 
TITLE: 
Proposals to adapt the aid scheme for cotton 
LEGAL BASIS: 
Protocol No 4 annexed to the Act of Accession of Greece 
AIMS: 
To ensure fair administration in the cotton sector, taking account of the differences in the development of cotton 
production in Greece and Spain 
5. FINANCIAL IMPLICATIONS: PERIOD OF 12 
MONTHS 
(ECU million) CURRENT 
FINANCIAL 
YEAR 
(95) 
(ECU million) FOLLOWING 
FINANCIAL 
YEAR 
(96) 
(ECU million) 
5.0. EXPENDITURE 
- CHARGED TO THE EC BUDGET 
(REFUNDS/INTERVENTION) 
- NATIONAL AUTHORITIES 
-OTHER ECU 5 million 
5.1. REVENUE 
- OWN RESOURCES OF THE EC 
(LEVIES/CUSTOMS DUTIES) 
- NATIONAL 
1997 
5.0.1. ESTIMATED EXPENDITURE 
5.1.1. ESTIMATED REVENUE 1998 1999 2000 
5.2. METHOD OF CALCULATION: 
See Annex 
6.0. CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN THE RELEVANT 
CHAPTER OF THE CURRENT BUDGET? VSSMG 
6.1. CAN THE PROJECT BE FINANCED BY TRANSFER BETWEEN CHAPTERS OF THE CURRENT 
BUDGET? 1 JL»wW-J-4V 
6.2. WILL A SUPPLEMENTARY BUDGET BE NECESSARY? NO 
6.3. WILL FUTURE BUDGET APPROPRIATIONS BE NECESSARY? YES 
OBSERVATIONS 
M 
VI/i516/95F (PGRA\EN\0017.wpd) , 
'•"•',, • ' -';'.' • •'• ANNEX-' .v.. . .,, \. 
I. Costs for the 1995/96 marketing year under the old scheme (1996 budget) 
1. Assumptions - v 
- production : Spain 210 000 tonnes 
Greece 1 050 000 tonnes 
EUR 15 1 260 OOfrtonnes , N 
- overrun : \ 260 000 t - 701000 t = 559 000 tonnes 
559 0001: 701 000 t = 80% 
- world price : ECU 303/t (77 cts/lb and $/ECU rate ôf 0.82) 
- guide price .: ECU 1 225.1/t 
- aid reduction : 20% of the target price, plus 7% carried forward from 1994/95 
27% x ECU 1 225.1/t - ECU 330.8/t 
- aid granted : ECU (1 225.1 - 303 - 330.8)/t - ECU 591.3/t . 
2. Calculation of expenditure excluding aid for small producers f 
126 million t x ECU 591.3/t x 0.993 (DR) = ECU 739 million 
3. Cost of aid to small producers 
73 000 ha x ECU 298/ha.x 0.993 (DR) = ECU 22 million 
4. Total cost of former scheme 
ECU 739 million + ECU 22 million = ECU 761 million 
II. Cost of scheme proposed for the 1995/96 marketing year (1996 budget) ' 
1. Assumptions "' 
- Production ) 
- World price ) same as for I 
- Community overrun: 
1 260 000 t - 947 000 t = 313 000 tonnes 
313 OOOt: 947 OOOt = 33.1% 
- 10% of Community overrun: 94 700 tonnes 
- guide price: ECU 1 107.3/t _ 
- Reduction of 5% in aid, both in Greece and Spain: 
5% x ECU 1 107.3/t = ECU 55.4/t 
- Overrun in Greece: 1 050 000 t : 698 000 t = 352 000 t 
352 000 t : 698 000 t = 50.4% 
- Overrun in Spain: 0 t 
- Overrun per country: ^ 
313 OOOt-94 700 t = 218 300 t 
of which Spain 0 t 
of which Greece 218 300 t = 31.2% 
- Additional reduction: 
Spain =0 
Greece = 31.2% x 0.5 = 15.6% > 
15.6% x ECU 1 107.3/t = ECU 172.7/t 
- Total aid reduction: 
Spain = ECU55.4/t 
Greece = ECU 55.4/t + ECU 172.7/t = ECU 288.1/t 
- Aid granted: Spain ECU (1 107.3 - 303-55.4)/t = ECU 748.9/t 
Greece ECU (1 107.3 - 303 - 228.1)/t = ECU 576.2/t 
2. Calculation of expenditure 
- Spain: 0.21 million t x ECU 748.9/t x 0.991 (DR) = ECU 156 million 
- Greece : 1.05 million t x ECU 576.2/t x 0,993 (DR) = ECU 600 million 
ECU 756 million 
III. Impact of proposal - • - '. * 
ECU 756 million-ECU 76rmillion= -ECU 5 mUHoji '\< ^ ,- '-.•/ 
x ' . -'- '' ; ' ; -'; • <r-
ISSN 0254-1475 
COM(95) 35 final 
DOCUMENTS 
EN 03 
Catalogue number : CB-CO-95-080-EN-C 
ISBN 92-77-86274-2 
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