Opinion of the Economic and Social Committee on the 'Commission Proposals on the prices for agricultural products and related measures (1998-1999) - Vols. I, II and III` () (98/C 214/17)

On 19 February 1998 the Council decided to consult the Economic and Social Committee, under Articles 43 and 198 of the Treaty establishing the European Community, on the above-mentioned proposals.

The Section for Agriculture and Fisheries, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 2 April 1998. The rapporteur was Mr Barato Triguero.

At its 354th plenary session of 29 and 30 April 1998 (sitting of 29 April), the Economic and Social Committee adopted its opinion by 106 votes to two, with 14 abstentions.

1. Presentation by the Commission

1.1. Agricultural production and situation in 1997

1.1.1. The Commission proposal summarizes the general situation of production and the agricultural economy for 1997 as follows:

- The economic situation of agriculture was much more balanced in 1997 than in 1996.

- Despite the serious swine fever outbreaks in the pigmeat sector, the market situation was generally favourable for most EU producers.

- The agricultural year was quite positive for oilseeds, sugar beet and poultry.

- Climatic conditions were less advantageous than in the previous year, but less disastrous than expected.

- With the exception of Ireland and the United Kingdom (whose currencies underwent major revaluations in the course of 1997), agricultural conversion rates rose moderately in 1997.

- Cereal production is estimated at 202 million tonnes, less than 1996, although the area sown increased by 2 % due, basically, to the lower percentage of compulsory set-aside (down from 10 % to 5 %).

- Oilseed production achieved a record level of 14,7 million tonnes.

- Production of protein crops rose by 20 %.

- Sugar production also reached a record level, of 17 million tonnes.

- Olive oil rose to 1 859 400 tonnes, a record figure which led to a sustained fall in prices.

- Wine production fell by 5 %, due in particular to falls in Italy and France. The quality, however, is considered to be outstanding.

- Milk production is expected to have reached 1996 levels (121 million tonnes). As a result, prices remained stable.

- Beef and veal production was stable (7,9750 million tonnes). Prices recovered due to exports.

- Following the swine fever outbreaks in the Netherlands and Spain pigmeat experienced a series of ups and downs, as did prices.

- Poultry production rose by 3,4 % compared with 1996.

- Lastly, sheep and goat meat production fell slightly.

1.1.2. Production prices fell by 3,4 % in real terms, particularly in vegetable crops (5,3 %), principally due to price falls for olive oil (36 %) and cereals (8,9 %). Animal production fell by an average of 3,1 %.

1.1.3. According to Commission figures, farm income fell by 3,1 % in 1997. It should be pointed out that this fall in farm income across the EU as a whole masks highly diverse situations between countries and sectors.

1.2. Budgetary context

1.2.1. 1998 budget appropriations for the EAGGF-Guarantee Section have been set at ECU 40 596 million, lower than those for 1997 (ECU 40 805 million). The financial guideline for 1998 is ECU 43 263 million, leaving a margin of ECU 2 667 million.

1.3. The Commission proposal

1.3.1. The Commission proposal is based on that for the previous agricultural year, with the following modifications:

- Arable crops: in the context of regionalized base areas, the Commission is allowing the Member States to set the deadline for informing producers by 15 September instead of 15 May.

- Rice: in accordance with the provisions adopted under the CMO reform for the sector, the Commission proposes to set the price for paddy rice in the 1998/1999 marketing year at ECU 315,5 per tonne, 5,3 % lower than the price for the previous year. However, the monthly increases are kept are ECU 2/tonne/month.

- Sugar: the latest statistics indicate that Italy is not a deficit area and consequently no derived intervention price for white sugar is proposed.

- Flax: in anticipation of a Council decision on an amendment to the CMO, the Commission proposes the same level of aid per hectare.

- Hemp: reduction in aid per hectare, on account of the increased area sown.

- Olive oil: the Commission is currently preparing a reform, quite separate from the present package, which includes price setting for the 1998-1999 and 1999-2000 marketing years. No prices are therefore proposed in the present package.

- Wine: in anticipation of a new proposal, it is necessary to avoid legal gaps and for this reason an extension by one year of the ban on new plantings and of the regime for permanent abandonment is proposed.

- Tobacco: in anticipation of the adoption of the Commission proposal to reform the CMO, the current provisions for the sector are extended.

- Beef: increased ceilings for Spain and Portugal so that applications do not exceed them by more than 10 %. It is also proposed to extend by one year the reduction of ceilings which was decided in 1996 for the years 1997 and 1998.

- Sheepmeat and goatmeat: the Commission proposes to freeze the basic price and keep the stabilizer at 7 %.

2. Comments on the proposal

2.1. Preliminary comments

2.1.1. The Commission proposal fails to take account of the repercussions of price setting measures on farmers' income as well as the impact on EU consumers. The Committee therefore urges the Commission to carry out an in-depth study of the impact of its farm prices policy on EU consumers.

2.1.2. For most products, the Commission proposal means freezing the prices and related measures in comparison with the previous year. However, the Commission fails to take account of the documented 3,1 % loss of income in the sector during 1997. This is all the more serious given that committed expenditure is more than ECU 2 500 million below the financial guideline.

2.1.3. Regrettably, the Commission makes no proposals concerning the non-food outlets for agricultural production, such as, for example, renewable and sustainable sources of energy. The Commission should adopt a courageous policy in favour of such new, non-food outlets, providing stable, direct supplementary aid for the raw materials in question, together with a series of tax measures and others giving priority to the use of such materials to produce fuel.

2.1.4. It is difficult to understand why the Commission also fails, in its explanatory memorandum, to mention Mediterranean agriculture and, more specifically, the recently reformed fruit and vegetable sector. The Commission must carry out a serious, objective analysis of the effects of applying the new reform of the sector on the farmers and areas affected: such an analysis should cover the impact of preferential imports from third countries.

2.2. Specific comments

2.2.1. Arable crops

2.2.1.1. In view of crop prospects, the Committee urges the Commission to set the percentage of compulsory set-aside well in advance and at a level significantly lower than in the basic Regulation 1765/92.

2.2.1.2. Similarly, the Committee considers that the date of compensatory payments should be brought forward to 31 October (instead of 31 December) for cereals and protein crops.

2.2.1.3. The Committee believes that the base areas of the new German Länder should now be definitively established.

2.2.2. Cereals

2.2.2.1. In fixing the monthly increases, the Commission should take account of aspects, other than interest rates, which are connected with the real cost of cereal storage.

2.2.2.2. The Commission should allow for the fact that, in certain parts of the EU, harvesting takes place several months before the opening date for intervention.

2.2.2.3. The Commission should display a degree of flexibility in establishing its quality criteria for intervention eligibility, particularly when justified on the grounds of exceptional climatic conditions.

2.2.2.4. Similarly, weather conditions should be taken into account when deciding on penalties for exceeding base areas. Such conditions may compel farmers to adjust their crop plans.

2.2.3. Rice

2.2.3.1. The Committee is concerned at the crisis in the European rice sector, which is experiencing severe problems in providing its producers with income, due to the continued fall in market prices within the EU. This has been triggered principally by large-scale imports of milled rice from third countries. This situation cannot be resolved simply by maintaining the level of monthly increases, as the Commission claims: because the fall in prices was greater than expected by the Commission, the necessary increase in aid per hectare did not occur.

2.2.4. Protein crops

2.2.4.1. The reduction in areas sown more than justifies an increase in the reference aid for these crops. A series of crops, such as kidney beans, should be included under grain legumes, with the corresponding increase in the Maximum Guaranteed Area in order to ensure their viability.

2.2.5. Oilseeds

2.2.5.1. In view of the size of the compensatory payments and yield and world price trends in this sector, it would seem appropriate to ask for the advance on the premium to be 80 % rather than the proposed 50 %.

2.2.5.2. The recorded reference price should accurately reflect the real prices received by producers in each region as practised on the market each month.

2.2.6. Hemp

2.2.6.1. The measure reducing production aid for hemp by 25 % is not the best way of stabilizing areas used for this crop, putting as it does the viability of production zones at risk. The reduction is not justified given that this is an ecological crop, and since demand is expanding rapidly there is no surplus; producers and processors have invested heavily in it. On the contrary, in view of the potential for use and consumption of the crop, the Committee considers that the Commission should encourage production.

2.2.6.2. Consequently, and pending the Commission's presentation of proposals for hemp production controls in the forthcoming months, the Committee believes that the amounts of aid for hemp production should remain unaltered.

2.2.7. Sugar

2.2.7.1. The Committee recalls the loss of income experienced by beet growers from sale of sliced beet, as a result of the fall in cereal prices.

2.2.7.2. Secondly, the Committee would point to the Council's call for the Commission to carry out research on inter-occupational relations.

2.2.8. Fruit and vegetables

2.2.8.1. The Committee regrets the Commission proposal's lack of attention to this sector. There is no analysis of the impact of the first year of reform implementation. The Committee would point to the situation of the processed citrus fruit sector, which is heavily penalized because the reform takes no account of its production capacity when setting thresholds.

2.2.8.2. The Committee also stresses the need to establish, at Community level, clear and objective criteria for the definition, identification and classification of juices, as the best safeguard for consumer information on product quality and origin.

2.2.9. Livestock

2.2.9.1. In general terms, the Committee would emphasize the need to guarantee the competitiveness of EU livestock production in the world context. It would therefore warn of the need for compensation in the event of animal welfare or environmental protection measures which are stricter than those demanded of imported products.

2.2.9.2. The EU should also aim to maximize all its export opportunities, ensuring our produce is present on international markets, taking into account third world agriculture.

2.2.10. Beef and veal

2.2.10.1. The Commission's proposal to increase the ceiling on the number of male bovines eligible for the premium in Spain and Portugal does not match the Commission's own figures. It is therefore necessary to clarify the real increase in the number of male bovines which will qualify. It should be borne in mind that in the EU as a whole, 85 % of male bovines are entitled to aid, while only 60 % of animals qualify in Spain and Portugal. A more balanced distribution of premiums should be achieved.

2.2.10.2. The Committee also regrets that in its proposals the Commission does not refer to extension of the special measures applicable in the new German Länder with regard to the ceilings for beef premiums on farms with 90 animals.

2.2.11. Sheepmeat and goatmeat

2.2.11.1. Freezing the basic price for the fifth consecutive year means there can be no increase in the premium for sheepmeat and goatmeat.

2.2.11.2. The establishment of individual references for premium eligibility means that maintaining the stabilizer is pointless. The Committee therefore calls for it to be abolished.

2.2.12. Milk

2.2.12.1. The Committee accepts the Commission's proposal to maintain prices for the 1998-99 marketing year, but believes that in the context of WTO commitments, the export support mechanism should be put to full use. This should not be hampered by administrative measures concerning the fixing of export support.

2.2.13. Olive oil

2.2.13.1. The Committee highlights the need to put forward a farm prices proposal for the sector, bearing in mind that there is no guarantee that the Council debate on the reform of the CMO in olive oil will end before the new marketing year begins.

2.2.14. Cotton

2.2.14.1. The Committee recalls the need to adjust the MGQ and, consequently, the national reference quantities, for the sector at EU level, bringing it into line with real production in the main EU producer countries.

2.2.14.2. Furthermore, the Committee considers that the calculation of advances on aid must be better managed, so that the 15 % currently taken into account by the Commission in increasing estimated production can be reduced without delaying payment dates.

Brussels, 29 April 1998.

The President of the Economic and Social Committee

Tom JENKINS

() OJ C 87, 23.3.1998.