REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGGF Guarantee Section expenditure - Early warning system No 1/2004

1. APPROPRIATIONS

1.1. Appropriations under Heading 1 (Agriculture) of the 2004 budget

This year's budget is the first whose appropriations are established on the basis of activities undertaken by the Commission. The EAGGF-Guarantee section budget includes appropriations which relate to three Commission activities, namely: Agriculture (Policy area No 05), Fisheries (Policy area No 11) and Health and consumer protection (Policy area No 17).

The budget appropriations adopted by the European Parliament in December 2004 for EU-15 under budget heading 1 amount to EUR 44 761,4 million

The budget appropriations under the subheading 1a covering all policy areas concerned, i.e: 05, 11 and 17, amount to EUR 39 958,4 million for EU-15.

The appropriations under the subheading 1b amount to EUR 4 803,0 million for EU-15.

2. Overall outturn in monthly expenditure

The following tables show the overall outturn in monthly expenditure in relation to the expenditure profile. This situation corresponds to expenditure incurred in the Member States from 16 October to 30 November 2003.

2.1. Subheading 1a: Policy areas 05 (Agriculture), 11 (Fisheries) and 17 (Health and Consumer Protection)

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2.2. Subheading 1b: Policy area 05 (Agriculture) - Rural Development

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3. Provisional utilisation of appropriations

The following table presents the provisional utilisation of appropriations for the first month of the 2004 budget year:

Budget year 2004 - Provisional utilisation of appropriations

Expenditure incurred by the Member States from 16.10.2003 to 30.11.2003 charged to the EU budget in January 2004

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4. COMMENTS

4.1. The uptake of appropriations for January 2004

The uptake of appropriations under heading 1 of the budget for January 2004 (Member States' expenditure from 16 October to 30 November 2003) amounts to EUR 19 414.3 million, i.e. 43.4 % of appropriations. Expenditure is

- EUR 1 871,2 million above the indicator for subheading 1a, and

- EUR 97,7 million under the indicator for subheading 1b.

4.2. Monetary factors

The dollar/euro rate

The expenditure indicated above takes account of the movement in the dollar/euro rate. In the case of a large part of export refunds for agricultural products, particularly for cereals and sugar, and of some internal aids such as aid for cotton, expenditure depends on the trend in the dollar rate.

In accordance with the Council Regulation on budgetary discipline (Council Regulation (EC) No 2040/2000 of 26 September 2000), the letter of amendment to the 2004 agriculture budget was drawn up on the basis of the average dollar rate for July, August and September 2003, i.e. EUR 1 = $ 1,12. For the period 1 August to 30 November 2003 the average dollar rate was equal to EUR 1 = $ 1,14, i.e. at a level slightly above the rate used for the establishment of the 2004 budget.

4.3. Market factors

Subheading 1a

For subheading 1a, the rhythm of execution is above the level of the indicator for both the plant and animal products sectors. For the plant products sector, this over-execution is primarily related to arable crops and to olive oil. For the animal products sector, this over-execution is mainly attributed to beefmeat and sheepmeat. Therefore, the following comments are due:

Article 05 02 03: Direct payments for arable crops // Divergence:+ EUR 943 million (+5,5%)

// (expenditure: EUR 14 022 million)

(indicator: EUR 13 079 million)

Following the summer drought in certain Member States the Commission adopted special measures (Commission Regulation (EC) No 1577/2003 of 8 September 2003) whereby these Member States were authorised to make an advance payment of up to 50% of the area payments for arable crops and for set-aside from 16 October 2003 instead of waiting for the commencement of the normal payment period starting 16 November 2003. The over-execution observed by comparison to the level of the indicator reflects this advance in the payment of these aids by the Member States concerned. At this point in time, this over-execution is deemed to be temporary.

Article 05 02 05: Sugar // Divergence: -EUR 145 million (-8,5%)

// (expenditure: EUR 174 million)

(indicator: EUR 319 million)

This under-execution by comparison to the level of the indicator is due to the reduced volume of sugar exported with refunds which stood at 75% of the volume of exports expected as of this point in time.

Article 05 02 06: Olive oil // Divergence: + EUR 379 million (+16,0%)

// (expenditure: EUR 757 million)

(indicator: EUR 379 million)

This over-execution is due to the acceleration of the rhythm of payments of the advances for the production aid for olive oil as compared to the level of the indicator. The situation is expected to be regularised over the coming months on the basis of the maximum pre-determined quantities of olive oil expected to be subsidised under this measure.

Article 05 03 02: Beef and veal // Divergence:+ EUR 406 million (+5,1%)

// (expenditure: EUR 1 730 million)

(indicator: EUR 1 324 million)

The Commission, following the summer drought in certain Member States, adopted Regulation (EC) No 1621/2003 of 16 September 2003 allowing the advance payment of the 2003 beef premiums in the budget year 2003 instead of 2004. The Member States concerned apparently accelerated the payment rhythm of these premiums with the start of the new budget year as it is evidenced by this over-implementation when compared to the level of the indicator for this article of the 2004 budget. At this point in time, this over-execution is deemed to be temporary.

Article 05 03 03: Sheepmeat and goatmeat // Divergence: +EUR 618 million (+40,4%)

// (expenditure: EUR 1 036 million)

(indicator: EUR 418 million)

The Commission, following the summer drought in certain Member States, adopted Regulation (EC) No 1621/2003 of 16 September 2003 allowing the advance payment of the 2003 sheep/goat premium in the budget year 2003 instead of 2004. The Member States concerned apparently accelerated the payment rhythm of these premiums with the start of the new budget year as it is evidenced by this over-implementation when compared to the level of the indicator for this article of the 2004 budget. At this point in time, this over-execution is deemed to be temporary.

5. CONCLUSIONS

Implementation of appropriations at 31 January 2004

The uptake of appropriations for January 2004 (Member States' expenditure from 16 October to 30 November 2003) shows an over-execution for subheading 1a. This over-execution relates to certain individual articles of the budget and, at this point in time, it is expected to be temporary. The under-execution for subheading 1b invites no comment at this point in time.