REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGGF Guarantee Section expenditure - Early warning system No 3/2001

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

Early warning system No 3/2001

TABLE OF CONTENTS

1. Overall outturn in monthly expenditure

2. Provisional utilisation of appropriations

3. Comments

4. Conclusions

1. 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 2000 to 31 January 2001.

1.1. Subheading 1a: CAP (not including rural development)

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1.2. Subheading 1b: Rural development and accompanying measures

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2. Provisional utilisation of appropriations

The following table shows provisional utilisation of appropriations for the first three months of 2001.

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3. COMMENTS

3.1. The uptake of appropriations for March 2001

The uptake of appropriations under heading 1 of the budget for March 2001 (Member States' expenditure from 16 October 2000 to 31 January 2001) is EUR 25 622.7 million, i.e. 59.2% of appropriations. Expenditure is

-EUR 450.9 million below the indicator for subheading 1a (CAP, not including rural development),

-EUR 370.6 million below the indicator for subheading 1b (rural development and accompanying measures).

3.2. Monetary factors

3.2.1. The dollar/euro rate

The expenditure indicated under the above point 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 how the dollar rate develops.

In accordance with the Council Regulation on budgetary discipline (Regulation (EC) No 2040/2000 of 26 September 2000), the letter of amendment to the 2001 agriculture budget was drawn up on the basis of the average dollar rate for July to September 2000, i.e. EUR 1 = $ 0.91.

3.2.2. The impact of the dual rates

The cost of the dual rate to the EAGGF Guarantee Section is estimated at EUR 77 million.

3.3. Market factors

3.3.1. Subheading 1a

For subheading 1a, two thirds of the unutilised amount in relation to the indicator (EUR 450.9 million) was due to animal products. A detailed explanation chapter by chapter is given below, for the most significant divergences.

Chapter B1-11: Sugar // Divergence: -EUR 88 million (-5.1%)

// (expenditure: EUR 531 million)

(indicator: EUR 619 million)

The underutilisation of appropriations in relation to the indicator was due to the volume of sugar exported up to the end of January 2001, which was equal to only 80% of the volume that should have been exported at that time of the year under the programmes drawn up by the departments that monitor the sugar market, while the average rate of refund granted since the beginning of the budget year was 96% of the rate assumed when the 2001 budget was drawn up.

Chapter B1-12: Olive oil // Divergence: -EUR 117 million (- 4.7 %)

// (expenditure: EUR 1 885 million)

(indicator: EUR 2 002 million)

The profile for the year was based on the rate of payments observed in 2000. Underutilisation was due to delayed payment of advances on production aid in Greece (associated producers) and Spain (both associated producers and others), despite Italy's having advanced virtually all the olive oil production aid for 1999/2000.

Chapter B1-14 : Fibre plants and silkworms // Divergence: -EUR 168 million (- 19.7%)

// (expenditure: EUR 426 million)

(indicator: EUR 594 million)

Underutilisation in relation to the indicator was due to delayed payments, since the volume of unginned cotton entitled to aid that had been taken into supervised storage up to January 2001 in Greece (the main cotton producer) was less than the indicator implied.

Chapter B1-15 : Fruit and vegetables // Divergence: +EUR 82 million (+ 4.9%)

// (expenditure: EUR 525 million)

(indicator: EUR 443 million)

The overrun of the indicator is due:

-for fresh fruit and vegetables: to a faster rate of payment of financial compensation for withdrawals and expenditure on buying in of fruit in Greece, France and Italy, and to a faster rate of payments by the operational funds of producer organisations in Spain, France, Italy, the Netherlands and the United Kingdom. Moreover, amounts paid in aid for bananas in France and Spain were higher, because of the increase in the rate of the advance paid in 2001,

-for processed fruit and vegetables: to a faster rate of payment of production aid for processed tomato products in Italy, payment of financial compensation for the processing of citrus fruit in Italy and Spain, and payment of aid and intervention expenditure for dried grapes in Greece.

Chapter B1-16 : Products of the vine-growing sector // Divergence: +EUR 39 million (+ 3.4%)

(expenditure: EUR 179 million)

(indicator: EUR 140 million)

Most of the overrun of the indicator is due to settlement of aid for the storage of wine and grape must for the 1999/2000 crop year in Italy, and to the cost of preventive distillation under the former arrangements of Council Regulation (EEC) No 822/87 in Italy, Germany, Spain, Greece, France and Portugal. Under the new arrangements of Council Regulation (EC) No 1493/1999, payments in January refer to the distillation of wine for potable spirit in Spain and Italy.

Chapter B1-21: Beef and veal // Divergence: -EUR 283 million (- 4.7%)

// (expenditure: EUR 2 066 million)

(indicator: EUR 2 349 million)

In addition to the significant reduction in payments of export refunds for beef and veal following the closing of export markets, the divergence is due to livestock premiums. The indicator for these premiums was based on the assumption that the Member States would pay advances at the high rate of 80% voted in December 2000. This assumption was not borne out by the rate of payments actually observed in most of the Member States concerned. Apparently, only Ireland and Denmark paid the advance on livestock premiums for bovine animals at a rate of 80%. Moreover, in view of low prices and the instability of the market for bovine animals, farmers were keeping their animals on the farm for a longer period than previously; consequently, budget implementation for the slaughter premium was slower, and could be less than available appropriations.

Chapter B1-30: Non-Annex I products // Divergence: +EUR 23 million (+ 5.6%)

// (expenditure: EUR 150 million)

(indicator: EUR 127 million)

Overshooting of the indicator was due to settlement of export refunds for skimmed milk and other milk products, and for sugar and isoglucose. These were cases left over from he previous year at higher rates of refund than those now obtaining.

Chapter B1-39: Other measures // Divergence: +EUR 56 million (+ 13.4%)

// (expenditure: EUR 190 million)

(indicator: EUR 134 million)

The overrun of the indicator results from payment of the balance of the first tranche of agri-monetary aid in Ireland, Italy, Denmark and Sweden, and the second tranche in the United Kingdom.

3.3.2. Subheading 1b

Chapter B1-40: Rural development // Divergence: -EUR 371 million (- 8.3%)

// (expenditure: EUR 824 million)

(indicator: EUR 1 195 million)

2001 is the first year of implementation of the new rural development programmes for the 2000-06 programming period. Most of these programmes were approved in the second half of 2000. Consequently, the indicator was constructed on the assumption that expenditure would be evenly distributed over the year for most of the budget headings in this chapter. Owing to lack of experience of Member States' rates of payment for these measures, the indicator probably does not reflect the real rate of payments.

It should be borne in mind that the Member States pay, among other things, for the former accompanying measures. Specifically, this expenditure mainly concerns early retirement, agri-environmental measures and afforestation under this chapter.

4. CONCLUSIONS

4.1. The uptake of appropriations by 31 March 2001 for subheading 1a

The uptake of appropriations by 31 March 2001 (Member States' expenditure from 16 October 2000 to 31 January 2001) is EUR 24 798.4 million, i.e. 63% of appropriations.

Expenditure is EUR 451 million below the indicator. The divergence between expenditure incurred and the indicator is therefore smaller than last month. Divergence is due to the rate of payment by the Member States being different from that forecast for the indicator (especially for Chapters B1-12, B1-14 and B1-21). At this stage of budget implementation, the divergence may be regarded as temporary for these chapters.

4.2. The uptake of appropriations by 31 March 2001 for subheading 1b

The uptake of appropriations by 31 March 2001 (Member States' expenditure from 16 October 2000 to 31 January 2001) is EUR 824.2 million, i.e. 18% of appropriations.

Expenditure is EUR 371 million below the indicator. The divergence between expenditure incurred and the indicator is therefore greater than last month. However, at this stage there are no grounds for supposing that the negative divergence will persist until the end of the year.