COMMISSION OF THE EUROPEAN COMVIDNITIES 
C0MC91) 258 final 
Brussels, 11 July 1991 
fr^mnirATinvi rvc THf flo^iSSIOM TO THg COUNCIL AND TO THE 
EUROPEAN PARLIAMENT 
THE DEVELOPMENT ANP FUTURE OF THE COMMON AGRICULTURAL POLICY 
Follow-up to the Reflection» Paper (COM (91) 100 of 1 February 1991) 
Proposa le of the Com I et I on 
i>j, i 
Table of contents 
Pages 
Introduction 3 
Part One: Market Organieations 7 
I. Cereals, Oilseeds, Protein Crope 7 
II. Tobacco 17 
III. Milk 20 
IV. Beef 25 
V. Sheepmeat 28 
VI Other Market Organieations 30 
VII Management and Control 30 
Part Two: Accompanying Measures 32 
I. Agri-Environmental Action Programme 33 
II. Afforestation of Agricultural Land 35 
III. Structural Improvement through Early Retirement 36 
Budgetary Implications 38 
Annex I 39 
Annex II 40 
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COMMUNICATION OF THE COMMISSION TÛ THE COUNCIL AND TO THE 
EUROPEAN PARLIAMENT 
Subject : ,• The Development and Future of the Common Agrlcut tura I Pol Icy -
Proposals of the Commise Ion 
Introduction 
1. In its communication C0WC0D100 of 1 February 1991 the Commies ton set 
out its reflections on the present state of the Common Agricultural 
Policy and on the need for fundamental change. 
It concluded that: 
- existing price guarantees, through their direct link to 
production, lead to growing output 
- this extra output could be accommodated only by adding to 
intervention stocks, already at excessive levels, or by exporte to 
already oversupplied world markets 
- the in-built incentive to greater Intensity and further production, 
provided by preeent mechanisms, puts the environment at increasing 
risk 
- rapidly rising budgetary expenditure, devoted in large part to a 
small minority of farms, provides no solution to the problems of 
farm incomes generally. 
2. Against the background of thie ana Iye le the Commission suggested 
objectives and guide 11 nee for future policy. A more competitive 
agriculture through continuing action on prices was considered 
essential. It wae recognised that farmere should be compensated for 
lower prices, that there would be advantage in doing thie In a 
manner which would reduce production and reflect greater concern for 
the environment, that there should be a better distribution of 
support among farmers taking Into account the difficulties of some 
categories of producere and regions, that more specific Incentives 
towards environmentally - friendly farming should be available, that 
there should be greater recognition of the dual role of the farmer in 
producing food and managing the countryside, that non-food use of 
agricultural products should be encouraged and that better Incentives 
should be available for farmere to take early retirement. 
3. As regards the budgetary implications of the new approach, the 
Commission recognised that reasonable compensation to producers for 
lower prices would give rlee to additional budgetary costs. But It 
considered also that additional budgetary costs could be Justified -
while maintaining a budgetary discipline framework Including an 
agricultural guideline - if as a result the -Common Agricultural 
Policy were placed on a eounder footing, giving benefits internally, 
eg to producers and consumers and to the environment, and externally, 
by contributing to stabilisation of world markets. 
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4. All Member States, many professional organisations end private 
Individuals have given their views on the Reflections Paper. There 
has been a large consensus on the Commies ion's analysis and on the 
need to adapt the existing mechanisms. While initially some Member 
States and farming organisations were very opposed to change, there 
has been growing support for reform even from those quarters. The 
Commission recognises that the decisions by the Council on these 
proposals will be the result of negotiation and compromise. In these 
negotiations, the Commission will adopt a flexible approach with a 
view to meeting the legitimate concerns of the Member States. 
5. Two aspects in particular have given rise to widespread comment in 
the course of- reactions to the Reflect lone Paper, namely the role of 
price policy, and modulation. 
There has been strong support from some Member States, consumer 
representatives and economic analysts for the Commission's approach 
to price policy. Other Member States and farming organisations have 
argued that maintaining existing institutional prices, coupled with 
more effective supply control on a voluntary basis, and the 
reduction of imports, would bring about a more stable situation for 
Community agriculture, without prejudicing other essential Community 
interests. 
Many farmere and their représentâtivee have stressed the need for a 
stable multiannual framework for agricultural policy which would 
replace the present year by year approach. This would offer farmers 
a more solid basis for rational planning and remove the uncertainty 
inherent in annual decisions as part of the price fixing 
arrangements. 
The farming organisations have emphasised also that any curtailment 
of Community output In the interests of a more balanced world market, 
must be part of a coherent international effort under which all the 
major world producers accept comparable commitments. 
6. The second aspect relates to modulation of support. Concern has been 
expressed by some Member States and farming organisations about what 
is seen as discriminatory treatment of certain classes of producer 
and of the impact of severe modulation using Community criteria on 
agriculture generally In Individual Member States. Other Member 
States and farmers' representatives have taken the opposite view 
arguing that modulation should feature as a prominent element in the 
new approach. 
7. The Commission considers that sufficient time has elapsed for all 
interested parties to have presented their views and to have had 
them considered. To avoid uncertainty, proposals should now be 
presented. The proposals herewith follow broadly the approach In 
the Reflections Paper, adjusted where necessary to take account of 
the varloue concerns expressed. 
8. The Commission believes that the prospect of maintaining existing 
prices through voluntary restraint on supply and increased 
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restriction of Imports Is not a viable option» Commun:ty price 
policy must be cased on the used to meet Inevitable competition ^n 
its domestic market and on world markets. 
Nevertheless, more effective supply control is an important feature 
of the present proposals. Indeed, the success of the mechanisms 
proposed Is dependent on their Influence in reducing supply In the 
interest of more balanced markets. The Commission agrees with the 
farming representatives on the need for corresponding efforts by 
other agricultural producing and exporting countries. 
9. The Commission shares also the concern of the farming organisations 
that the system should provide greater stability for farmere. It 
points out that the substantial compensation envisaged for farmere in 
these proposals and the greater stability Inherent in a system of 
direct payments provide an attractive prospect for the farming 
community. In the case of arable crops, the direct aids are 
independent of levels of production; the premiums in the livestock 
sector are linked to a closely defined extensive form of farming. 
In the absence of reform farmers can expect to be faced with 
continual adaptation of existing policies and uncertainty about 
returns from the market. 
10. The proposals meet many concerns on the issue of modulation In that 
they provide very substantial compensation to all farmers for price 
cuts and quota reductions. At the same time the approach is designed 
to maintain economic and social cohesion to the benefit of the vast 
majority of farmers who are less well placed to fully avail of the 
benefits of the Policy. 
11. The present proposals, which cover the principal sectors and account 
for some 75% of the value of agricultural production subject to the 
common market organisations, Involve a significant and far reaching 
change of approach which will bring substantial benefits to the 
Community and its citizens. 
There are limits to what can be achieved In the short-term by way of 
reform. The market organisations and farm practices In the Member 
States differ eignifIcantly and this can give rise to difficulties 
as regards overall coherence and balance. Besides, It Is not 
opportune to propose changes In some market organisations that have 
been decided recently or are working reasonably well. 
In preparing these proposals the Commission has been aware of theee 
problems and has sought to overcome them in an equitable way eg 
through developing the premium system In the cattle sector. This 
approach Is designed to compensate farmers practicing traditional 
extensive grass-based systems of production which would otherwise be 
penalised by price reductions for beef and milk. 
The substantial shift in policy approach recommended may give rise to 
unexpected reactions and side effects In the practical operation of 
new measures. The Commission will keep this aspect under review and 
will take the required counter balancing action within Its own powers 
or make proposals to the Council as necessary. 
12. Apart from the changes In the agrl-environmental arid forestry 
measures and the Improved early retirement arrangements - which 
complement the approach to the market organisations - the Commission 
is not proposing further changes in measures of a structural nature 
at this stage. The development of rural communities, while closely 
linked to agriculture, will Increasingly depend on other sectors for 
new opportunities. As foreseen in the Reflections Paper, a review of 
rural development policies will bs carried out In conjunction with 
the mid-term review of the structural funds later this year. 
13. As indicated in the "budgetary implications" (page 38), once the new 
arrangements come into effect fully the additional annual budgetary 
costs to Feoga Guarantee of a reformed policy would be 2300 MECU. 
This is some-1000 MECU less than the agricultural guideline based 
on existing rules and taking into account predictions of likely 
growth in GNP over the next five years. 
If as proposed the new arrangements are fully operative by 1997 
projected expenditure in that year would be substantially less than 
that likely to arise on the basis of continuing past trends of EAGGF 
Guarantee expenditure over a representative period. Expenditure can 
be expected to decline after 1997 as the corrective measures and 
improved world market prices take effect. 
14. As for the agri-environmental, forestry and early retirement 
programmes, the estimated budgetary expenditure (in constant 92 
prices) would be of some 4000 MECU in total over a five year period. 
15. The Commission considers the extra costs to be well Justified and 
that in the context of these proposals and taking into account German 
Unification an increase in the base of the agricultural guideline of 
some 1500 MECU is warranted. The new approach will lead to a more 
balanced Community agriculture conferring 'substantial additional 
benefits on producers and consumers and In harmony with the 
environment. While the principal benefits will be internal, the 
approach now proposed will be helpful also at the International 
level. 
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fart Qne : Market Organisations 
1. Cereals, OiI seeds and Protein Crops 
A. Overview 
1. There are some 4.3 million holdings growing cereals, oilseeds 
and protein crops in the Community. In quantitative terms (36 
mio hectares, 172 mio tonnes In 1990/91) cereale represent by 
far the most important crop of the three. The average area 
under cereale is about 8 ha. The great majority of cereals 
producers (88% or 3.7 mio holdings) have less than 20 ha under 
cereals.. They account for 40% of the total cereals area and for 
one third of cereals output. The average yield In the Community 
is between 4.5 and 5 tonnes per ha, but varies greatly (from 
less than 1 tonne to more than 10 tonnes per ha) depending on 
agronomic conditions and farm structure. 
Half a million farmers are engaged In producing oilseeds on 
nearly 5.5 mio hectares. Production reached 11.7 million tonnes 
(oilseed rape 5.% million tonnes, sunflower seed 3.9 million 
tonnes and soyabeans 1.9 million tonnes) in 1990/91 and Is 
expected to Increase to 13 mio tonnes In 1991/92 (including the 
five new German Lender). 
2. Oilseeds and protein crops are generally grown on farms that 
produce cereals and have cereal yields above the Community 
average. In determining land use, a farmer can switch between 
oilseeds and cereals depending on the relative profitability of 
the crops and on weather conditions. 
Oilseeds are used for the production of cake for animal feed and 
of oil for human, animal and industrial use. The Community's 
degree of self-sufficiency in all vegetable oils (including 
olive oil) is about 65% (rapeseed oil 125%, sunflower oil 107%). 
In the case of cake, self sufficiency Is around 20% (80% for 
rape seed cake, 61% for sunflower, 7% for soya). The 
Community's crushing capacity is roughly double its oilseeds 
production. 
3. The area under protein crops is stable at around 1.3 mio ha with 
production at some 5 mio tonnes (1.5 mio tonnes In excess of 
guaranteed threshold). The crop Is particularly suited for 
rotation purposes. Its principal market Is the animal feed 
industry. 
4. In spite of a slight decrease In output in 1990/91 due to 
drought, the continual reduction (at an annual rate of about 
1.5 mio tonnes) In the use of cereals In animal feed, static 
use for human consumption and industrial purposes, together 
with a reduced export demand have contributed to a sharp rise In 
cereals Intervention stocks (currently at the record level of 
some 20 million tonnes). 
Cereals production in 1991/92 is expected to Increase again 
(In terms of yields and of area) and to reach some 180 mio 
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tonnes. With a continuing upward trend in yields, total cereals 
production could reach 187 million tonnes by 1996. Any growth 
in human and industrial consumption would be offset by the 
continuing decline In animal feed use. Domestic use is expected 
to remain at around 140 mio tonnes, leaving a surplus for export 
of more than 45 mio tonnes (compared to about 30 mio tonnes In 
1990/91). The annual surpluses would be well in excess of 
foreseeable export outlets. The temporary set aside arangement 
adopted as part of this year's price proposals (15% of arable 
land with reimbursement of the Increased coresponslblIIty levy 
of 5% together with payment of a set-aside premium) is designed 
to limit the serious disposal problems expected from the 1992 
harvest but not to resolve the longer term difficulties. 
5. Although cereals, oilseeds and protein crops are interdependent 
in terms of land use and in terms of their use in animal feed, 
the common market organisations (CMOe) have little In common. 
The cereals regime is based on maintaining prices to producers 
through a high level of protection at the border, intervention 
purchasing at guaranteed prices and export refunds to bridge the 
gap between the Community and world market prices. The oilseeds 
and protein regimes are essentially deficiency payments to the 
industry reflecting the difference between the price paid to the 
producer and the world price level. A system of guaranteed 
thresholds with a reduction in the guarantee when production 
exceeds spec fled quantities applies in both cases. 
In the absence of reform cereals production would almost 
certainly exceed the guaranteed threshold (160m tonnes without 
counting the five new Lander) in most years, giving rise in turn 
to additional coresponslblIity levy and price cuts annually of 
3%. 
Production of oilseeds is normally in excess of the guaranteed 
thresholds and can give rise to sharp price reductions eg. of 
15.5%, 21% and 30% for rape, sunflower and soya respectively in 
1990/91. 
6. Following the conclusions of the GATT "Oilseeds Panel" the 
Community has committed itself to reform the oilseeds regime. 
As the cereale sector Is affected also by serious and growing 
problems (surplus production and growing use of substitutes), 
the Commission proposes to reform all the sectors concerned. 
This should bring about a more coherent policy for the major 
crop sectors. Given that these products are major Inputs for 
milk and meat production, the reform has important implications 
for the livestock sector. 
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B. Reform Proposals 
1. Common Market Organisations and Institutional Prices 
a. Cereals 
a.1) The basic principles and instruments of the common market 
organisation for cereals will be maintained. The target price 
will be TOO ECU/t, that Is some 35% below the existing average 
buying-In price for cereals. 100 ECU represents the expected 
world market price on a stabilized world market. The 
intervention price will be 10% below, and the threshold price 
10% above, the target price. 
a.2) These prices will apply to all cereals. A special corrective 
factor will be introduced for rice in order to provide an 
equivalent system. 
a.3) The existing stabiliser arrangements, including co-
responsibility levies and the maximum guaranteed quantity, 
will be withdrawn once the new market organisation comes fully 
into effect. 
b. Oilseeds and Protein Crops 
b.1) As outlined below (see points 2.b and 2.c) support for oilseeds 
and protein crops will be provided fully In the form of a 
standardised compensatory payment system with per hectare aids 
paid direct to the producer. In this context, the traditional 
institutional prices will no longer apply. A reference price 
for the world market will be established for the purpose of 
calculation of the compensatory payments. 
b.2 In line with the requirements of the reformed market 
organieation, new market management Instruments will be 
developed by the Commission to facilitate the orderly marketing 
of each crop. For oilseeds, these will be set out in the 
Commission proposals which will be tabled before the end of the 
month (see transitional arrangements, point C.2 below). 
b.3 The current Maximum Guaranteed Quantities and their associated 
stabilizer mechanisms are based on the traditional system of 
institutional prices. These mechanisms should expire with the 
full implementation of the new common market organization. 
2. Introduction of a System of Compensatory Payments 
A system of compensatory payments will be introduced for existing 
holdings to compensate the loss of income caused by the reduction of 
institutional prices. The payments will be on a per hectare basis 
and will not be related to current levels of output. Participation 
in the aid scheme will be voluntary. 
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a. Cereals 
a.1) The income loss for cereals will be the difference IT 55 ECU/t 
between the new target price of 100 ECU/t and U., current 
average buying In price of 155 ECU/t. The compensatory payment 
will be reviewed periodically to take into account the 
development of productivity as well as expected developments on 
domestic and world markets. 
a.2) For the purpose of establishing the aid to be paid per hectare 
each Member State will draw up a régionalisation plan for its 
territory which must be approved by the Commission. For each 
region a historical three year average yield will be 
calculated; this will be based on the average of three of the 
last five marketing years (1986/87 to 1990/91), ie after 
eliminating the lowest and the highest figure. This regional 
average yield will be the basis for translating the compensatory 
payment into a regional per hectare aid (regional average yield 
in tonnes/ha x 55 ECU/t). 
When drawing up the régionalisation plan, specific structural 
characteristics that influence yields (soil fertility, 
irrigation...) should also be taken Into account, in order to 
define more homogenous sub-regions ana zones. 
a.3) All reliable statistical data aval I able should be used for the 
purpose of drawing up plans. It Is to be expected that the 
weighted average of regional (or cub-regional) yields in this 
plan should be comparable to a national reference amount 
calculated according to the same procedure on the basis of a 
national average yield. The weighted average of tho national 
average amounts should correspond to the Co:.«mmity average. 
As an illustration of what the system may give, the three year 
average yield for the Community has been calculated at 4.6 t/ha. 
The indicative Community reference amount would therefore be 253 
ECU/ha (4.6 t/ha x 55 ECU/t). 
a.4) A special aid for durum wheat of 300 ECU/ha will be paid as a 
supplement in the traditional production zones as currently 
defined. This would fully compensate durum wheat producers in 
these regions for the income loss due to alignment on the 
reduced price for other cereals. 
a.5) The compensatory cereals aid per hectare and the special aid for 
durum wheat will be paid during the first half of the marketing 
year. 
b. 0U seeds 
b.1) For the purpose of calculating the aid for oilseeds a Community 
reference amount will first be determined. It will take 
account of two elements: 
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- a reference price for the world market, corresponding 
to the expected medium term equilibrium price on a 
stabilized world market; this price Is estimated at 
163 ECU/t; 
an estimated equilibrium price relationship between 
oilseeds and cereals ie which would not provide a 
particular incentive to opt for one crop as opposed 
to the other. 
Taking a relationship of 2.1:1, for Illustrative purposes the 
Community reference amount for the oilseeds aid would be set at 
384 ECU/ha based on a Community average yield for oilseeds of 
2.36 t/ha. 
b.2) At a second stage the Community reference amount will be 
regionalised for each region identified In the régionalisation 
plans presented by the Member States (see point 2.a.2 above). 
The calculation of the aid for oilseeds and Its régionalisation 
is illustrated in Annex I. 
b.3) The aid will be the same for all oilseeds. 
b.4) The aid for oilseeds will be paid In two parts. The first part 
is paid in advance on the basis of area cultivated and on 
condition that the crop Is under contract to an approved buyer. 
The second part will be paid as a complement at the end of the 
marketing year and will take account (with a franchise to be 
determined) of the evolution on world market prices as compared 
to the reference price. Where the crop Is not under contract, 
the whole aid (basic amount plus variable supplement) will be 
paid at the end of the marketing year. 
b.5) As foreseen in the Treaties of Accession special provisions 
will continue in the case of Spain and Portugal notably In 
relation to sunflower seed, until the end of the transitional 
period i.e. the end of the marketing year 1995/96. 
b.6) Should acute regional imbalances arise as a result of the 
operation of the new arrangements the Commission will t&ke the 
necessary remedial measures. 
c. Protein Crops 
c.D The aid for protein crops will be fixed initially at the level 
of the cereals aid and regionalised on the same basis. 
c.2) The same level of aid will apply to all protein crept, other 
than dried fodder where the aid Is being withdrawn, 
c.3> The aid will be paid in two parts under the same conditions as 
for olI seeds. 
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3. Simplified Aid Scheme for Small Producers 
This approach will facilitate administration ard control. It does 
not confer a particular entitlement to compensatory paymentG, which 
apply to all producers irrespective of size. Small producers in this 
scheme are exempt from the set-aside obligation. 
a) pofinmon of email producers 
It is proposed that small producers be defined on the basis of an 
area equivalent to annual production of not more than 92 tonnes of 
cereals. On the basis of average Community cereals yields this 
corresponds to a holding of 20 ha. The yield averages for cereals in 
the different regions, sub-regions or zones, which have been defined 
In the régionalisation plans for the aid (see point 2.a.2 above), 
will be used to determine eligibility of individual producers. 
The limit defined for each region would refer to the combined area 
under cereals, oilseeds and protein crops. 
Producers who do not fall under the definition of "small producers" 
are considered to be "professional producers". However it is open to 
a small producer to opt for the professional scheme (see point 4 
below) should it be to his advantage. 
An illustration of how a small producer Is defined is in Annsx II. 
b) Operation of the small producers scheme 
b.1) Small producers can benefit from a simplified aid scheme, 
subject to accepting certain administrative procedures to 
faclIitate control. 
b.2) In the framework of the small producer scheme, the 
(regional ised) cereals aid will be paid on a per hectare basis 
for the area under cereals, oilseeds and protein crops, 
independent of the mix of crops sown. 
b.3) There are no set-aside requirements under this scheme. 
4. Aid Scheme for "Professional" Producers 
In order to benefit from the compensatory payments described under 
point 2. above, those who do not qualify as small producers (as well 
as small producers who opt to do so) can take part In the scheme for 
professional producers. 
a. Supply control reauIremonta 
a.1) Every farm participating In the scheme must set aside a pre­
determined percentage of its area under cereals, oilseeds and 
protein crops. For environmental reasons, the set-aside should 
•bs organized on the basis of a rotation of surfaces and the land 
seî LI!L: viould have to be cred for so as to meet certain 
minimum environmental standards. 
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a.2) The set-aside requirement would be fixed Initially at 15%. it 
would be re-examined on a yearly basis to take account of 
production and market developments. 
a.3) The areas set aside as temporary fallow can also be used for non 
food purposes provided effective control systems can be 
applled. 
b. Compensation for set-aside 
b.1) Participants in the "professional" scheme will receive limited 
compensation for the obligation to set-aside and for keeping 
set as I de land In an environmentally acceptable condition. The 
amount of the compensation for the area set-aside will b© the 
equivalent of the compensatory aid per hectare for cereals 
calculated at the regional level. 
b.2) The compensation will apply to the set-aside obligation I.e. 15% 
applicable to an area equivalent to production of up to 230 
tonnes of cereals. On the basis of the Community average 
cereals yield, 230 tonnes Is the equivalent of 50 ha. Thie? 
means that each participating farm of 50 hectares or over would 
receive compensation for 7.5 of the hectares set-aside. 
Participating farms of below 50 hectares would reçoive 
compensation on a proportionate basis, unless of course they 
qualify as small producers In which event no set-aside 
obi igation applles. 
The yield averages for cereals in the régionalisation plans will 
be used to determine the upper area limit for compensation for 
set-aside at the corresponding regional level, 
The limit for compensation applies to the sum of the areas under 
the three crops. 
c Transition 
1. Cereals 
The reduction In Institutional prices and the introduction of 
compensatory payment system would be carried out in three 
ses: 
First phase : beginning from the first market inci y^-ar ©f 
implementation of the reform. The new target prl^c i. c/^fr^a 
price for the calculation of the aid) will ka I3fl F£Vt. Jfri 
GCMpcnastory payment will b® 30 ECU/t. This Cwr;*-, ;- ft". Ic an 
&lù of about 138 ECU/ha on the basis of *V~'in£*y ' >;->;\igs 
ceroals yi©ld. 
Second . Phase- : the second marketing y@ar of : ... .s * ;<j>- of 
the roform. Tho target prie© will be reduced 'T T'l *- "«c 
compensatory payment will be fixed provisional J: .. 4C JC;P*. 
This sorresponse to an aid of about 207 EUJ/>>;. cr« ihfj s-kJ» of 
Community cvera-je cereals yield . 
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Third phase : beginning from the third marketing year of 
implementation of the reform. The target price will be reduced 
to 100 ECU/t. The compensatory payment will be fixed 
provisionally at 55 ECU/t. This corresponds to an aid of about 
253 ECU/ha on the basis of Community average cereals yield. 
The set-aside compensation will be calculated on the basis of 
55 ECU a tonne multiplied by the regional cereals yield and will 
be paid In full from the first phase. 
2. Oilseeds and Protein Crops 
The reform will be Implemented In one step in the first 
marketing year of Implementation of the reform. However, In 
order to comply with commitments by the Community In connection 
with the oilseeds panel, a transitional scheme will be proposed 
before 31 July 1091 for oilseeds. This scheme will contain some 
of the features of the reform, and will cover the period from 
the 1991 sowings (for the 1992/93 marketing year) to the date of 
implementation for the reform. The transitional scheme will 
be based on direct compensatory payments to producers with 
appropriate safeguards to ensure production remains under 
control. 
3. General 
The new mechanisms proposed should be effective In bringing 
about a significant reduction in production leading to better 
market balance. In practice this will mean that existing 
stabiliser mechanisms will become redundant. The Commission 
will keep these aspects under continual, review with a view to 
ensuring that the mechanisms in place achieve the results 
required. 
While the Commission believes that a transitional period could 
be useful in enabling Member States and producers to adapt to 
the new system, it draws attention all so to the substantial 
benefits that would derive from the immediate application of the 
new cereals arrangements in line with the approach to oilseeds. 
This is an aspect that can be kept under review in the course of 
the negotiations. 
D. General rules for cereals, oilseeds and protein crocs 
1. The aid will be paid once a year for a given area, whatever the 
crop. Areas previously not cultivated will not be eligible for 
aid, with the exception of an area that, has been set aside In 
previous years under the existing voluntary set aside 
arrangements. No aid will be granted for a second crop 
following or proceeding the main one. 
2. The aids for cereals, oilseeds and protein crops and the aid 
regime foreseen in the framework of the new agri-environmental 
programme (see part 2 - page 33) are complementary. Where aids 
are being provided and in the case of production for non-food 
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use on land set aside as temporary fallow, participants wiH be 
reminded of the need to respect existing environmental 
legislation. 
3. The new arrangements proposed will replace the existing 
voluntary 5 year set-aside scheme. However, suit stile 
transitional arrangements will be made to protect the pcsition 
of producers who have taken commitwenIs under th® present 
scheme, and to ensure that they are not at my financial 
disadvantage compared to aid available under th® new 
arrangements. A system of longterm set aside will remain as 
part of the agri-environment arrangements and an equivalent 
measure will apply for the purpose of afforestation. 
E. Sugar 
The Commission will review the sugar regime In the light of the 
reform of the arable crops sector and in connection with 
proposals on the future of the existing regime which expires at 
the end of 1993. Account will be taken also of the Cofismunlty't 
international commitments especially in relation to the ACP 
countries. 
F. Evaluation 
1. The proposed regime for arable crops Is a radical departure from 
existing arrangements. In future the guarantee t© the fermer 
will no longer relate primarily to th© volume produced. At farm 
level the reduction In prices, for which farmers will b* fully 
compensated, will bring about significant change;» in tho 
relationship between input prices (fertilisers âncj p?sti?l<fc«) 
and the price of th© product. These change"; LIKHIIC» lead 
progressively to benefits to th© environment thrctçh s ï^**seriiiv^, 
of Intensification and to lower production. In the r^ic-r* lorw, 
reduction in production will b© achieved through sot ©fïïdc. I'm 
annual set as id* requirement will be adjusted In ih& I lgh>. -rf 
the market situation and having regard t© th& development of 
production in the Community. The mechanism pr&p«o:!@d çhwi the-
Community a flexible and guaranteed instrument for Influencing 
overaiI output. 
2. Having a significant psrt of their annual Income &^!5»"to ».»< Q ii 
advance gives farmers greater certainty, stability and security. 
j. As regards use of cereals in animal feed the gradual decline 
should be arrested and there should indeed be a greater take-up 
once the reform is implemented. It Se to be aipsetsd that th® 
'price of cereals substitutes will fail also though not to s 
point to offset the benefits from th© substantif^ Ijoprovemsnt to 
fee brought about In the competitive position of cereals. 
4. Lower cereals prices should benefit producers of plgms-st and of 
poultry and egg®. In the case of milk and beef producer®, the 
benefits will vary depending on the use of cereals and 
concentrates in animal feed. The wide variation in the degree 
of utilisation of these inputs, together with concern for the 
- 16 -
environment has led the Commission to propose increased aids for 
extensive farming practices since the farmers concerned will 
derive limited benefit from lower cereals prices. 
5. The consumer should benefit also from the changes proposed as 
cereals Is a key ingredient in most staple foods and the knock 
on effects In the livestock sector should lead to lower prices 
also for meat and milk. 
6. Production restraint on the part of the Community especially If 
matched by other major world suppliers, should contribute to a 
better balance on the world market and to improving prices 
generally. 
7. In the case of oilseeds the new arrangements conform to the 
conclusions of the "soya panel" and provide also greater 
simplification and clarity. 
8. The limited success of the non-food policy to date can be 
attributed In large part to the high cost of raw materials for 
this purpose. Bringing this cost to world market levels 
together with the facility to produce for non food use on set 
aside land should help to open up new opportunities for non-food 
production, including energy related products. 
9. As regards the budgetary aspect, since part of the cost of 
supporting cereals will be transferred from the consumer to the 
Community budget, agricultural spending for the sector will 
Inevitably increase in the short-term. This increase will be 
partly offset by : 
the expected decrease In production as well as increased 
demand In the cereals sector Itself; this should have the 
effect of reducing Intervention and export refund costs. 
savings in other sectors (livestock and processed products) 
where, following the reduction In Input prices, 
expenditure on market supports can be reduced In 
consequence. 
- 17 -
II. Tpfraçço 
A. Overview 
Some 200 000 holdings with an average production area of 
1 hectare each are producing annually around 400 000 tonnes of 
tobacco In the Community. Production takes place mainly In 
Italy (49%), Greece (31%) and to a lesser extent in Spain (10%), 
France (7.5%), Germany, Portugal and Belgium (3.5%). 
Overall consumption in the Community stands at 600 000 tonnes of 
which 64% is imported. Therefore out of an annual 400 000 
tonnes of Community production, 220 000 tonnes are consumed 
Internally and 180 000 tonnes or 45% are exported. 
General health concerns combined with shifts in taste among 
smokers have induced a preference for light, less toxic 
varieties (flue cured tobacco). This trend, coupled with 
sharp Increases in production of some varieties without any 
outlet, have lead to structural imbalances in the market 
resulting in increased budget expenditure and growing 
intervention stocr.s (currently around 100 000 tonnes). 
Tobacco imports are GATT bound and not subject to any Import 
levy. Community support should be essentially a deficiency 
payment type for 34 different varieties, consisting of per 
kilogram premiums paid to first processors responsible for 
baling tobacco leaves bought from producers under certain 
conditions. However, over the years the premium has lost its 
character of a deficiency payment; this development Is 
reflected also in the Introduction of export refunds and 
intervention. 
B. Reform proposals 
1. Premium system 
a. The 34 varieties produced In the Community will be 
regrouped Into: 
5 groups of varieties according to the type 
of curing; 
3 "Greek" varieties that are distinctly 
different. 
b. A single premium per group of varieties will be Introduced. 
c. In the context of cultivation contracts between first 
processors and producers a bonus of 10% can be added to the 
premium If the cultivation contracts are signed with 
producer associations. In order to Improve the quality of 
the tobacco delivered, the producer association can apply a 
"bonus-malus" coefficient both to the premium and to the 
association bonus. 
- 18 -
d. A Control Agency will be established, financed by an 
advance deduction from the premium. Controls will come 
into force when the tobacco is delivered by the producer to 
the first processor. The Agency will control the payments 
of premium and could perhaps have a role also in the 
administration of the quota system to ensure that producers 
are treated In an equitable way. 
e. The establishment of Inter-branch organisations will be 
authorised in order to streamline contacts through the 
production and marketing chain (producers, first 
processors, tobacco industry). 
2. Quota System 
a. A system of production quotas per group of varieties will 
be introduced at Member State level. Total quota level 
will be reduced significantly to become 340.000 tonnes and 
no premiums will be payable for production beyond the quota 
level. The quotas will be distributed between the 
producers/producer groups or as the case may be the 
processors, as a general rule on the basis of the average 
quantities produced or processed over the past three years. 
However, adjustments will be made to take account of the 
sharp increase in poorer quality varieties during the 
period, In order to ensure that production of the more 
marketable varieties Is not reduced. Community rules will 
be introduced to ensure equitable treatment of producers 
where quotas have to be operated through processors. 
3. Other measures 
a. Support to the producers will be assured by means of the 
premium. Intervention and export refunds should be no 
longer necessary. 
b. A research programme will be launched to further develop 
and Identify less toxic varieties of tobacco with a low tar 
content. The programme will be financed by a deduction 
from the premium, to be matched by direct Community 
funding. 
c. An important conversion programme for Tsebella and Mavra 
varieties will be funded. 
c. évaluation 
The set of measures proposed will be effective In reducing 
production and in adjusting supply to varieties in demand. At the 
same time the role of producer associations In market management will 
be strengthened and the Control Agency will play an Important part In 
overseeing the proper disbursement of expenditure. 
As long as demand for tobacco exists it is reasonable that the 
product should be supplied ar^f supported at producer level in the 
Community. Apart from the market aspect , the socio-economic p©slts«»n 
- 19 -
of tobacco producers, who are located In the least developed parts of 
the Community and have few economic alternatives, requires that 
worthwhile support continues to be available. On the other hand the 
emphasis In the support system must be on encouraging variât les, 
usually of low yield, that can find a place in the market. 
Research programmes to develop less toxic varieties and an effective 
conversion programme must be pursued vigorously. 
- 20 -
-in. ..jam 
*•• WBÊÊSLJLJJBL 
There ere seme 1.5 million farmers In milk production in the 
Community with 9tn average 16 milk sows per holding. Three 
quarters of farms produce lass than 100,000 kg a year. Less 
than 15% of farms have annual production of over 200,000 kg but 
account for nearly half of the Community's milk output. 
Milk yield per cow has been Increasing by 1.5% a year and the 
Community average currently stands at some 4700 kg. With a 
total dairy herd of 24.5 mio cows (Including the five new German 
lander) the Community's productive capacity Is some 115 mio 
tonnes. 
Milk production has not declined by as much as necessary to 
maintain market balance. This is partly due to the attribution 
of new quotas to SL0M producers, partly to the re-distribution 
in 1990 of part of the quotas frozen In 1988, and partly due to 
some exceeding of current quotas. 
On the demand side, butter consumption is decreasing 
continually. Despite this decrease, consumption of milk and 
milk products (including consumption due to special subsidized 
disposal measures) is expected to stabilize globally at Just 
under 99 mio tonnes, leaving an excess over internal 
requirements of over 15 mio tonnes. In the absence of the 
special internal disposal measures (costing over 2 bio ECU in 
1991), the potentiel milk surplus would amount to 25 mio tonnes. 
With an almost constant share of around 50% of world market 
trade in dairy products but with a less f our able development 
of world demand (dropping from a high of S3 mio tonnes in milk 
equivalent in 1988 to 26.8 mio tonnes in 1990) the Community's 
stocks of butter and milk powder have been building up again and 
currently stand at over 900,000 tonnes. 
For the medium term, internal consumption is expected to remain 
at best stable, whereas export prospects. In particular for 
butter, are not promising. Under these circumstances, the 
quota reduction of 2% decided In the 1991/92 price package will 
not be sufficient to avoid a further Increase In intervention 
stocks. A further reduction of at least 3% la considered 
necessary to avoid such Increases. 
B. Reform Proposals 
1. Quota system 
The quota regime which expires in 1992 will be extended. 
- 21 -
a. Quota reduction and re-distrIbut Ion 
a.1) In addition to the 2% reduction decided in tha 
1991/92 price package, the global quota will be 
reduced by a further 3%. 
a.2) This cut will be achieved by a 4% cut In individual 
reference quantities. However Member States will 
be required to set up a special cessation scheme open 
to all producers with a view to creating a milk pool 
so that small and medium sized producers (producing 
less than 200,000 kg a year) will have the 
opportunity of avoiding a cut In quotas. The 
voluntary cessation scheme will be on attractive 
terms with co-financing by the Community, up to an 
annual amount of 17 ECU per 100 kg for each of the 3 
years. The premium system will be administered by 
way of guaranteed bonds, as described under point b.2 
below. 
a.3) Member States will re-distrIbute 1% out of the 4% cut 
in individual reference quantities to special 
categories viz: 
extensive dairy holdings in mountain areas; 
extensive dairy holdings in other less 
favoured areas where milk production plays an 
important role in the agricultural economy 
and where little alternative exists. (The 
areas will be selected by Member States and 
presented in a re-dlstribution plan to be 
approved by the Commission.]) 
Redistribution may take place also according to other 
priority criteria (e.g. extensive holdings outside 
less favoured areas; young farmers; producers with 
high quality products for direct marketing, 
participants In an agri-environment programme etc) as 
identified in the re-distrIbution plan. 
b. Compensation for the ouota reduction 
b.1) Farmers whose quotas are reduced, will receive an 
annual compensation of 5 ECU per 100 kg ov9r a period 
of 10 years. Member States can add a national 
suppIement. 
b.2) The compensation arrangements wis s be operated 
through a bond issued to the farmers concerned, on 
the basis of which the Community would sssks annual 
payments over Its life-time (10-years). The farmers 
cou Si choose to keep the bond and receive the 
associated annual payments, or could s©§§ it on the 
private market. 
- 22 -
c. Voluntary buy-up programme 
Once the new quota arrangements are In plsct- Member 
States would be free to continue tfc# buy-
up/redIstrIbution scheme on a voluntary bcois. 
Farmers would then be able to sell quotas to rational 
authorities and In exchange to receive i^onds 
(guaranteed by the Community and by the Bsmber 
State). This would allow quota reserves to be built 
up on an ongoing basis. The reserves could be used 
to re-dlstribute milk to priority farmers (as 
identified under point a.3) above or otherwise dealt 
with having regard to the market situation at the 
time. 
The programme would be co-financed by the Community 
at a rate of 50% and up to a maximum annual amount 
of premium of 2.5 ECU per 100 kg over 10 years. 
2. Prices and Prwila 
a. Institutional prices for dairy products will 
be reduced by 10% (15% for butter and 5% for 
skimmed milk powder) to take account of, 
inter alia, the reduction of production costs 
following the price decrease for cereals and 
concentrates. 
b. Since the price decrease for Inputs will 
mainly benefit Intensive milk production, an 
annual dairy cow premium (75 ECU) will be 
introduced to avoid penalising the producers 
concerned and to encourage extensive dairy 
farming. The premium will be paid for the 
first 40 cows In every herd on condition that 
the following stocking rates are fully 
respected: 
less favoured areas : 1.4 LU per hectare 
of forage. 
other areas : 2 livestock units (LU) per 
hectare of forage; 
For the purpose of complying with the 
extensifloat Ion criterion, the numbers of 
dairy cows, suck 1er cows, male bovines and 
ewes , will be taken Into account. 
c. Payment of premium to producers with annual 
deliveries of less than 24.000 litres would 
not be subject to the stocking rate 
requirement. 
d. The milk co-responsibility levy (currently 
payable outside less favoured areas at a rate 
- 23 -
of 1.5% of the target price tor over 60.000 
litres and 1% up to 60.000 litres) will be 
withdrawn. 
A Community programme for the promotion of 
dairy products will be established. It will 
be co-financed by producers, market operators 
and the Community. A levy on sales to 
intervention will provide part of the 
financing. 
c. Transition 
1. The reduction In quotas will take place In three steps : 2% 
reduction, of which 1% may be re-dlstrlbuted, from the beginning of 
the first marketing year of the reform, and 1% (without re­
distribution) from the beginning of each of the following two 
market ing years. 
2. institutional prices will be reduced in three steps: 4% reduction (6% 
for butter and 2% for skimmed milk powder) from the beginning of the 
first marketing year of the reform, 3% (4.5% for butter and 1.5% for 
skimmed milk powder) from the beginning of each of the following two 
marketing years. 
3. The new dairy cow premium will be introduced In three equal steps of 
25 ECU per cow from the beginning of the first marketing year of the 
reform. The stocking rate conditions apply fully from the beginning. 
4. The milk co-responsibility levy will be withdrawn from the beginning. 
D. Evaluation 
1. A quota system by definition implies that production under quota 
should bear a close relationship to disposal opportunities. Despite 
a 2% reduction in quotas agreed as part of this year's price package, 
existing levels of expenditure (over 6 billion ECU this year) and the 
build up of intervention stocks requires further corrective action. 
The degree of action required must take account of the consequences 
for the beef sector where prices are already weak. Hence, the 
gradual approach suggested. The rate of aid and payment method for 
the cessation programme I.e. through bonds will provide an attractive 
opportunity to milk producers who wish to leave the industry on a 
voluntary basis. Where producers have to accept a cut In quotas 
full compensation will be available. 
2. The redistribution arrangements proposed in order to avoid, where 
possible, quota cuts for farmers with less than 200.000 kgs are 
designed to maintain the output of small to medium sized farmers -
covering some 90% of total dairy producers - thereby encouraging 
greater economic and social cohesion. 
3. The permanent buy up programme, 50% of the costy of which are met by 
the Community, Is designed to provide a mechanism for enabling milk, 
- 24 -
coming available regularly from producers wishing to cease 
production, to be redistributed to priority categories or otherwise 
disposed of in the light of market requirestants. 
4. The buying up and redistribution arrangeants apply at the level of 
the Member State. This should meet fuily any concern that these 
reforms might have lead to the overall quotas In Member States being 
altered. 
5. The approach to price reductions for sal Ik Involves larger price cuts 
for butter due to the difficulties of maintaining Its competitive 
position. 
6. The cow premium is introduced to provide encouragement of extensive 
based production systems which would otherwise Incur price cuts for 
milk but with little corresponding benefit by way of reduced prices 
for inputs. While the stocking rates system proposed as a condition 
for eligibility for premium is strict, in that beyond these levels 
no aid is payable, environmental considerations require that farmera 
be actively encouraged to accomodate themselves to more extensive 
systems. 
- 25 -
IV. Beef 
A. Overview 
Cattle (beef and dairy) rearing which takes place on 2.6 mio 
holdings with 32 animals on average accounts for about a third of 
total farm production in the Community (beef/veal 15%: milk 17%). 
The vast majority of farms (between 80 and 90%) have less than 20 
beef cattle and account for 45% of beef output. Many farms are 
involved In both beef and milk production, 
After reaching a trough in 1989, beef production is In the upward 
phase of the production cycle. Output Increased by 6.3% In 1990 to 
7.927 mio tonnes and is expected to Increase further this year to 
8.040 mio tonnes (8.349 mio tonnes including the five new German 
lander). Several factors have influenced a rapid resumption of 
output eg the switch to beef production on dairy holdings, a rise in 
slaughterweights due to the switch from veal to beef, and increased 
imports of calves, in particular from Eastern Europe (now subject to 
the safeguard clause to prevent market disturbance). The new 
reduction in milk quota decided In the 1991/92 price package will 
again increase slaughterings and may aggravate the situation. Hence 
the phased approach to further milk quota reductions. 
At the same time Internal consumption and external demand have 
weakened as a result of several developments related to changing 
consumer preferences and difficulties in third country markets. 
Intervention stocks have risen to a level of some 750,000 tonnes. 
Budgetary costs for this sector have increased rapidly over the last 
two years and now exceed 4 billion ECU annually. 
B. Reform Proposa I a 
1. Prices and Premla 
a. The Intervention price will be reduced by 15%. Of 
this price cut, 10% reflects the lower prices for 
Inputs and the remaining 5% Is considered necessary 
to maintain the competitive position of beef. 
b. In order to compensate for the loss from this price 
reduction for more extensive beef producers, who 
will not be in a position to profit from the 
decreases in the price of cereals and concentrates, 
the current special premium for male bovines will be 
Increased to 180 ECU per animal. The premium will be 
for the first 90 animals of every herd in three 
annual payments of 60 ECU during the life of the 
animal: ie between 8 and 9 months, between 18 and 21 
months and between 30 and 33 months. 
c. The annual suck 1er cow premium will be increased to 
75 ECU per cow (with, as at present, the 
possibility of a national supplement of up to 25 
ECU). As In the case of the b@ef pr@nHum3 the aid 
- 26 -
will be limited to the first 90 animals of every 
herd, and will be paid for beef or dual purpose 
(beef/milk) breeds only. 
d. Extens If Icat Ion criteria will be Introduced for the 
special premium for male bovines and the suck 1er cow 
premium. Payment of premium Is on condition that the 
following stocking rates are fully respected: 
- less favoured areas : 1.4 LU par hectare of 
forage area. 
- "other" areas: 2 livestock imita (LU) par 
hectare of forage area; 
Dairy cows, suckler cows, male bovines and ewes will 
be Included In the calculation of the stocking rate. 
2. special Piaposal scheme for Youna Male Cal yea from Palrv 
Herde 
The Commission will closely monitor the evolution of the 
calf herd with a view to early Identification of 
developments that could lead to surplus production later. 
In this connection a processing/marketing premium will be 
introduced for the early disposal of young (8/10 days) male 
calves from dairy herds. The premium will be fixed 
initially at 100 ECU a head. 
3. promotion Proaraiffne and Controls 
A special Community promotion and marketing programme for 
quality beef will be launched. Thla programme will be co-
financed by producers, the Industry and by the Community. 
A levy on sales to Intervention will provide part of the 
financing. In addition, a programme will be established to 
give reassurance in relation to the absence of hormones and 
other forbidden substances from beef production. 
4. Transition 
a. Pries reductions will be Introduced In three equal 
steps of 5% beginning from the first, second and 
third marketing yeara of implementation of the 
reform. 
b. The special premium for mala bovines will be phased 
In In three steps aa fol Iowa : 
first step beginning from the first 
marketing year of the reform, a premium of 40 
ECU par animal will be paid - under the 
conditions act out under point 1 above - for 
each animal of 6-9, 18-21 and 30-33 months. 
- 27 -
Second step beginning from the second 
marketing year of the reform; the premium la 
Increased to 50 ECU par animal. 
Third step beginning from the third 
marketing year of the reform, the premium is 
Increased to 60 ECU per animal. 
c. The tUCKIer COW Premium will be phased In In three 
steps as follows: 
First step: beginning from the first 
marketing year of the reform, the premium 
will be Increased to 55 ECU (plus existing 
supplement) par cow, limited to the first 90 
animale of a herd and paid only for cows of 
beef and dual purpose breeds. 
Second and third steps : beginning from the 
second marketing year, the premium will be 
Increased to 65 ECU (plus existing 
supplement), per cow and beginning from the 
third marketing year 75 ECU per cow. 
d. The stocking rate requirements will apply from the 
beginning of the fI rat marketing year of the reform. 
c. Evaluation 
1. The reform proposals are intended to reduce beef production by 
a) providing a mechanism is the calf disposal scheme, to 
regulate a source of supply and b) encouragement of extensive 
production through increased premla but with the Introduction of 
strict stocking limits. 
2. The reduction In institutional prices should help maintain the 
competitive position of beef In the face of additional cost 
reductions available to the plgmeat and poultrymeat sectors as a 
result of the fall In the price of feedingstuffs. 
3. Effective support prices for beef have been reduced continually 
over the last decade. The changes proposed should help beef 
consumption to recover. Much depends on the prospects for 
restoring consumer confidence; hence the proposal for a 
promotion programme and greater guarantees about the quality of 
the product. The situation as regards key third country 
markets is an essential factor as is the need also to maintain 
Community preference. 
4. The headage limita proposed for premium purposes are consistent 
with the limit already In application for the purpoaa of the 
existing beef premium Is 90 animals. 
- 28 -
V. Sheeomeat 
A. Overview 
There are around one million farms raising sheep in the Community. 
70% of the flock is in less favoured or mountainous areas. Half of 
the holdings have less than 50 awes. 
Sheep numbers have Increased rapidly in recent yaara, e.g. by some 10 
million head from 1987 to 1990 and now axcaed 100 million head. 
Since then the flock size has stabilized, but production has 
continued to rise, although at a decreasing rata (6.6% In 1990 and an 
estimated 1.3% In 1991). Consumption haa also increased but at a 
lower rate. Against thla background the dagraa of self sufficiency 
has risen steadily to around 83%. 
Support in this sector la of the deficiency payment type, paid 
through a ewe premium which compensates the farmer for fluctuations 
in market prices. Increasing production and low market prices in 
recent years have led to a rapid Increase in spending In this sector 
viz to a level of 2.3 bio ECU In 1991. 
B. Reform Proposals 
1. A limit, based on the producer's reference flock, will be 
applied from the first year of the reform to the number of ewes 
eligible for premium. The reference flock will be the number of 
eligible ewas in the year 1990. 
The reference flock cannot however exceed 750 owes In less 
favoured areas and 350 elsewhere. Ho premiums are paid for ewes 
In excess of the reference flock. These requirements will be 
introduced in three steps as follows: 
beginning from the first marketing year of the reform, the 
limits will be 920 for the less favoured areas and 450 
elsewhere, with 33% of the premium being paid for eligible 
ewes in excess of these limits. 
from the second marketing year of the reform, the limits 
will be 830 for the less favoured areas and 400 elsewhere 
with 17% of the premium being paid for eligible ewes In 
excess of these limita 
from the third marketing year of the reform, the new limits 
of 750 and 350 will apply, with no premium payments in 
excess of these limits. 
To simplify the scheme no specific criteria for "eliolble" ewes 
wiII be applled. 
2. The existing supplement (currently 5ft ECU per awe) to the awe 
premium In less favoured areas will be maintained. 
- 29 -
c. Evaluation 
1. The political aensltlvlty of this sector and the comparatively 
recent (1989) reform of the market organisation placée limita on 
the options for reform of what la a complex and relatively 
costly regime. The key requirement Is to reduce production 
within the Community, maintain Community prafaranca, and raatore 
market prices. 
2. The double celling to the premium, la based on the Individual 
producer'a rafaranca flock In 1990 and the reduction In the 
overall maximum limit to 750 and 350 ewes In the laaa favoured 
and normal ragIone respectively, does bring about a fair 
balance between producers and should prevent further expansion 
of flocks. There may be acme Increase In slaughterings In the 
ahort term as producers reduce numbers from 1991 levels. 
Production and expenditure should stabilise subsequently aa the 
market recovers. 
3. Ths proposed éliminât ion of the specific criteria for "eligible" 
ewes should simplifyadministration of the new regime. 
- 30 -
VI. Other Common Market Organizations 
The reform envisaged covers some 75% of the Community's agricultural 
output in value terms of products subject to the common market 
organisations. The principal areas not covered at this atage are 
olive oil, augar, fruit and vegetables and wine. As regards these 
sectors, ths Commission believes that it la not opportune to re-open 
debate where recent dec la ions have been taken ag the comprehensive 
reform of the olive oil regime in *90 and on the augar regime In 
1991. 
It Is proposed to terminate the dried fodder aid regime - which has 
experienced uncontrolled axpanaion of production and a corresponding 
explosive Increase in expenditure In recant yaara - at the and of the 
three year imp lamentât Ion period for reform In tha cropa sector. 
The Commission is alao preparing a proposal for the adaption of the 
common market organization for wine which will be praaented before 
the end of 1991 . The technical complexities Involved require that 
this proposal should be pressnted and examined aeparately. Pending 
the reform of the aector the below average level of recent harvests 
and ths grubbing up arrangements now In operation should kesp 
expenditure under control. 
As for fresh fruit and vegetables, the ax fating stabiliser 
arrangements Involving intervention thresholds with the reduction In 
basic and buying-in prices In the event of the threshold being 
exceeded, have been successful In bringing production and axpandlture 
under control. At thia atage there are no substantive reasons for 
modifying the regimes. 
The regime for processed fruits and vegetables ara alao aubjact to 
stabilisation mechanisms Involving cuts In production aid where 
guaranteed thresholds are exceeded; In the case of processed 
tomatoes a quota system applies. The current arrangements have been 
successful alao In their objectives and accordingly no changes are 
envisaged at thia atage. 
The Commission is aware that substantial changes In particular 
regimes can havs unforeseen effects In other sectors and that In the 
interest of coherence It may be necessary at a later atage to propose 
changes in regimes not Included In thaae proposals. This Is an 
aspect that it will keep under continual review having regard to the 
development of negotiations on the reform. 
VII. Management and Control 
The introduction, or extension in certain caaaa, of support 
arrangements linked to factors of production ag aize of holdings or 
numbers of livestock units, may require putting together a complex 
aeriea of data with a good deal of admlniatrativa checking and on-
the-spot controls. The same Is true for any new Inatrument designed 
to control production at Individual producer levai. 
m <-
This will raquire the reorganisation of traditional means of paying 
aids, control and ant I fraud measures, In the Interest of a mora cost 
effective approach and less "red tape". 
It la the primary responsibility of each Member State to administer 
the aid arrangements properly and, taking account of ita particular 
requirements, to take the necessary measures to apply Community rules 
effectively, while respecting the common criteria laid down. 
As regards the detailed rulaa for applying and controlling the new 
aid arrangements, the Commission will limit Itself to establishing 
those Community rules considered strictly necessary. It will be a 
matter for each Member State to adopt Ita own detailed admlniatrativa 
measures under Commission supervision. 
The Commission Intends also to take tha necessary measures to update 
the statistical tools that ara essential to put Into affect the new 
aid arrangements. It considers alao that in tha Intaraat of 
simplifying the approach, the detailed rulaa for the management and 
control of these aida should bs regrouped under a single mechanism. 
In this context it would be appropriate to establish a rag later for 
each holding giving all essential data. 
The Commission will also use all the means at Its disposal to promote 
the use of new techniques such as data processing and satellite 
Information. 
- 32 -
PART TWQ : ACCOMPANY|Nfi MfASUqgS 
While the reforms proposed will give rise to some -ofdJusU. i, they should 
have an overall positive effect on rural areas. They art -'orlgned to 
ensure that economic and social cohssion Is strengthened V:reugh fully 
safeguarding the position of the vast majority of farmer©. At the same 
time the vary substantial compensation for price and quota reductions 
should minimise the burden for the other farmers concerned. The reform 
measures envisaged should also Improve the standard of land use end land 
conservation and ensure a balanced development of the countryside. 
The longer term problems of rural communities require an active and 
integrated rural development policy. A thriving agricultural sector is an 
integral part of rural development. But an effective rural development 
policy has to integrate wider objectives in particular those of reorienting 
rural economies towards new economic activities on and off the farm. 
The forthcoming mid-term review of the Community's structural policies will 
provide an opportunity and a framework for a review of rural development 
po11c i es. 
Under these circumstances the Commission proposes to limit the accompanying 
proposals to three key measures complementary to the changes proposed in 
the market organisations and which offer special opportunities for rural 
development. 
These concern a specific environmental action programme in agriculture, an 
enhanced programme for the afforestation of agricultural land and more 
attractive early retirement incentives. If the objectives of these 
programmes are to be achieved It is essential that the additional 
resources to be provided by the Community result in supplementary action 
and expenditure at Member State level. Hence tic rules of additionality, 
as laid down for the structural funds, should np:>iy. 
As regards the financial resources to be made available, the Commission 
will ensure a balanced response to the programmes presented by the Member 
States and regions as appropriate. In this it will take account of the 
gravity of the problems In the areas concerned and the quality of the 
programmes. It will be necessary to ensure alao in respect of Objective 1 
and 5(b) areas, the coherence of the new measures with existing actions In 
these sectors and that the new resources are additional to the allocations 
available from Community Support Frameworks. 
As regards rates of Community co-financing. It would be the intention to 
provide for a basic rate of 50% with a higher rate of 75% applicable in 
respect of regions covered by Objective 1 of the Structural Funds. 
- 33 -
1- Afiri-envtrQnrental Action froar 
A. PacKgrpund 
1. Farming takes up more than half the land area of the Contemn ity 
(80% if forests are included). in ita «eflections ?tp@r the 
Commission emphasized that the farmers role In the protection of 
the rural environment and management of the landscape shouie ce 
racogniaed mora fully and remunerated accordingly. This is the 
basis for the agri-environmental action progressai® to b@ 
proposed. 
B« Proposal 
1. A system of aids will be provided to encourage farmer© to use 
production methods with low risks of pollution and damege to tha 
environment. This would involve significant reduction In Che 
use of potentially polluting Inputs (fertlIIsern, pesticides, 
herbicides) in the case of crop production. In thé ci»s© of 
livestock farming, reduction of numbers would be sought where 
damage is being caused by overstocking by sheep and cattle. 
Participating farmers would undertake to respect constraints in 
their farming methods and would be paid compensation In return 
for the associated losses. The constraints «souId be daterained 
in the light of the different environmental situations and ths 
particular needs of each region or zone concerned. 
The maximum amount for Community co-financing would be Malted 
to 250 ECU/ha In the case of arable crops and 210 ECU per 
livestock unit where reduction in numbers are achieved. 
2. A system of aids will be set up to promote environmentally 
friendly management of farmed land in order to conserve or re­
establish the divaraity and quality of the natural environment 
(scenery, flora and fauna). 
Under these arrangements farmers would receive aids where they 
undertook to desist from practices harmful to the environment 
(eg drainage. Irrigation, ploughing up meadows...) or where they 
replaced former natural faaturaa whose removal has been 
detrimental to the environment generally ag for wildlife. Aid 
would apply alao where farmera undertook to farm extensively on 
areas of low value In agricultural terms. The maximum eligible 
amount for Community co-financing would be 250 ECU/hs in the 
case of annual crops and pasture Iand. 
3. Finally, an aid aystem will be established to onouro the 
environmental upkeep of abandoned agricultural land by farmers 
and nonfarmers living In rural areas. This t;ould coneist of a 
flat-rate per hectare aid paid annually. The naz^um eligible 
amount for Community co-financing would bo 250 ECU/ha. 
4. The new arrangements would be managed within tho framework of 
plurlannual programmes negotiated between Member States and the 
- 34 -
^ommlstSon. These programmes would défit*- t** r.s*-'jr : * r !^d 
in the areas concerned, the amount and modulation of \ ~r *iia, 
conditions to be met by bénéficier lea, and control pt . ."'ires. 
The level of the various aida would be fixed wit' : the 
progrârssmes ao as to be attractive in the ragiona cr zones 
concerned. The aids proposed would be in the fra»c-ck of 
contractual arrangementa between farmers and reeocniaed 
authorities. 
5. The agri-environmental action programme will be compiatad by a 
provision allowing the aet aaide of agricultural land on a long 
term basis (20 yeara) for environmental purposes. Land aet 
aside could be uaed for example to constitute a conservation 
reserve, for the creation of biotopea and or small natural parka 
etc. In addition to the axiatlng aat aaida premium (max amount 
eligible for Community financing 600 ECU) a premium additional 
to that for aet aside of a maximum 100 ECU per hectare (for 
Community financing) would be granted for maintaining the land 
in sound environmental condition. 
- 35 -
M. Afforestation of Agricultural Land 
A. Background 
The Community has a considerable deficit In wood and wood products 
and the Importance of forestry for land uae and the environment Is 
well recognized. 
Experience of afforestation of agricultural land by farmers has 
suggests that the axiating pramla for Invaatmant aid and for the 
compensation of tha income loaa pending maturity of forests are too 
low. 
B. Proposal 
1. The maximum grant for the purpose of EAGGF reimbursement of 
afforestation costs will be Increased from 1,800 ECU per hectare 
to 2,000 ECU per hectare for conifers and 4,000 ECU per hectare 
for broad-leaved trees. 
2. Apart from private Individuals and associations, public 
authorities will be eligible for afforestation aid. 
3. Aid at a maximum eligible amount of 950 ECU per hectare over 5 
years (1.900 ECU in the case of broad leaved trees) will be made 
available for the management of new plantations on farm 
ho IdIngs. 
4. The maximum eligible amount of tha annual forestry premium of 
150 ECU per hectare which compensa tea for tha loss of Income 
foregone by farmers pending maturity of the trees, will be 
increased to the level of the existing sat-aalde premium for 
comparable land in tha same region (maximum eligible amount 600 
ECU per hectare) The premium will be payable over a maximum 
period of 20 years. 
5. An annual premium of 150 ECU per hectare will be payable for a 
period of 20 yeara, to private individuals living In rural areas 
other than farmers who afforest agricultural land. This Is to 
compensate them for part of tha coata associated with their 
investment in forestry. 
c. evaluation 
In many cases agricultural land available and au itable for 
afforestation ia not being planted aa landowners are reluctant 
to incur the afforestation coata involved. There la a need also 
to avoid the abandonment of agricultural land v.ith attendant 
risks of erosion and deterioration of landscapes. In these 
circumstances the Commission is proposing an improvement of 
existing incentives with the intent«on of promoting 
afforestation on a sound ecological basis and improving the 
- 36 -
rural environment. At the same time tha new measures will 
provide an important source of divara If lad Income for fermera 
and will reduce tha Community's deficit In wood In due course. 
Hi- Structural Improvement through Earlv Retirement 
A. BacKground 
1. The agricultural aector faces subatantial difficult Isa aa 
regards changing traditional attltudaa and davaloping new 
opportunities which will enable rural communitlaa to survive and 
prosper.' The above average age atructura of tha farming 
population poses a apecial problem. About two million fermera 
are over 65 yaara old and over two and half million ara between 
55 and 65 yeara old. Half of these farmera have no successors. 
Two in three of the 4.6 million farmers over 55 years of age 
have less than 5 hectares. 
2. The economic viability of many small farms is under continual 
threat, and the acope for availing of extra aida eg through for 
extensifying production and for other environmentally friendly 
practices is limited. This has lad tha Commission to propose 
the revision of tha axiating aarly retirement arrangementa. 
B. Proposal 
1. In the new scheme - which will be compulsory for tha Member 
States - all full-time farmers aged 55 yaara or mora and not 
yet in receipt of a pension can benefit. The land made 
available by farmera must bs used: 
a. by their successors or other farmera to incraaae tha area 
farmed with a view to Improving the production atructura 
and ensuring economic viability; 
b. for non-agricultural purposes where reatructuring la not 
possible; 
In tha case of abandonment of land by fermera opting for or 
aarly retirement premiums, local author it lea would be 
encouraged to maintain the land In an ecologically sound 
condition. For this purpoaa, aid would ba available to uae tha 
land aa a conaervation rassrva, creation of blot ope s or small 
natural parka, or for afforestation depending on ths local 
aituatlon and naada. Aa a minimum tha land ahouid ba subjsctto 
simple maintenance. Financial assistance would ba granted for 
these purposes under the Community's agri-environmental action 
programme, and under the afforestation programme. 
2. The maximum eligible amount (which may be aupplamented by 
national payments), to be >ald for aarly retirement will 
comprise a fixed element of 4000 ECU which will guarantee a 
- 37 -
minimum income and a variable element of 250 ECU per hectare 
subject to a maximum total eligible amount per beneficiary of 
10.000 ECU a year. 
3. The new early retirement scheme will be managed in the context 
of pluriannual programmes negotiated between the Commission and 
the Member States. This should allow for maximum flexibility 
with regard to national and regional situations which may vary 
greatly. In this context, in the interests of an effective 
scheme the Commission will seek to ensure that the availability 
of Community financed-ear Iy retirement pensions will not lead to 
the withdrawal or reduction of national social security 
payments that would otherwise continue to be payable. 
4. Agricultural workers will be eligible also for early retirement 
pensions at the fixed rates in accordance with the terms of 
existing schemes. 
5. In order to ensure the smooth operation of the new arrangements 
the creation of information and coordination networks will be 
provided at local level. Aids wil» be available on a degressive 
basis for the launching of suitable agencies. 
C. Comments 
1. The attractive rates of aid and the flexibility in the new 
scheme should accelerate the adaptation and the improvement of 
agricultural structures and increase the economic viability of 
holdings. This should apply especially in regions which 
suffer from considerable structural handicaps due to small farm 
size and a high proportion of older farmers. 
2. A major difficulty In previous aarly retirement schemes arose 
from the sudden fall in income at the time of transition from a 
favourable Community regime to a financially less attractive 
national pension scheme. The earlier schemes suffered also from 
a tendency by national administrations to roduce social security 
arrangements once Community aids became available. By managing 
the early retirement scheme by way of multi-annual operational 
programmes, sufficient flexibility should exist to overcome 
such problems. 
- 38 
Pudgetary implications 
Any pluriannual estimate of future spending in agriculture has to be made 
with caution. Many unpredictable elements Internally and externally 
including the ECU/dollar rate, will affect expenditure over the period of 
reform. A major change of direction for the Policy Involving fundamental 
adaptation of existing mechanisms adds greatly to the difficulty of 
accurate forecasting. 
When the measures proposed are fully in effect the estimated additional 
expenditure In the market sectors, compared to that provided for in the 
preliminary draft budget for 1992, is of some 2300 MECU annually, which 
would be some 1000 MECU less than the agricultural guideline aasuming 
continuation over the next five years of recent trends in the development 
of GNP le average annual increase of some 2.5%. 
As for the acompanying measures, the budgetary envelope required over the 
five year period (1993/97) is of some 4000 MECU. The environment programme 
and the early retirement programme would cost some 1800 MECU each and the 
forestry measures some 300 MECU. 
The Commission is of ths visw that, given the close complementarity of 
these accompanying measures with the new market mechanisms, and in the 
interest of not prejudicing the resources and actions to be financed for 
the purpose of the next phase of the structural funds, there are arguments 
for meeting the budgetary costs of the accompanying measures from other 
than traditional budget chapters. This aspect will be considered further 
in the context of the Commission's proposals on the Community's financial 
and budgetary arrangements after 1992. 
The Commission considers the extra costs to be well Justified and that in 
the context of these proposals and taking Into account German Unification 
an increase in the base of the agricultural guideline of some 1500 MECU is 
warranted. 
- 39 -
Annex 
Illustration of the calculation of the Community reference amount for the 
oilseeds aid and of ita regionallaatIon 
Reference amount 
Expected world market price for cereala 
Cereals deficiency payment 
Equivalent EC cereal price 
Equilibrium price relationship 
Equivalent EC oilseeds price 
Estimated world market price oilseeds 
Oilseeds deficiency payment 
EC average yield for oilseeds 
Oilseeds reference aid 100 ECU/t 
55 ECU/t 
100 + 55 - ECU/t 
2.1 to 1 
155 • 2.1 
163 ECU/t 
325.5-163 * 162.5 ECU/t 
2.36 t/ha 
162.5*2.36 « 383.5 ECU/ha 325.5 ECU/t 
Régionalisation 
- Average EC cereals yield 
- Regional cereals yield 4.6 t/ha 
5 t/ha 
- 011 seeds aid -383.5*5 
4.6 - 416.8 ECU/ha 
- 40 -
Anne* Il 
Definition of small producera up to tha 
equivalent of 62 tonnes of cereals 
a. In a region where tha average caraala yield la equal to the Community 
average of 4.6 t/ha, a small producer would have 20 ha or Issa of 
cereala, oilseeds and protein crops; tha regional par hectare 
compensatory aid In thia region would also ba equal to tha Community 
average (253 ECU/ha); 
b. In a region where the average yield la sstlmated at half the 
Community average la 2.3 t/ha, a producer with 40 hectaraa or leas of 
cereals, oilseeds and protein crops would be considered to be a 
small producer of these crops; the regional compensatory aid in this 
region would be 126.5 ECU/ha. 
V'-G-l 10.7,1891 
(RG/91/002) 
g Y If T H S SE 
DES INCIDENCES FINANCIERES DES REFORMES DES OCM 
(12 mois - réformes accomplies) 
Mio £cu(B) 
i. céréales, oieaqjneMx et protéafllnsui 
Dépensas 
- aida à l'ha pour las surfaces en culture 
- compensation du set-asIde 
sous-total 
Economies 
- dépensas actue!les (lettre rectificative 1602) 
coût net 
Conséquences induUsa sur las autres secteurs 
- baisse des prix institutionnels de 10 % des 
produits laitiers et de la viande bovine 
. produits laitiers CD 
viande bovins 
- suppression des restitutions pour Iss produits 
transformés daa céréales 
viande porcins 
oaufs st volai lias 
. hors annexa II (partie céréales) 
- dépenses supplémentaires viande ovine 
(baisse du prix de marché estimée à 10 %) 
sous-total 
Total de ia rubrique l (arrondi) +13.122 
+ i 841 
i 
+13'. ©S3 
-10.505 
+3.458 
- ! 880 
- • 620 
; 163 
; 259 
i 250 
340 
- Tj.762 
+ JLZQQ 
(+} augmentation des dépansas 
(-) diminution des dépenses 
(1) Dont : réduction du prix d'intervention du beurra 15 % 
réduction du prix d'Intervention du lait écrémé art poudra 5 % 
- 2 -
II. Lait 
- réduction des quotas de 3 X 
- compensation pour 4 % des quotas sous forme de: 
. programme de cessation pour las producteurs 
produisant Jusqu'à 200.000 kg 
(170 ECU/t pour 3 ans) 
. compensation (50 ECU/t pour 10 ans) 
(calcul effectué pour la 4e année de paiement) 
- programme de ceasatlon avec redistribution 
applicable pour la 4e année de ia réforma 
- prime à la vache laitière (76 ECU/tété pour 
toutes les vaches dea exploitations produisant 
moins de 24.000 kg et pour les 40 1ères vaches 
de chaque exploitation respectant 1,4 UGS/Ha 
fourrager dans las zones défavorisées 
et 2 UGB/Ha fourrager dans les zones normales) 
- suppression prélèvement de corespons. de base 
- dépenses supplémentairas dans le secteur de 
la viande bovine suite aux abattages des 
vaches laitières 610 
355 
p.m, 
+ .1.370 
+ ; 280 
+ |(450)(1) 
+ {1,406 Total de la rubrique II 
III. Viande bovins 
- réduction addit. du prix Institutionnel da 5 X 
- réduction da 125.000 t des quantités achetées 
à l'Intervention suite à l'Introduction 
d'une prime à la transformation pour les 
Jeunes veaux 
- adaptation de la prima à ia vache allaitante 
(75 ECU/tête pour las 90 premières vaches de 
chaque exploitation respectant 1,4 UGB/Ha 
dans les zones défavorisées et 2 UGB/Ha 
fourrager dans las zones normales) 
- adaptation da la prime spéciale 
(60 ECU/téta et par an pour les 60 premiers 
bovins ma las dans les exploitations respectant 
1,4 UGB/Ha fourrager dans Isa zonas défavo­
risées et 2 UGB/Ha fourrager dana Isa zonas 
normales 
- primes à la transformation pour las Jaunes 
veaux des troupeaux laitiers 
(100 ECU/téte, hypothèse 500.000 veaux) 260 
240 
320 
+ ! 460 
+ \ 60 
* \ MO. Total da la rubrique Ut 
1) Cette dépense interviendra au cours des premiers exercices!suivant 
celui de la réforme. Pour cette raison, cette dépense n'ajpas été 
totalisée puisque ces incidences se réfèrent i une période'de 12 mois 
après que les réformes sont accomplies. 
- 3 -
IV. viande ovins 
plafonnement da ia prime au troupeau da 
référence (brebis eligible» 1990) 
limitation du paiement de ia prime è 
750 animaux dans les zonas défavorisées et à 
350 animaux dans les autres zones 70 
330 
Total ds la rubrique IV 4ÛÛ 
V. Tabac. 
introduction du quota 
supprsssion de l'intervention 
suppression das restitutions 
masures da reconversion <- i 218 
- ; 136 
- i 64 
+ ! (29)(1) 
Total ds la rubrique V (arrondi) 420 
VI. Suppression da l'aide aux fourrages sèches 
(an 4 ans è partir de la campagne 1993/94) 
(arrondi) 42£ 
TQTfM, reNgBA^ fSW-SAftfflnig (arrondi) 2.300 
(1) Cette dépense Interviendra au cours des 3 premiers exercices.suivant 
celui da la réforma. Pour cette raison, cette dépense n'a pas été 
totalisée puisque ces incidences se réfèrent è une période de 12 mol a 
après qua las réformes sont accomplies. 
l-G-5 
CAP REFORM - ACCOMPANYING MEASURES 
Earlv retlreaent 
EAGGF contribution 
Meiber States' contribution 
Envlronaent 
EAGGF contribution 
- Input reduction/organic fanlng/extenslf Icatlon 
- environmentally friendly farilng 
- countryside aalntenance (1) 
- afforestation (2) 
- total 
Meiber States' contribution 
TOTAL EAGGF COST 1993 
29 
23 
5-
16 
18 
JO 
79 
65 
108 1994 
183 
146 
22 
66 
77 
45 
210 
172 
393 1995 
411 
323 
45 
134 
156 
52 
387 
317 
798 1996 
542 
427 
73 
216 
252 
65 
606 
496 
1148 1997 
635 
502 
111 
330 
385 
83 
909 
744 
1544 Total 
(5 years) 
1800 
1421 
256 
762 
888 , W 2191 
1794 
3991 
(1) Including land abandoned by faraers taking early retlreaent (est lia ted at 16 MECU In 1997) 
(2) of agricultural land . .: .. " '...'. 
ISSN QÏS4-1475 
C0M(91) 258 final 
DOCUMENTS 
EN 03 
Catalogue number : CB-CO-91-316-EN-C 
ISBN 92-77-74414-6 
Office for Official Publicatioxis of the Européen Communities 
L-2985 Luxembourg