The agricultural situation in the European Union 2002 Report - Report in conjunction with the General Report on the Activities of the European Union - 2002 BRUSSELS AND LUXEMBOURG, 2003

TABLE OF CONTENTS

1. Economic situation and farm incomes

1.1. Overview

1.2. Production

1.3. Producer prices and market prices

1.4. Input prices

1.5. Farm income

1.6. Farm accountancy data network (FADN)

2. Policy developments and legislative initiatives in 2002

2.1. Mid-Term Review of the CAP

2.2. Quality policy

2.3. Organic farming

2.4. Promotion of agricultural products

2.5. Simplification of agricultural legislation

2.6. State aid

2.7. Assistance to the needy

2.8. Outermost regions

2.9. Information measures concerning the CAP

2.10. Information and communication technology

2.11. Advisory committees and relations with bodies representing the EU socio-professional sector

3. Market developments

3.1. Crop products

3.2. Livestock products

4. AGRIMONETARY ARRANGEMENTS

4.1. Developments in 2002

5. Rural development in 2002

5.1. Belgium

5.2. Denmark

5.3. Germany

5.4. Greece

5.5. Spain

5.6. France

5.7. Ireland

5.8. Italy

5.9. Luxembourg

5.10. Netherlands

5.11. Austria

5.12. Portugal

5.13. Finland

5.14. Sweden

5.15. United Kingdom

6. Environment and forestry

6.1. Environmental measures

6.2. Forestry measures

7. Financing of the cap in 2002

7.1. EAGGF Guarantee Section

7.2. EAGGF Guidance Section

7.3. Evaluation

8. Enlargement

8.1. Main developments

9. International relations

9.1. International organisations and agreements

9.2. Bilateral and regional trade relations

1. ECONOMIC SITUATION AND FARM INCOMES

1.1. Overview

1. The 2002 agricultural year was mainly characterised by the following developments:

(a) generally disappointing level of global economic recovery, with the international situation suffering from an atmosphere of uncertainty brought about by the combined effect of geopolitical tensions, negative developments in the equity markets and uncertainty about the true state of the economy and the corporate sector;

(b) a sharp rebound in oil prices over the course of 2002, back to around the relatively high levels of the first half of 2001;

(c) a deterioration in investor confidence which, combined with rising oil prices, eroded purchasing power and led to private consumption in the EU increasing only marginally in 2002;

(d) a noticeable recovery in the cattle sector from the recent BSE and foot and mouth disease crises, with a significant improvement in beef and veal consumption, and with prices in the sector increasing by more than 6% on average. The recovery in the beef sector resulted in prices for pig meat during 2002 being well down on the exceptionally high prices of 2001 and those for poultry meat also being well down on corresponding 2001 prices for most of the year;

(e) generally favourable weather conditions over the course of the agricultural year, except for the severe floods during the summer in some Member States, leading to the second largest cereals harvest ever apart from that of 2000.

2. A limited recovery in global trade growth in 2002 helped overall EU exports improve slightly on 2001 levels. However the situation was less positive for EU agricultural exports, which faced increased competition from third countries especially in the cereals sector, where non-traditional exporters in the Black Sea area had a large impact on the markets in 2002, although meat sector exports improved considerably from the previous year's levels when trade restrictions due to animal disease scares hit exports. The strengthening of the euro during 2002 also acted to restrain the level of EU agricultural exports.

3. According to initial estimates at the end of 2002, farm incomes (measured as real net value added at factor cost per annual work unit) for the European Union as a whole fell by 3.0% in real terms in 2002, in contrast to the large increases of 2000 and 2001 (when real incomes rose 4.4% and 6.1% respectively, according to the most recent figures) and against a background of a significant further decline in overall agricultural labour (down 2.9% on 2001). Despite this fall in income, the average farm income in 2002 still remains some 25% higher than that of the early 1990s. Underlying the drop in income for 2002 was a sharp fall in the prices of many crop and animal products, which more than offset the increase in the volume of production. This was especially true for animals and animal products such as pig meat, poultry and milk, which all exhibited a sharp drop in real average prices, but was also the case for cereals, oilseeds and potatoes. However, as usual, these first estimates should be treated with some degree of caution.

4. In terms of weather, the 2002 agricultural year got off to a good start with autumn 2001 field preparation and sowing of winter cereals and rapeseed occurring under conditions which were almost optimal and generally much more favourable than for the previous year, particularly so in France and the UK. While the autumn period ended with unseasonably cold weeks across Europe in December and in January 2002, raising some concern for frost damage, the subsequent conditions during the winter season were generally favourable, with mainly higher than average temperatures and a favourable spell for spring crop sowing preparations.

5. During spring 2002 the climatic conditions were as a whole satisfactory for crop growth and farming operations. The Iberian Peninsula, the South of Italy (with the exception of Sicily) and Greece received good levels of rainfall, allowing partial replenishment of water reserves and with a resulting potential impact on durum wheat production. Higher than seasonal temperatures at the end of April and May boosted crop development especially in central and northern countries, while in the Mediterranean areas a wave of peak temperatures in June boosted summer crop growth.

6. The situation generally worsened in July and August with excessive rain in many central European Member States, especially in Germany and Austria. This resulted in saturated soils and flooding, hampering straw cereals harvesting operations or causing local damage in many areas and leading to loss of harvest and grazing land. For England, France and Spain, July harvesting operations were on the whole more favourable than in 2001, and in contrast to the situation in Germany and Austria, favourable conditions for summer crop development were experienced in many parts of France, Italy and Spain. Late summer was generally favourable for summer crops, with drier and warmer conditions in northern areas and cooler, wet conditions in the Mediterranean regions, but this was followed by abundant rain and cooler than normal temperatures in October which partially affected field operations such as late potato harvesting and initial sugar beet harvesting in northern countries.

7. Domestic consumption for cereals is estimated to have risen to close to 192 million tonnes in 2002/03 (up some 2 million tonnes on 2001/02), driven by an increase in human consumption (up 1.2 million tonnes) and a rise of around 1 million tonnes in the use of cereals for animal feed, mainly due to relatively low cereals prices compared to oilseeds in 2002. For beef and veal, consumption is expected to have recovered strongly in 2002. Following the strong falls recorded at the end of 2000 and the start of 2001, beef consumption recovered gradually over the subsequent period, and current estimates put total consumption for 2002 at 7.5 million tonnes, an increase of 11.3% on the 2001 level. Pig meat consumption in 2002 remained at more-or-less the same level as in 2001 (around 16.5 million tonnes), following on from the slight increase seen last year, while poultry meat consumption, which had benefited most from the last BSE scare and increased by over 3% in 2001, is expected to have decreased slightly in 2002 (down 1.7% on last year) due to the recovery in beef consumption. Lastly, while butter consumption remained more-or-less unchanged from 2001, consumption of cheese continued its upward trend, growing by 1.4% in 2002, although this rise is slightly below the trend of recent years.

8. Concerning the general economic scene, global recovery was somewhat disappointing during 2002. At the beginning of the year vigorous global growth had been expected, following significant policy stimulus after the events of 11 September 2001 and a widespread loosening of monetary policy. However, an atmosphere of uncertainty brought about by the combined effect of geopolitical tensions especially in the Middle East, which led to higher oil prices over the course of the year, the negative developments in equity markets and uncertainty about the true state of the economy and the corporate sector undermined confidence and led to subsequent weakness in the recovery, with the result that world GDP growth is expected to be only 2.6% for 2002. Following its contraction in 2001, the first in 20 years, global trade growth is expected to have recovered to around 2% in 2002.

9. In line with global developments, recovery in the EU began in the first quarter of 2002 but failed to pick up over the rest of the year. Consequently, the overall recovery was much slower than foreseen, with the average growth rate in the euro area expected to have attained a level of only 0.8% in 2002. At the same time increases in food and oil prices eroded purchasing power, with a shortage of demand as a consequence. This, combined with a deterioration in investor confidence and an increase in the household savings rate, resulted in overall private consumption in the euro area increasing by only about 0.6% in 2002. Concerning inflation, this declined only slowly during 2002, with the inflation rate for the year expected to be 2.3% on average in the euro area (slightly down from last year's rate of 2.5%).

10. Compared to the level of recent years oil prices were fairly low at the start of 2002 (around $20/bl for Brent oil), but generally increased over the course of the year back to around the levels of the first half of 2001. Brent oil prices initially peaked at above $29/bl at the end of September, reflecting fears of an oil supply disruption in the event of war with Iraq, then fell to around $23/bl by mid-November before rising again, driven by a disruption in supplies from Venezuela, to break through the $30/bl level by late December. On the currency front, following on from last year's historically weak levels against the US dollar, the euro strengthened somewhat over the course of the year and by November had regained parity with the dollar.

11. Developments in international agricultural markets were somewhat mixed in 2002, with international prices for most cereals recovering noticeably during the year, mainly due to low output levels in some key producer countries and in light of the smallest expected global cereal crop since 1995, while on the whole international prices for meat fell. However, international prices for most cereals weakened towards the end of the year, as several countries not traditionally known as exporters took advantage of their recent good harvests and the drop in exportable supplies from traditional exporting countries to make more of their production surpluses available for export.

12. International wheat and coarse grain prices (based on US prices) increased noticeably from the middle of the year onwards to exceed the price levels of the previous year, driven by mounting evidence of lower exportable grain supplies in traditional grain exporting countries. The steepest price rises were observed for North American and Australian cereals, where drought caused noticeable declines in output in 2002. By September prices for good quality US milling wheat were up nearly 50% on prices one year earlier, and with price rises for US soft wheat not far behind. However, although remaining noticeably higher than one year earlier, wheat prices fell back over the latter part of the year due to the large surpluses available for export at relatively cheap prices in non-traditional exporting countries such as the Russian Federation, Kazakhstan and the Ukraine. Maize prices showed similar behaviour over the course of 2002, with prices rising initially mainly due to worsening crop conditions in the United States and with September export prices for US maize up some 28% on those one year earlier. Nevertheless, in the latter part of the year lower world import demand together with large supplies of feed wheat and of maize in several non-traditional exporting countries acted to alleviate to a certain extent the upward pressure on maize prices. In contrast to the cereals markets, large supplies in the major exporting countries acted to keep prices for rice under downward pressure.

13. In the meat markets, overall international prices fell in 2002. This development in prices was mainly a result of rising levels of supply, especially in those countries previously subject to meat export restrictions in 2001, the reduced effects on markets of animal diseases and the effect of exchange rate movements in 2002 on South American meat exports. Concerning the specific meat markets, abundant supplies of poultry and pig meat led to prices for these falling noticeably from 2001 levels, while beef prices and especially sheep meat prices increased somewhat, the latter due to strong demand and reduced output in developed countries, especially Australia. International prices for dairy products fell for most of the year but recovered somewhat in the latter part of 2002 as a result of a decline in supplies in Australia and South America. By November prices of all dairy products had shown some recovery, with milk powder prices showing the greatest rise and with butter and cheese prices rising less noticeably. Nevertheless, prices of all dairy products remained well below those twelve months earlier.

14. The performance of the European Union on world agricultural markets has again been somewhat mixed in 2002. The disappointing level of global recovery in 2002, the strengthening of the euro and the continued strong competition from third countries especially in the cereals sector all had a restraining effect on EU agricultural exports. However, a very positive development was the strong recovery in meat exports from the crisis-hit levels of the year before.

15. In the first nine months of 2002 the overall value of Community agricultural exports was marginally down (by around 0.8%) on the same period in 2001. Cereal exports fell heavily in 2002, by some 16% in volume and 15% in value (in euro terms), mainly due to the continuing impact of increased competition from exports by third countries and especially the republics of the Former Soviet Union. (The latter was so pronounced that while EU cereals exports fell, EU imports of cereals almost doubled in value compared to the same period in 2001). Large falls in the value of exports were also recorded for animal feedstuffs (down 13%), sugar (down 42%) and skimmed milk powder (down 37%), although for the latter developments over the last quarter of 2002 may result in final figures for 2002 showing a much smaller reduction. In contrast, significant rises in the value of exports occurred for rice (up 42%), vegetables (up 18%), potatoes (up 37%) and olive oil (up 21%). Although less pronounced, increases were also recorded for fruit (up 7%) and wine (up 6%).

16. Concerning meat exports, the volume of exports in the first nine months of 2002 showed a marked improvement compared with the same period the previous year, when the impact of the BSE and foot and mouth disease crises virtually halted for a certain period EU exports of meat products. Over the period mentioned, exports of beef and veal rose by around 8% in both volume and value, while those for pig meat and poultry meat rose markedly in volume (by 23% and 21% respectively) although much less so in terms of value (by 4% and 7% respectively). Concerning dairy products, while skimmed milk powder exports for the first nine months fell as mentioned previously, the value of butter and cheese exports rose (up 8% and 1.4% respectively) for the same period, reflecting the rise in export volumes for these products (of 20% for butter and 4% for cheese).

17. On the whole, intervention stocks for most of the main agricultural products covered by the intervention scheme increased in 2002. For cereals, intervention stocks increased from around 7.0 million tonnes at the start of 2002 to around 8.0 million tonnes in early January 2003. Underlying this, however, were quite wide variations in changes in the stock levels for individual cereals. While wheat stocks were further run down during 2002, down to around 0.41 million tonnes by January 2003 from a level of 0.61 million tonnes in January 2002, over the same period stocks of barley increased from 1.8 to 2.3 million tonnes, and stocks of rye continued the rise of previous years, increasing from 4.6 to 5.3 million tonnes and remain a cause for concern. However, the situation for rye is expected to improve since production fell in 2002 and is foreseen to decline further in 2003.

18. Important increases in stocks also occurred for dairy products during 2002. Intervention stocks of milk powder, which had been completely run down by October 2000 and remained so during 2001, started up again in March 2002 and increased sharply from then onwards to reach a level of just under 147 000 tonnes by the end of September. However, by January 2003 stocks had been reduced back down to around 109 000 tonnes, thanks to a surge in exports in the latter part of the year. Butter stocks also increased substantially in 2002, rising from just under 86 000 tonnes at the start of the year to reach a level of 186 000 tonnes by early January 2003. Further developments worthy of note were the increase in wine alcohol stocks from 2.2 million hectolitres in December 2001 to 3.6 million hectolitres twelve months later, and the reduction in beef intervention stocks by around 65 000 tonnes during 2002. Finally, in accordance with policy developments in the sector, public stocks of olive oil were phased out to become non-existent during 2002.

1.2. Production

1.2.1. Crop production

19. Latest estimates indicate overall cereal production in 2002 at around 210 million tonnes, more than 10 million tonnes (or about 5%) higher than last year's crop, and the second highest crop ever after that of 2000. The biggest production increases are expected in France (up some 9 million tonnes), Spain (up 4 million tonnes), and the UK (up 4 million tonnes), although production in Germany is expected to have fallen (down 6.5 million tonnes from last year's bumper crop level), so that in contrast to 2001 France once again became, as usual, the largest EU straw cereal producer. Most of the overall rise in production is due to an increase in the common wheat harvest (up about 10.9 million tonnes, or 13%, compared to last year). Durum wheat and oats productions are also expected to be up on last year, rising to 9.8 million tonnes (up around 21%) and 7.2 million tonnes (up 15%) respectively. In contrast, barley production is expected to remain more-or-less at last year's levels, while maize production declined slightly (down 2.7% on 2001) and rye production should decrease significantly (by 24%) to around 4.7 million tonnes, driven by a 1.5 million tonne decrease in production in Germany. For rice, a small decrease in production was more than compensated for by higher milling yields, so that production in milled equivalent (about 1.6 million tonnes) rose by 5% compared to the previous year.

20. The overall rise in cereals production reflects an increase in both area under cereals and in the yields for 2002. The total area under cereals increased by 2.4% (almost 1 million ha) compared to the previous year, due for the most part to the rise in area allocated to common wheat production (up around 8% to 14.1 million ha). Areas allocated to growing durum wheat and oats also rose slightly (between 4 and 6%), while, in contrast, barley, maize and rye areas all fell.

21. Latest estimates show average cereal yields up 2.9% compared to last year, at 5.6 tonnes/ha, with average yields for common wheat (up 4.3%), durum wheat (up 16.1%) and oats (up around 10%) showing the largest increases. In contrast, average yields for barley and maize were only slightly up on 2001 (up around 2% and 1% respectively), while those for rye fell markedly (by around 15%). However, the pattern of crop yield variation differs greatly from one Member State to another. For example, while soft wheat yields rose appreciably in Spain (up 32%), and to a lesser extent in France (up 12%) and the United Kingdom (up 13%), following last year's poor results, they fell significantly in Germany (by around 13%) and Ireland (by 5%) as a result of less favourable weather there than in 2001. The return to a more favourable climatic situation in Greece, Spain, France and Italy compared to the previous year largely accounts for the marked rise in average yields for durum wheat.

22. Following an overall decrease in area (down 5% on 2001) total oilseed production (rape, sunflower and soya) should be slightly down on last year (by around 2% at 12.9 million tonnes), despite a rise in yields (up 3% to 2.6 t/ha). The overall fall in production is also despite an increase in rapeseed production (up 3%), itself a result of a larger cultivated area (up 2% overall, mainly due to a 14% increase in rapeseed area in Germany) and marginally higher average yields (up 1%). In contrast, sunflower production fell by around 6%, resulting from an 11% drop in total area (driven mainly by a 12% decrease in area in both France and Spain) and despite a 6% improvement in yields compared to last year. Soya production for 2002 was heavily down on 2001 (by 26%) as a result of a sharp 27% drop in cultivated area.

23. The dramatic decline in linseed area observed over recent years continued in 2002, with total EU area falling a further 43% to around 62 000 ha, driven by significant falls in area in Germany and the United Kingdom. With yields more-or-less the same as in 2001, overall production decreased in line with the decline in area, falling from 136 000 tonnes in 2001 to 79 000 tonnes in 2002. While protein crop area remained unchanged from last year, a significant improvement in the average yield (up 6% on 2001) led to a rise in total output to 4.1 million tonnes (up 5%).

24. EU sugar production in 2002 is estimated to have increased by around 9% relative to 2001's exceptionally low level. This was mainly the result of a recovery in average yields from the poor levels of the year before, driven by large expected yield increases in France, Ireland, Italy, and the UK. The good amounts of rain received in summer, especially in southern areas, and the good climatic conditions in September boosted 2002 yield levels, although the main producing areas in Germany were later affected by excessive rain in October which disrupted harvest operations there.

25. Olive oil production is expected to be significantly higher in 2002, up some 0.5 million tonnes compared to the previous year (an increase of around 25% on 2001) and continuing the rising trend in production seen over recent years.

26. Early estimates indicate only a very marginal increase in fruit production for 2002 (up 0.6% on 2001), while production of fresh vegetables remained essentially unchanged from the levels of the previous year. In contrast to last year's marked fall in production, which was mainly due to poor weather conditions in 2001 affecting yields, potato output is estimated to have recovered slightly in 2002, rising by 1.8% compared to 2001.

27. Preliminary estimates show wine and must production in 2002 having fallen slightly to around 158-160 million hectolitres, approximately 3% below the previous year's level, and remaining well down on the exceptional harvest of 1999 (of 186.5 million hectolitres). 2002 production in both France and Italy (down around 5% and 12% respectively on 2001) was affected by adverse weather conditions, in particular heavy rains in southern France, which destroyed some vineyards. Significant production falls are also expected in Greece and Portugal. By contrast, wine production is estimated to have risen markedly in Germany (by 19%) and Spain (by 7-10%) in 2002 following the large declines the year before.

1.2.2. Animal production

28. Beef and veal production in 2002 remained strongly influenced by the disturbances of recent years. The low prices which became a feature of the market from autumn 2000 onwards and which persisted for most of 2001, together with an atmosphere of uncertainty linked to weak and volatile demand, seems to have led to a subsequent reduction in production capacity. On top of this, the special measures decided on in June 2001 to stabilise the market are expected to have further reduced incentives for production. As a consequence, recovery in beef and veal production in 2002 is expected to have been somewhat limited, with net production in 2002 estimated to reach 7.5 million tonnes, an increase of only 2.9% on last year's level and still some 3% down on levels in 1999.

29. Following the stabilisation in production in 2001, current estimates indicate a marginal increase in pig meat production for 2002 to around 17.7 million tonnes, just 1% higher than that for 2001. The overall development of EU production has been strongly influenced by the reduction in capacity which took place over recent years in three Member States (due to the build-up of environmental pressures in Belgium and the Netherlands, and to the 2001 foot and mouth epidemic in the UK), where the size of the pig herd is now about 10% lower than in 2000, and which were unable to respond to the positive price situation observed in 2000 and part of 2001. As a result, overall production for 2002 remained down by about 1.5% on the peak levels of 1999.

30. Following the increase in poultry meat production in 2001 (up 1.9% on 2000), which mainly resulted from the switch in demand away from beef following the last BSE scare and which mostly benefited the poultry sector, production of poultry meat decreased slightly in 2002 (down 0.5% compared to 2001). The downturn in growth was partly due to increased competition in the sector from countries such as Brazil and Thailand as well as the recovery in demand for beef.

31. Production of sheep meat and goat meat in 2002 is expected to have only partially recovered from the dramatic fall seen last year (when production fell 9.4 % compared to 2000), to reach around 1.03 million tonnes (up just 1% on 2001). This follows on from the severe disruptions experienced in the sector in 2001, when the outbreak of foot and mouth disease in the United Kingdom and in some other European countries led to large losses through culling as well as limitations on trade. The limited extent of the subsequent recovery in production in 2002 was mainly due to re-stocking of the sheep herd in the UK, which led to retention of female lambs for breeding. While the situation in the sector did improve slightly in 2002, overall EU production levels remain well down on the highs of the early 1990s.

1.2.3. Milk and dairy production

32. Continuing the downward trend in dairy cow numbers, although at a much lower rate than the trend of recent years, the Community dairy herd is expected to fall to about 20.1 million head at the end of 2002, a small reduction of 0.4% from the previous year. Milk yields should increase by around 1.2%, well down on the previous year's increase of 3.3%, so that total milk production for 2002 is expected to be close to 121.6 million tonnes, more-or-less unchanged from 2001 levels and continuing the stability in production seen over recent years. Overall deliveries to dairies were also flat compared to 2001, with no major changes within Member States.

33. In contrast to the fall of the previous two years, butter production is estimated to have increased in 2002 by around 3.5% compared to 2001, driven by large production increases in Belgium, Ireland and especially Spain, and in parallel with a strong rise in exports. Cheese production continued to rise in 2002 (up by 0.8% on 2001), although at a much lower rate than in 2000 and 2001, helped by a continued increase in consumption and a slight rise in exports. Production of skimmed milk powder is expected to have recovered noticeably in 2002, rising by around 8% compared to 2001.

1.3. Producer prices and market prices

1.3.1. Producer Prices

34. According to the figures available at the end of December 2002, compared with the previous year the index of farm-gate prices is estimated to have fallen slightly in 2002, by an average of 1.4% in the EU in nominal terms. This slight decrease is mainly the result of a 5.6% drop in the price of animals and animal products, and is despite a 2.8% increase in overall crop prices. The steepest decreases in prices for animal products occurred for pig meat (down 17.7%, in sharp contrast to the large price increases of recent years), sheep meat (down 7.9%), and poultry (down 7.7%), while milk prices also decreased noticeably (down 4.5%). In contrast, beef and veal prices rose significantly (by 8.5% and 10.1% respectively), marking a partial recovery following the market disturbances of recent years and the very low prices of 2001. As regards crop prices, the steepest increases were recorded for vegetables (fresh vegetables up 8.5%, dried up 9.6%), olives and olive oil (up 8.3%) and fruit (up 7.0%). Average overall prices for cereals and rice fell 6.7%, driven by significant decreases in prices of soft wheat and barley of around 8 to 10%. Potato prices also fell heavily, down 14% on those of the previous year.

35. After accounting for inflation, the producer price index for the European Union as a whole is estimated to have fallen by around 4% on the previous year. The biggest decreases were in Austria (down 5.7%), Belgium (down 7.8%), Denmark (down 10.4%), Ireland (down 8.6%), Portugal (down 7.4%), Spain (down 5.1%) and Sweden (down 5.4%). Farm-gate prices also declined in most other Member States: in Finland (by 3.7%), Germany (by 4.3%), France (by 4.7%), Luxembourg (by 4.9%), the Netherlands (by 3.8%) and the United Kingdom (by 4.6%). Only two Member States experienced a rise in the real producer price index, namely Greece (up 3.0%) and Italy (up 0.8%).

1.3.2. Market prices

36. Following the decreases of recent years in application of Agenda 2000, for marketing year 2002/03 the intervention price for cereals stayed at the same level as the previous campaign 2001/02 (EUR 101.31 per tonne). Similarly, aids for cereals, which had increased in recent years, remained at EUR 63 per tonne of reference yield for 2002/03. The level of compulsory set-aside was kept at 10%, although derogation to this was allowed in September 2002 in those Member States that had been heavily affected by the August floods. Against this policy background the good prospects for an improved EU cereals harvest for marketing year 2002/03 compared to 2001/02, together with the impact of highly competitive exports from certain third countries, especially the republics of the Former Soviet Union, resulted in average EU cereal market prices generally declining over the first eight months of the year, the main exception being maize prices. However, prices for many cereals recovered somewhat over the latter part of 2002 in light of downward adjustments in initial EU harvest estimates for these crops and in anticipation of modifications to the EU cereals import regime for 2003.

37. Given the prospects for a large 2002 wheat harvest in the EU, average market prices for bread-making wheat declined over the first part of the year, falling from around EUR 141 per tonne at the start of the year to close to EUR 120 per tonne by August, before recovering to around EUR 127 per tonne from the end of September onwards, some 10% down on prices at the start of the year. Prices for durum wheat showed similar behaviour, with these peaking in March and then falling sharply through to the end of June to reach a low of EUR 153 per tonne before stabilising in July and August. Prices then recovered to around EUR 180 per tonne by December, some 7% down on prices at the start of the year. In contrast, average maize prices remained fairly stable (at between EUR 131-136 per tonne) over the first half of the year, with expected EU production for 2002 little changed from that of 2001, before rising sharply from July to mid-August, when prices rose to around EUR 154 per tonne (some 13% up on prices at the start of the year). However, maize prices fell sharply over the rest of August back to the EUR 130 per tonne level and remained close to this level for the rest of the year. Concerning barley prices, average EU market prices for brewing barley declined from EUR 141 per tonne at the start of 2002 to around EUR 110 per tonne in August, but recovered strongly over the following months so that by November prices had regained the levels of the start of the year. For rye, average bread rye prices generally fluctuated in a range from EUR 117-125 per tonne until late July, at which point prices fell sharply to around EUR 106 per tonne before gradually recovering with the start of the new marketing year to around the EUR 120 per tonne level by the end of November onwards, in response to the much reduced rye harvest in Germany.

38. Olive oil prices remained fairly stable over 2002, although generally slightly up on the prices of the year before. Figures for late November 2002 show prices for Italian extra virgin and lampante olive oil somewhat higher (by around 9% and 3% respectively) than twelve months earlier, and remaining well above the trigger level for private storage. Those for Spanish olive oil show lampante prices up by some 3.5% on the corresponding point in 2001, but with extra virgin prices more-or-less unchanged and remaining only just above the trigger level for private storage.

39. In general, wine prices improved over the course of 2002 from the low levels of the year before, although this was mainly due to a sharp rise in prices in the latter part of the year in France and Italy in expectation of the reduced 2002 harvests in those countries. By early December 2002, market rates for red wine relative to the same period in the previous year were up 24% in France, 14% in Italy and 12% in Spain. Similarly, white wine prices showed improvement on those of 2001, with early December prices up 8% in France, 27% in Italy and 8% in Spain on those twelve months earlier. However, while prices developed quite smoothly over the course of 2002 in Spain and Italy, prices in France fluctuated widely during the year.

40. The improved overall situation in the beef sector was reflected in prices for beef and veal in 2002. The strong recovery in demand over 2002 led to a substantial improvement in beef prices, especially for cow meat, which by September had improved to around EUR 190 per 100 kg compared to EUR 160 one year earlier. Although cow meat prices then trailed off over the latter part of the year, they still remained significantly above corresponding 2001 levels. Prices for young bull carcasses also generally improved during 2002, recovering to close to 1999 levels and remaining well above corresponding 2001 prices throughout the year. Only steer carcass prices fared worse in 2002 compared to 2001, with these generally falling over the course of the year and remaining below corresponding 2001 prices.

41. Following the strong decline in prices which occurred over the course of 2001 (a fall of some 20% from the record prices of February/March 2001 (of almost EUR 170 per 100 kg) to those in December 2001), which mainly resulted from the ending of the positive impact on the poultry sector of the last BSE crisis, prices for poultry meat developed in a more traditional manner over the course of 2002, closely following the pattern set by the average of the last few years. Beginning the year at around EUR 134 per 100 kg, prices followed a rising trend through to the start of October to peak at around EUR 145 per 100 kg, before dropping over the remaining months of 2002 back to around the price levels at the start of the year.

42. During 2002 average EU prices for pig meat kept broadly stable in comparison to the variability of recent years, in general remaining in a range between EUR 127 and EUR 147 per 100 kg. Prices remained throughout the year at levels well below the exceptionally high prices of 2001, reflecting the impact of the recovery in beef consumption also on pig meat prices. Starting the year at around EUR 136 per 100 kg, prices peaked at the end of March at close to EUR 147 per 100 kg and then fluctuated around a generally declining trend which saw prices fall to around EUR 127 per 100 kg by the end of November. In light of developments and in order to support the pig meat market, aid for private storage was introduced from 9 December 2002.

43. Given the very limited recovery in production in 2002 market prices for sheep meat and goat meat products generally remained at historically high levels similar to those of the previous year. Over the first half of 2002 prices generally fell from their start of year level, of around EUR 450 per 100 kg, to bottom out over the middle part of the year at around EUR 380 per 100 kg. From July onwards average prices picked up again and were back to around the EUR 430 per 100 kg level by the beginning of September, with prices generally remaining in a range between EUR 415 and EUR 435 per 100 kg for the rest of the year. While at the start of December prices were down in most Member States compared to twelve months earlier, they were significantly higher in Italy, Sweden and the United Kingdom.

44. Following the noticeable drop in prices over the second half of 2001, average EU butter prices stayed relatively depressed throughout 2002, remaining at levels close to 90-92% of the intervention price throughout the year and well below the price levels of recent years. Average EU prices for skimmed milk powder began the year at just above the intervention price. However, the fall in prices experienced at the end of 2001 continued into 2002 in view of the significant rise in production, with average prices only bottoming out at the end of May at around 2.4% below the intervention price. Prices only showed a sustained improvement from September onwards, with average prices generally moving above the intervention price over the latter part of the year as external demand for EU milk powder increased in reaction to the low, drought-affected production in Australia.

1.4. Input prices

45. In 2002, the index of purchase prices in nominal terms for goods and services currently consumed in agriculture remained more-or-less unchanged (up only by an average of 0.1%) from the previous year. The biggest rises were for maintenance and repair of materiel (up 4.4%) and buildings (up 2.1%), seeds and plants (up 2.2%) and general costs (up 2.3%), but these rises were heavily offset by decreases for fertilisers and energy (down 3.3% and 3.0% respectively), while feeding-stuffs remained more-or-less stable compared to the previous year.

46. When account is taken of inflation, the real change since 2001 in the index of purchase prices for goods and services currently consumed in agriculture was a decrease of just over 2% for the European Union as a whole, mainly due to the significant drop in prices for fertilisers and energy (both down over 5% in real terms). Above-average decreases were recorded in Austria (down 3.0%), Finland (down 2.5%), Ireland (down 3.3%), the Netherlands (down 2.9%), Portugal (down 8.3%) and Spain (down 2.7%). Real input prices were also down in Belgium (by 1.3%), France (by 1.9%), Germany (by 1.5%), Greece (by 1.6%), Italy (by 2.2%), Luxembourg (by 1.6%) and the United Kingdom (by 1.5%), and more-or-less stable in Denmark and Sweden.

1.5. Farm income

47. Eurostat's initial estimates, based on information received from Member States up until early December 2002, indicate average farm income (measured as the real net value added at factor cost per annual work unit) across the European Union as a whole 3.0% down on the previous year. Declines in income are expected in a clear majority of Member States, with only five foreseen to record any increase. The strongest falls are expected in Denmark (down 26.3%), Germany (down 18.0%), Ireland (down 11.4%), Belgium (down 7.7%) and the Netherlands (down 7.5%), with the sharp drop in pig and milk prices being the main common factor in the decline in agricultural income in most of these countries. The other Member States where income declined, although to a much lower extent, were Austria (down 2.8%), France (down 0.9%), Italy (down 1.6%), Portugal (down 2.2%) and Sweden (down 1.5%). In contrast, incomes were up in Greece (by 5.7%), Luxembourg (by 1.0%), Finland (by 7.3%), Spain (by 1.2%) and the United Kingdom (by 3.9%), with most of these countries also recording a strong decrease in agricultural labour.

48. Underlying the overall decrease in average farm income are quite wide variations according to the type of farming. According to first estimates from the Farm Accountancy Data Network, average income should decrease most significantly compared to 2001 levels in those farms specialising in pork and poultry production (down 38.7%), while decreases are also expected for mixed (crops and livestock) production (down 15.9%) and milk production (down 7.3%). While farms specialised in wine production also saw a decline in average income (down 7.5%), those specialising in the production of other permanent crops experienced a large rise in income of around 18.6%. Similarly, farms specialising in grazing livestock also experienced a rise in average income (up 10.5%), and those specialised in horticulture a rise of around 11.7%. Finally, incomes are once again expected to remain more-or-less static in farms specialising in the production of field crops.

Changes in nominal farm-gate prices in 2002 and 2001

(%)

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Changes in nominal purchase prices for agricultural inputs in 2002 and 2001

(%)

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Real output price indices for agricultural products

(1995=100)

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Development of agricultural income in the EU over the 1980-2002 period, in terms of annual change (%) and cumulative growth (1980 = 100)

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Source: Eurostat - DG AGRI calculation

Development of agricultural income in the EU Member States in 2002 (% change versus 2001)

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Source: Eurostat - DG AGRI calculation

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1.6. Farm accountancy data network (FADN)

49. The FADN is used to calculate output, costs and incomes of commercial farms in the EU from observed data collected in a survey of harmonised farm accounts. The survey provides valuable information about how farm incomes vary according to type of farming and location, which is not apparent from the global averages in the results for the agricultural sector as a whole. This section presents some information by type of farming and by country.

50. At the time of going to press, the results for the Netherlands for 2000 were not yet available and for some countries they were still provisional.

51. The large differences in average income among Member States are inherent in the structure of their agriculture. The Member States with the highest average incomes are, generally speaking, those with a large number of large-sized farms specialising in arable crops, dairy or the less regulated sectors of production (pigs, poultry, horticulture, ...). The southern Member States, with a large number of small farms engaged in 'mixed' farming (crop and livestock production) or 'other permanent crops' (mixes of different cropping enterprises) have average incomes below the EU average.

52. Table 1 shows the wide range of economic results among Member States for each type of farming, as measured by the Farm Net Value Added (FNVA). In 1999 Sweden showed a negative FNVA for the type of farm Drystock.

53. Table 2 shows the contribution of the balance of subsidies and taxes to FNVA. For EU-15 in 1999 the proportion of subsidies net of taxes to FNVA was 35% but there were big differences among Member States and among types of farming. In that year Finland and Sweden had an average FNVA that was lower than the balance of subsidies and taxes. This means that revenue from the market was not enough to cover production costs. On the other hand the part of subsidies in FNVA was the lowest in the Netherlands followed by Italy, Belgium and Spain. Regarding types of farming there are also big differences. Net subsidies in the drystock, arable and mixed types of farm were the highest as a proportion to income. The horticulture and vineyards types of farm were the least subsidised by far. In 2000 only Finland among the available countries had an average FNVA lower than the balance of subsidies and taxes. Belgium, Denmark, Spain and Italy had the lowest part of subsidies in FNVA.

54. FADN data can also be used to analyse the degree of concentration in the agricultural sector. This is reflected in tables 3 and 4 with data for 1999. In order to avoid the problems caused by the presence of some negative values for FNVA, the variable used is total receipts from farming, i.e. receipts from the market and from subsidies.

55. Table 3 shows the share of the 20% of farms with the highest total receipts per type of farm, per country and for the EU as a whole. For the EU and for all types of farms the 20% with the highest receipts account for 67% of the total. Per country, however, the degree of concentration is lower and only Portugal, Italy, Denmark and the UK reach 60%. Luxembourg, Austria and Finland are the countries with the lowest degree of concentration. Per type of farm at the EU level the concentration is the highest for general field cropping, horticulture, vineyards and mixed cropping. The lowest concentration is found in cattle dairying, rearing and fattening combined, specialists dairying, sheep and goats and specialists olives. Per country, specialists dairying is the least or one of the least concentrated types of farm in practically all the countries. The types of farm in which the concentration is the highest vary substantially from country to country.

56. Table 4 shows the degree of concentration according to the share of the 50% of farms with the highest total receipts. At the EU level for all the types of farm this share is 91%, while at the country level it is between 71% in Luxembourg and 87% in Italy and Portugal. Per type of farm specialists dairying, and cattle dairying, rearing and fattening combined are the least concentrated, followed by specialist olives. At the other extreme, the highest concentration is found in mixed livestock, mainly grazing.

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2. POLICY DEVELOPMENTS AND LEGISLATIVE INITIATIVES IN 2002

2.1. Mid-Term Review of the CAP

57. In its Communication dated 10 July 2002 [1], the Commission proposed a review in accordance with the objectives and general framework (Agenda 2000) established by the European Councils held in Berlin and Göteborg in 1999 [2] and 2001 respectively. This proposal is aimed at stabilising markets and improving common market organisations (first pillar of the CAP), achieving simpler and more sustainable direct support, bringing about a better balance of support for sustainable agriculture and rural development, and consolidating and strengthening rural development (second pillar of the CAP). To this end, the Commission proposes severing the link between production and direct aid; making such aid conditional upon meeting environmental, food safety, animal welfare and occupational safety standards; substantially increasing aid through modulation of direct payments; implementing a farm auditing system; and introducing new rural development measures to improve the quality of production, food safety and animal welfare and to cover farm auditing costs. In addition, where market policy is concerned, in order to improve the competitiveness of European agriculture, the Commission proposes completing the reform process initiated in 1992 [3], particularly through cuts in a number of intervention prices.

[1] COM(2002) 394, 10.7.2002 and Bulletin 7/8-2002, point 1.3.100.

[2] 1999 General Report, points 6 and 495 to 501.

[3] Twenty-sixth General Report, points 506 to 512.

58. The Commission played an active role in the major discussions which followed this Communication within the Council, the European Parliament, the European Economic and Social Committee, the Committee of the Regions and the Common Agricultural Policy Consultative Committees, as well as with civil society. These discussions were enriched by contacts in the Member States with farming and industrial circles, consumers and non-governmental organisations.

2.2. Quality policy

2.2.1. Proposal for an amendment to Council Regulation (EEC) No 2081/92 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs

59. Since 1994, geographical indications have been covered by the World Trade Organisation Agreement on TRIPS (Trade-Related Aspects of Intellectual Property Rights). Council Regulation (EEC) No 2081/92 therefore requires amendment in order to make it fully compatible with this Agreement. In March 2002 the Commission adopted a proposal for a Regulation amending Council Regulation (EEC) No 2081/92, the main objective of which is, first, to grant nationals of the WTO member countries the right to object and, second, to invite third countries to participate in the Community registration system by reciprocity and under equivalence conditions.

60. This Commission proposal was discussed within the European Parliament, which endorsed it in general terms in December 2002, while proposing some largely very constructive amendments. At the same time, a Council working party met on several occasions to discuss this proposal.

2.2.2. International context

61. During 2002, the Commission pursued its negotiations aimed at securing the establishment of a multilateral register of geographical indications within the context of the TRIPS Agreement, as well as the extension to other products of additional geographical indication protection equivalent to that provided for wines and spirits. In addition, within the framework of the WTO Agricultural Agreement, the Community presented a proposal aimed at restoring protection for certain names covered by the exceptions to Article 24 of the TRIPS Agreement, which suffer the effects of usurpation in third countries.

62. Where bilateral relations are concerned, a decision was taken within the Joint Committee set up under the Association Agreement between the European Union and Switzerland to propose to the Council that a working group be set up to negotiate a bilateral agreement on the mutual protection of geographical indications. The possibility of protecting the name "Emmental" as a protected designation of origin (PDO) in Switzerland would be a point of discussion within this working group.

63. In addition, the Commission entered into preliminary discussions with a view to laying down the foundations for future bilateral negotiations with China on the protection of geographical indications.

2.2.3. Registration of names under Council Regulations (EEC) Nos 2081/92 and 2082/92

64. Interest continued to be shown in the Community registration and protection schemes for names of quality products in 2002. Twenty-seven names were registered under Council Regulations (EEC) Nos 2081/92 and 2082/92, including ten as protected designations of origin, fourteen as protected geographical indications and three as traditional speciality guaranteed indications. These registrations bring the total number of names on the Community register of protected geographical indications and protected designations of origin up to six hundred and four, and the number of names on the Community register of certificates of specific character up to thirteen.

65. Registrations were carried out under the normal procedure laid down in Article 6 of Regulation (EEC) No 2081/92, save in the case of the name "Feta". This name had in fact been submitted by Greece for registration under the simplified procedure laid down in Article 17. The registration, which took place in 1996, had been annulled by the Court of Justice of the European Communities as a result of the appeals lodged by a number of Member States. The Commission took into account the Court's arguments that the possible "generic nature" of the term had not been examined in sufficient depth. As a result, a huge survey was conducted among the Member States. The matter was eventually submitted to the Scientific Committee for Protected Designations of Origin, Geographical Indications and Certificates of Specific Character, which expressed the view that the term is not generic.

66. In the absence of an opinion by the Regulatory Committee on Geographical Indications and Designations of Origin, the Commission proposal for registration was transmitted to the Council, which took no follow-up action. The Commission finally went ahead with the registration, which was published in October 2002.

List of PDOs, PGIs and GTSs registered in 2002

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2.2.4. Vertical Directives

67. In accordance with Article 5 of Council Regulation (EC) No 2991/94 of 5 December 1994 laying down standards for spreadable fats, the Commission presented the Council with a report, five years after the Regulation came into force, summing up the situation concerning the application of the specifications relating to claims implying a reduced-fat content. The general opinion is in favour of maintaining the terms, which meet manufacturers', distributors' and consumers' requirements, and no practical problems have arisen in applying the Regulation. This report was given a generally favourable reception by the Council.

68. The Commission presented to Member States its position (interpretative notes) concerning two labelling issues in relation to the implementation of Council Directive 2000/36/EC on cocoa and chocolate products. The Commission presented its position in Council concerning the current negotiations in Codex Alimentarius for the International Standard on fruit juices.

2.3. Organic farming

69. On 15 March 2002 the Commission adopted Regulation (EC) No 473/2002 [4] updating technical Annexes I, II and VI to Regulation (EEC) No 2092/91 [5] and laying down detailed rules as regards the transmission of information on the use of copper compounds.

[4] OJ L 75, 16.3.2002, p. 21.

[5] OJ L 198, 22.7.1991, p. 1.

70. On 26 June 2002 the Commission adopted Regulation (EC) No 1113/2002 [6] amending Regulation (EC) No 1788/2001 concerning the certificate of inspection for imports from third countries. The certificate has to be presented with the products to the competent authority of the importing Member State and will enter into force on 1 November 2002.

[6] OJ L 168, 27.6.2002, p. 31.

71. On 25 October 2002 the Commission adopted Regulation (EC) No 1918/2002 [7] amending Regulation (EC) No 1788/2001 concerning the certificate of inspection for imports from third countries. The purpose of the Regulation was to give clarifications concerning the information to be included in the certificate.

[7] OJ L 289, 26.10.2002, p. 15.

72. Following the adoption of Regulation (EC) No 1804/1999 [8] bringing organic livestock production within the scope of Regulation (EEC) No 2092/91, the Commission launched a work programme aimed at clarifying certain issues relating to organic livestock production which were raised by the Council at the time of the adoption of Regulation (EC) No 1804/1999. The main issues currently covered by the programme are as follows:

[8] OJ L 222, 24.8.1999, p. 1.

- a regulation establishing labelling and inspection requirements for animal feedingstuffs was adopted by the Standing Committee for organic farming in December 2002;

- additions to sections A and B of Annex VI as regards the non-agricultural ingredients and processing aids used in processed livestock products; a proposal will be submitted to the Standing Committee in the first half of 2003;

- supplementing feedingstuffs with synthetic vitamins;

- evaluation of the need for feed materials of conventional origin and feed supplements;

- issues concerning availability of organic livestock.

73. The continuous process of updating the annexes to Regulation (EEC) No 2092/91 included discussion on:

- derogation for the use of non-organic seeds;

- use of substrates in organic farming.

74. The possibility of developing a European Action Plan for organically produced food and organic farming was further discussed and a Commission staff working paper [9] has been drawn up.

[9] SEC(2002) 1368 of 12 December 2002.

75. The assessment of equivalency under Article 11(1) of Regulation (EC) No 2092/91 is ongoing for several third countries. On 28 June 2002 the Commission adopted Regulation (EC) No 1162/2002 [10] amending Regulation (EEC) No 94/92 laying down detailed rules for implementing the arrangements for imports from third countries provided for in Council Regulation (EEC) No 2092/91 and including New Zealand on the list of third countries. On 30 December 2002 the Commission adopted Regulation (EC) No 2382/2002 [11] amending Regulation (EEC) No 94/92 in order to prolong the duration of inclusion of the third countries listed in the Annex to this Regulation.

[10] OJ L 170, 29.6.2002, p. 44.

[11] OJ L 358, 31.12.2002, p. 120.

76. Harmonisation of the conditions for issuing import authorisations according to Article 11(6) has started in a working group.

2.4. Promotion of agricultural products

77. In August 2002 under the new arrangements for measures to provide information on, and to promote, agricultural products on the internal market of the Community introduced by Council Regulation (EC) No 2826/2000, the Commission approved 40 of the 123 programmes submitted by professional organisations via the national authorities concerned.

78. These campaigns chiefly target consumers within the EU. The products concerned are mainly cheese and milk products, fresh and processed fruit and vegetables, flowers and green plants, and wine, as well as information on organically produced food. Community part-financing (50%) will amount to EUR 32.1 million over three years, with EUR 17.5 million in the first campaign year.

79. The specific measures in the beef sector were ongoing during 2002, as were the measures for the promotion of agricultural products in third countries, both decided in 2001. For the latter measure, a new series of campaigns will be adopted in January 2003.

2.5. Simplification of agricultural legislation

2.5.1. Introduction

80. Simplification work carried out by the Commission in the field of agricultural legislation has focused on, first, making agricultural legislation as clear, transparent and easily accessible as possible and, second, reducing the administrative workload that the common agricultural policy (CAP) imposes on farmers and administrative authorities.

81. The simplification of agricultural legislation was discussed by the experts group on simplification which was set up by the Commission following the conclusions of the Agriculture Council meeting of October 2000. The group met several times and discussed and gave its opinion on issues including the implementation of the Small Farmers' Scheme, simplification of rural development policy, the CAP-ED project (a project creating an electronic dictionary of codes used within the CAP, with the intention of facilitating and simplifying the electronic exchange of information between the Commission and the Member States) and simplification of Member States' reporting obligations.

2.5.2. Transparency and accessibility of agricultural legislation

82. Work on the project to consolidate agricultural legislation continued this year. The project aims to consolidate agricultural legislation in all official languages of the EU and make it available on the Internet for the general public. Modifications to agricultural acts are integrated into the basic text so that a single and updated, though not legally binding, version can be consulted.

83. Moreover, the Commission has launched a horizontal project in order to codify the Community acquis before the end of 2005. Agricultural legislation will be included in this exercise and legally binding codified texts of agricultural acts will be adopted in the next few months.

2.5.3. Simplification measures in different sectors

84. The adjustments in policy measures proposed under the mid-term review promote a substantial simplification of the CAP. The Commission has proposed introducing a single decoupled income payment per farm for certain direct aids, which, by cutting the link between payments and production, will mean a major simplification in the support for EU farmers.

85. In the framework of rural development policies and in tandem with the discussions on the simplification of the Structural Funds, DG AGRI has started to reflect on how to simplify Community rural development policy. A priori the discussion is limited to the present programming period 2000-2006. The exercise is aimed, first, at identifying the legal and administrative provisions that are sources of complexities in Community rural development policy and so hinder its implementation and the achievement of its objectives and, second, at identifying possible solutions. This debate should also result in a useful exercise in view of the accession of candidate countries before the end of the programming period (2000-2006).

2.5.4. Small Farmers' Scheme

86. The implementing rules for the Small Farmers' Scheme were adopted at the end of last year [12]. For the calendar year 2002 only Italy applied the scheme. After having adopted the necessary national measures to implement it (database, internal rules, forms etc.), Italy received requests from over 2000 farmers to participate in the SFS. According to the Italian authorities the administrative adjustments needed to implement the scheme may be the reason for the relatively low number of participants. A higher number is expected for the year 2003.

[12] Commission Regulation (EC) No 1/2002 of 28 December 2001 laying down detailed rules for the application of Council Regulation (EC) No 1259/1999 as regards the simplified scheme for payments to farmers under certain support schemes (OJ L 1, 3.1.2002, p.1).

2.6. State aid

2.6.1. New guidelines for state aid relating to the cost of disposing of slaughterhouse waste and fallen stock, as well as for transmissible spongiform encephalopathies (TSE) tests

87. On 27 November 2002 the Commission adopted new guidelines for state aid relating to the cost of disposing of slaughterhouse waste and fallen stock, as well as for transmissible spongiform encephalopathies (TSE) tests [13]. These new rules clarify and modify state aid policy in these sectors. This was necessary because Member States had been following different policies that created a serious risk of distortion of competition.

[13] OJ C 324, 24.12.2002, p. 2.

88. BSE legislation has significantly altered the economics of slaughterhouse waste. What was a valuable product in the past is waste now, to be disposed of at a high cost.

89. In order to allow the sector to adapt, the Commission authorised the payment of appreciable amounts of public support. However, this could lead to serious distortions of competition. Some Member States grant substantial amounts of aid, while others do not. A review of the policy was, therefore, necessary. The new rules respect the need to protect human health and the environment, which justifies the granting of aid without creating undue distortions of competition.

90. These new guidelines do not in any way affect the possibility of granting state aid or the legal obligation deriving from specific Council Regulations to compensate farmers for losses where their animals are found to be infected by BSE or comparable diseases. They rather relate to the permanent financial burden associated with the general obligation to test and separate risk material from healthy animals.

91. In future, no state aid is to be granted towards the cost of disposing of slaughterhouse waste of any kind. By way of exception, Member States may grant 50% aid for the disposal of specified risk material and meat- and bonemeal produced in 2003 which may no longer be used for commercial purposes.

92. As to TSE tests, Member States will have to respect an upper limit of EUR 40 of total public support towards the cost of testing a bovine animal (BSE tests) slaughtered for human consumption from 1 January 2003. No such upper limit exists at present. The support comprises the total cost of testing, i.e. the test kit and the taking, transportation, analysis, storage and destruction of the sample. It should be borne in mind that EUR 15 of the EUR 40 is currently paid by the Community (EUR 10.5 in the year 2003). This limit of EUR 40 was found to be sufficient to cover the price charged by the most competitive test-kit suppliers in the European Union. It will prevent undue distortions of competition and give suppliers who charge more an incentive to reduce their prices. For other TSE screening tests (e.g. on fallen cattle or sheep), the Commission has decided to continue to authorise state aid of up to 100% with no restrictions on the amount.

93. In the case of fallen stock on the farm, and only such stock, Member States may also grant public support of up to 100% of the removal costs (collection and transport) and 75% of the destruction costs (storage, processing, destruction and ultimate disposal). 100% aid for destruction may be granted in some circumstances, e.g. if it is financed through fees or contributions from the meat sector. In order to allow Member States to adapt existing financing systems, the Commission will authorise aid of up to 100% up to the end of 2003.

94. These guidelines will apply to new state aid, including any notifications from Member States that are pending, with effect from 1 January 2003. The Commission proposes that Member States should bring their existing aid schemes into line with these guidelines by 31 December 2003. The present guidelines will remain in force until 31 December 2013.

2.6.2. Overall workload

95. The Commission received 341 notifications of draft state aid measures in the agricultural and agri-industrial sector. The Commission also started the examination of 34 aid measures which had not been notified in advance under Article 88(3) of the EC Treaty. No review of existing aid measures pursuant to Article 88(1) of the EC Treaty was commenced or concluded. Overall, the Commission raised no objections to 250 measures, several of which were approved after the Member States concerned either amended them or undertook to amend them in order to bring them into line with Community state aid rules. The Commission launched the procedure laid down in Article 88(2) of the EC Treaty in respect of five cases where the measures concerned raised serious doubts about compatibility with the common market. The Commission closed the procedure provided for in Article 88(2) of the EC Treaty in respect of four cases, taking a final negative decision in three. In all the cases where a negative decision was taken and state aid had already been granted by the Member State concerned, the Commission requested recovery of the aid paid.

96. The overview of cases which follows includes a selection of the cases which raised the most interesting issues of state aid policy in the agricultural and agri-industrial sector in 2002. For the sake of clarity, the cases have been classified by topic.

2.6.2.1. Germany

Aid schemes aimed at compensating for the damage caused by the recent floods in Germany

97. The European Commission approved five aid schemes aimed at compensating victims in the agricultural sector for the damage caused by the recent floods in Germany.

98. The schemes were examined rapidly and it was concluded that the compensation proposed by Germany could be paid in its entirety. The measures were considered compatible with Article 87(2)(b) of the Treaty, which states that the Commission can approve aid to repair the damage caused by natural disasters. The measures approved provide for:

- Financial compensation of up to a total of 20% (30% in disadvantaged areas) will be given to farmers for lost revenue due to floods and land surface damage [14].

[14] Aid N 567/2002.

- On-the-spot-payments of up to a total of 50% will be handed out for damage due to floods and, in particular, the loss, destruction and damage of economic goods, such as plant, machines, land and livestock. Farmers will be compensated for circulating capital as well as evacuation costs [15].

[15] Aid N 581/2002.

- Aid will also be given for the full or partial compensation of property investment losses in order to keep businesses in operation [16].

[16] Aid N 595/2002.

- The special programme under the Joint Scheme (Gemeinschaftsaufgabe) in the agricultural sector for flood damage specifically covers aid for the restoration of villages, roads in rural areas and forests, and aqua-culture activities. Particular emphasis is placed on environmentally friendly restoration [17].

[17] Aid N 647/2002.

99. Loans from the Landwirtschaftliche Rentenbank will be supported by a guarantee of 80% for loans for liquidity aid or for investments in agricultural and forestry holdings [18].

[18] Aid N 682/2002.

Certified beef quality label in Bavaria

100. On 13 February 2002 the Commission authorised Germany (Bavaria) to pay aid worth a total of EUR 3.5 million in the year 2002 for the introduction of a new quality label. For the years 2003 and 2004, an annual budget of more than EUR 2 million has been approved. The quality label is part of an extensive quality assurance and control programme, which has been introduced in order to restore consumer confidence after a significant drop in beef sales following the BSE crisis. Access to the quality label is open to all enterprises in the European Union complying with the programme requirements.

101. The aid is to cover the cost of several individual measures, such as:

- controls and certification of companies participating in the programme,

- information measures designed to explain the label and its performance to the consumer,

- sales promotion and advertising measures.

102. The aid will be granted to groups of users of the quality label, such as marketing associations or other firms in the food production area. Users of the label must meet conditions relating to the production, processing and marketing of cattle and beef and will encounter markedly higher control standards than normal. There are also plans to extend the label to products other than beef at a later date.

103. The Commission authorised this aid on the basis of new guidelines for state aid for the advertising of agricultural products, which entered into force on 1 January 2002. These guidelines make it possible, for the first time, to combine information about product quality and product origin in the framework of such a label. The label for which the Commission has now authorised the granting of state aid allows producers from all over the Community to indicate the respective origin of their products.

2.6.2.2. Greece

Aid to compensate for losses caused by natural disasters

104. On 26 September 2002 the Commission approved a major state aid scheme aimed at compensating for the losses caused by natural disasters in Greece [19]. The method used to calculate the losses is based not on overall production in the reference years, which is the principal method of calculation advocated by the Community guidelines on state aid in the agricultural sector, but on regional output (the guidelines state that methods of calculation other than those given may be used provided that their appropriateness is demonstrated). The budget for this scheme is very substantial: over EUR 171 million for state aid and more than EUR 126 million for the aid still under consideration which the Greek authorities would like the European Union to part-finance.

[19] Aid N 143/2002.

2.6.2.3. Spain

Measures taken by Spain to support agriculture following the fuel price increase

105. On 11 December 2002 the Commission took a final, partly negative decision concerning the support measures introduced by Spain following the fuel price increase, in respect of which it had initiated the formal investigation procedure in April 2001 [20]. The Commission considered that a number of measures directly associated with this price rise do not fall within the scope of the state aid rules. On the contrary, it considered that Spain was unable to demonstrate that two measures in the package presented (subsidising loans and guarantees and certain tax benefits) were confined to compensation for the losses incurred as a result of the fuel price increase. The Commission therefore regarded this aid as operating aid which was incompatible with the competition rules.

[20] Aid C 22/2001.

106. The Commission decided that the following measures did not constitute aid under the Treaty:

- Amendment of Law 37/1992 on value-added tax;

- Tax measures to support agricultural cooperatives;

- Measures in respect of natural persons' income tax and value-added tax, including the following:

- For 2000, the application of a corrective index to feed purchased from third parties in the case of certain livestock farming activities covered by the scheme for the objective assessment of personal income tax;

- For 2001, a reduction in the net yield under the scheme for the objective assessment of personal income tax for arable and livestock farming activities;

- Also for 2001, reduction in the percentage for calculating quarterly value-added tax payments under the simplified arrangements for certain agricultural activities and the tax measure consisting in raising the percentage of expenditure which is difficult to substantiate in the context of personal income tax.

107. Conversely, the Commission decided that state aid granted to farmers in the form of subsidies on loans and guarantees, and the measure extending for 2000 and 2001 the tax benefits applicable to personal income tax on transfer of certain agricultural land and holdings are incompatible with the common market. For these measures, Spain did not provide any information demonstrating any link between the rise in the price of oil and the losses suffered by farmers.

108. Since the aid is illegal, Spain must cancel it and recover it from the beneficiaries immediately. Spain must inform the Commission within two months of the measures which it has taken to cancel and recover the aid.

Aid for the extraction, refining and bottling of olive pomace oil

109. On 14 March the Commission decided to initiate the state aid investigation procedure with regard to a Spanish aid scheme for the extraction, refining and bottling of olive pomace oil [21].

[21] Aid C 21/2002 (ex NN 14/2002).

110. The aid granted is in the form of loans of a maximum overall amount of ESP 5 000 million (EUR 30.05 million), with a rate of interest subsidised by the Ministry of Agriculture, which will also be able to subsidise the guarantees on these loans.

111. At this stage, the Commission considers that this aid constitutes state aid which is intended to improve the financial situation of enterprises but does not in any way contribute to the development of the sector. Consequently, it could constitute operating aid incompatible with the common market. In addition, this aid is likely to be in breach of Community legislation (common market organisations).

Aid to olive oil producer organisations

112. On 19 July 2002 the Commission decided to initiate the state aid investigation procedure with regard to a regional (Extremadura) aid scheme for olive oil producer organisations. The aid, in the form of grants calculated on the basis of the number of production aid applications submitted for olive oil and table olives, is in addition to the aid provided for in Regulation No 136/66/EEC.

113. At this stage the Commission considers that a grant to olive oil producer organisations calculated on the basis of the number of production aid applications submitted for olive oil and table olives is a state aid intended to improve the financial situation of the groups but does not in any way contribute to the development of the sector. It is, therefore, to be regarded as operating aid incompatible with the common market. In addition, it is aid which is likely to interfere with the mechanisms governing the common market organisations and to be in breach of them and, therefore, Community legislation.

2.6.2.4. France

Aid for financing the public rendering service

114. On 10 July 2002 the Commission decided to initiate the formal investigation procedure with regard to certain aspects of the rendering scheme in France [22]. The Commission received several complaints claiming that the rendering levy is liable to result in distortion.

[22] Aid C 49/2002.

115. The purpose of the rendering levy is to finance a public service consisting in the collection and destruction of animal carcasses and material seized at slaughterhouses recognised as being unfit for human or animal consumption. The levy was introduced with effect from 1 January 1997, and is applied to the ex-VAT value of all purchases of meat and other specified products by all retailers of these products.

116. The major aspect under investigation is the application to meat imported from other Member States of the rendering levy introduced to finance the scheme, despite the fact that such meat gains no advantage from the scheme. In addition, since the public rendering service is free of charge, those benefiting from it, i.e. slaughterhouses, stockfarmers and holders of animal meal, do not have to meet the cost of eliminating the waste produced by their activities. This could constitute state aid to such businesses, which might be incompatible with the rules.

117. The Commission is also looking into the fact that the levy is imposed on businesses above a certain minimum total turnover rather than on the basis of sales of meat. In fact, a business that is exempt from the levy may in fact sell more meat than a business that pays the levy because of a higher total turnover generated by other products. Such exemption could constitute incompatible state aid to the businesses that do not pay the levy.

118. Moreover, the Court of Justice of the European Communities has been asked to give a preliminary ruling on the interpretation of Article 87(1) of the Treaty [23] in connection with the rendering levy.

[23] Case C-126/01, Ministry of Economic Affairs, Finance and Industry v GEMO SA.

2.6.2.5. Italy

Tax credits for investments in the agricultural sector

119. On 26 July 2002 the Commission approved an Italian aid scheme entitled "tax credits for agricultural investments" [24]. The scheme provides for measures to support farm investments in the production sector and in the processing sector for the agricultural output of any farm, with the exception of investments for processing products listed in Annex I to the Treaty that are carried out in Italian regions eligible for the exemptions provided for in Article 87(3)(a) and the Abruzzi and Molise areas eligible for the exemptions provided for under Article 87(3)(c) of the Treaty, which were covered by another Decision (Aid N 324/02). The budget for the scheme amounts to EUR 155 million a year up to 2006.

[24] Aid N 220/2002.

Aid scheme in favour of SMEs financed by the Union of the Chambers of Commerce

120. On 13 May 2002 the Commission approved an aid scheme [25] in favour of undertakings operating in the agricultural sector financed by the national Union of the Chambers of Commerce. The scheme, aimed at promoting the development of SMEs operating in the agricultural sector, has a yearly budget (for the first year) of about EUR 30 900 000. Aid is granted for investments in the production, processing and marketing sectors; for the diversification of agricultural activities, for the payment of insurance premiums, for encouraging the production and marketing of quality agricultural products, for technical assistance, for the livestock sector, for promotion and advertising, for the setting-up of risk-capital funds and for guarantees.

[25] Aid N 241/2001.

Italian aid to advertising

121. On 1 March 2002 the Commission approved a national aid scheme for promotion and advertising measures [26]. This scheme amends the similar schemes already approved by the Commission under Aid No N 558/2000 [27] and Aid N 729/A/2000 [28] in order to bring them into line with the Community guidelines for state aid for advertising of products listed in Annex I to the EC Treaty and of certain non-Annex I products [29].

[26] Aid N 30/2002.

[27] See letter SG(2001) D/286564 dated 28.2.2001.

[28] See letter SG(2001) D/286847 dated 13.3.2001.

[29] OJ C 252, 12.9.2001, p. 5.

122. This is one of the first instances of large-scale application of the guidelines (all types of association representing agricultural producers being potential beneficiaries of the scheme). The implementation of the scheme will be checked in the annual reports to be sent by the Italian authorities.

2.6.2.6. The Netherlands

Rationalisation aid scheme for pig slaughterhouses in the Netherlands

123. On 28 December 2001, the European Commission decided to initiate a formal state aid investigation procedure concerning a notified rationalisation scheme for pig slaughterhouses in the Netherlands [30]. In the light of the judgment of the Court of First Instance in the case Weyl Beef Products BV and Others v Commission [31], it was deemed necessary to examine whether the notified measure, involving an agreement between undertakings to reduce capacity, complied with Article 81 of the EC Treaty. The Commission doubted that the measure could be exempted as a crisis cartel because there appeared to be no structural over-capacity in the sector and, furthermore, it seemed doubtful that the measure would improve production. Finally the Commission also had doubts about the compatibility of the proposed measure with the provisions of section 9 of the guidelines on state aid in the agriculture sector. By letter of 5 August 2002 the Dutch authorities withdrew the notification of the measure. Therefore no final decision will be taken in this case.

[30] Aid C 91/2001 (ex N 568/2001), OJ C 37, 9.2.2002, p. 17.

[31] Joined cases T-197/97 and T-198/97, 31.1.2001.

2.6.2.7. Portugal

Recovery of incompatible aid granted to the pig sector: Article 88(2) of the Treaty, Case C-110/02, Commission v Council

124. On 27 February 2002 the European Commission decided to ask the Court of Justice to annul the Decision of the Council of Ministers of 21 January 2002 [32] authorising Portugal to grant aid of a maximum of EUR 16.3 million to pig farmers. This is the same amount of state aid as should have been repaid by 2 116 farmers under two final negative decisions of the Commission dated 25 November 1999 [33] and 4 October 2000 [34].

[32] Decision 2002/114/CE of 21 January 2002 (OJ L 43, 14.2.2002, p. 18).

[33] OJ L 66, 14.3.2000, p. 20.

[34] OJ L 29, 31.1.01, p. 49.

125. Considering that the aid under these measures was incompatible with Treaty Articles 87 and 88 on state aid, the Commission required Portugal to take action to recover the amounts illegally granted. Portugal did not appeal to the Court of Justice and so the decisions remained unchallenged.

126. The Portuguese authorities in fact launched proceedings to recover the incompatible aid but altered their opinion and in a letter dated 23 November 2001 formally asked the Council to authorise, under Article 88 of the Treaty, aid totalling EUR 16.3 million for the 2 116 farmers affected by the Commission's two negative decisions.

127. On 21 January the Council, despite the Commission's opposition, adopted a decision authorising this aid. The formal basis of that decision is Article 88(2) of the Treaty. The Commission considers that the Council has misused this provision in the case in point. The Council took this decision more than fifteen months after the Commission's second decision was adopted. It is the first time that the Council has used this exceptional procedure to approve an aid the sole purpose of which is to cancel the financial impact of two final decisions of the Commission. The latter considers the legal security of European Union decisions to be seriously threatened by the Council's decision.

128. For the Commission the Council's use of Article 88 to cancel out de facto and regardless of time the financial impact of the two final decisions:

- unacceptably violates the legal security of all the interested parties,

- involves an assumption by the Council of a position of higher authority that infringes both the Commission's decision-making power and the Court's jurisdictional power,

- raises questions of principle, on the reality of the Commission's authority in state aid policy matters and on the allocation of responsibilities between the Institutions as intended by the Treaty itself.

It has therefore referred this matter to the Court of Justice [35].

[35] Case C-110/02, Commission v Council.

2.6.2.8. Case law

Case T- 152/99 - Hijos de Andrés Molina SA (HAMSA) v Commission

129. On 11 July 2002, the Court of First Instance of the European Communities ruled on the action for the annulment of Commission Decision 1999/484/EC of 3 February 1999 [36] declaring as illegal and incompatible with the common market the state aid granted by the Spanish Government to the company Hijos de Andrés Molina SA (HAMSA), which was lodged by the latter and supported by Spain.

[36] OJ L 193, 26.7.1999, p. 1.

130. The beneficiary, HAMSA, had been the subject of a number of financial support measures since 1993, namely loans and guarantees from the public body IFA, capitalisation of part of its debt to IFA and the waiver of debts by several public bodies.

131. Of the eight pleas submitted by the applicant, with the support of the Spanish Government, for the annulment of the Commission Decision, the only one to be upheld by the Court related to the aid granted in the form of an annulment of debt by public bodies.

132. In its judgment, the Court recognised that the Commission had assessed the overall situation of the public creditors in relation to that of the private creditors, drawing decisive conclusions from a simple comparison between the total amount of public claims and private claims, and between the average percentage of the waiver of public claims and private claims, and finding that the public creditors, unlike most of the private creditors, had preferential claims or mortgages. The Court considers that it was for the Commission to assess, with regard to each of the public bodies in question and taking account of the above-mentioned factors, whether the waiver of debt which had been granted by it was more generous than that which would have been granted by a hypothetical private creditor had it been in a situation vis-à-vis the undertaking comparable to that of the public body and seeking to recover the sums owed to it. It is therefore the overall simplistic approach followed by the Commission that resulted in the annulment of this part of the Decision.

133. On the other hand, the Court rejected all of the applicant's other complaints, particularly that relating to non-application of the principle of regional discipline to ad hoc sectoral aid and that relating to the effects on trade, which was based on global data rather than specific analytical evidence.

Cases C-113/00 and C-114/00, Kingdom of Spain v Commission

134. Two applications were made to the Court for the annulment of Commission Decisions 2000/237/EC [37] and 2000/0240/EC [38], both dated 22 December 1999, declaring two aid schemes implemented by Spain to be incompatible with the Treaty. They concern aid for, first, horticultural products intended for industrial processing and, second, the financing of operating capital.

[37] OJ L 75, 24.3.2000, p. 54.

[38] OJ L 76, 25.3.2000, p. 16.

135. In both cases the Court confirmed that the relatively small amount of aid or the relatively small size of the undertaking which receives it does not as such exclude the possibility that intra-Community trade may be affected and that agricultural aid is exempt from the de minimis rule.

136. As regards the absence of a statement of reasons regarding the finding that there was an effect on intra-Community trade, the Court confirmed that the Commission is not bound to demonstrate the effect of aid. At the same time, it noted that the contested Decisions included figures on trade between the other Member States and Spain, thus indicating the overall context in which the aid schemes operate, as well as details of the general effect of aid on production costs and on the existence of a common organisation of the markets.

137. The Court also confirmed in the two judgments that:

- the use of the words "abnormally" and "serious" in Article 87(3)(a) shows that the exemption concerns only areas where the economic situation is extremely unfavourable in relation to the Community as a whole, while the exemption in Article 87(3)(c) is wider in scope inasmuch as it permits the development of certain areas in a Member State which are disadvantaged in relation to the national average. It adds that, in the case of operating aid not conceived as regional aid to investment or for the creation of jobs and not covered by another practice such as that involving subsidised short-term loans in agriculture (crédits de gestion), an analysis of the sectoral impact takes precedence over that of the regional impact;

- the aid schemes in question established a financial incentive to sell and purchase raw materials from the region and accordingly constitute a restriction on the free movement of goods; in practice, they amount to a measure having equivalent effect to a quantitative restriction, which is prohibited by the Treaty. In those circumstances, they could not be declared to be compatible with the common market, the common market organisation concerned being affected.

2.7. Assistance to the needy

138. During the year, the European Union spent EUR 200 million on a food aid programme for the needy under which agricultural products in intervention storage were made available to charities. Since Germany, Austria, the Netherlands, Sweden and the United Kingdom decided not to operate the programme in 2002, the amount allocated to them was spread between the other Member States.

2.8. Outermost regions

139. On 28 June 2001 the Council adopted a series of Regulations repealing the previous Regulations based on the programmes of options specific to remoteness and insularity (POSEIDOM, POSEIMA, POSEICAN). The new Regulations are Regulations (EC) No 1452/2001, (EC) No 1453/2001 and (EC) No 1454/2001 [39], applicable to the French overseas departments, the Azores and Madeira, and the Canary Islands respectively. In addition, Regulation (EC) No 1455/2001 made the necessary adaptations to the common organisation of the market in beef and veal [40].

[39] OJ L 198, 21.7.2001, pp. 11-57. They replace, respectively Regulations (EEC) No 3763/91 (POSEIDOM) for the French overseas departments, (EEC) No 1600/92 (POSEIMA) for Madeira and the Azores and (EEC) No 1601/92 (POSEICAN) for the Canary Islands.

[40] OJ L 198, 21.7.2001, p. 58. This common market organisation was last governed by Regulation (EC) No 1254/1999.

140. In 2002 the Commission completed the implementation of the innovations introduced by the 2001 Regulations. That involved, in particular, the adoption of Commission Regulation (EC) No 43/2003 of 23 December 2002 laying down detailed rules for applying Council Regulations (EC) No 1452/2001, (EC) No 1453/2001 and (EC) No 1454/2001 as regards aid for the local production of crop products in the outermost regions of the Union [41], and Regulation (EC) No 98/2003 of 20 January 2003 establishing the supply balances and Community aid for the supply of certain essential products for human consumption, for processing and as agricultural inputs and for the supply of live animals and eggs to the outermost regions under Council Regulations (EC) No 1452/2001, (EC) No 1453/2001 and (EC) No 1454/2001 [42].

[41] OJ L 7, 11.1.2003, p. 25.

[42] OJ L 14, 21.1.2003, p. 32.

141. Through Regulation (EC) No 43/2003, the Commission groups together in a single text all the provisions currently dispersed throughout eleven different implementing Regulations relating to all production of crop products in the outermost regions of the Union for which support is granted under Regulations (EC) No 1452/2001, (EC) No 1453/2001 and (EC) No 1454/2001. As well as consolidating the above-mentioned pre-existing provisions, the new text comprises a new title relating to the management and control system for aid schemes, which will align practices in the outermost regions on those applied in the rest of the territory of the Union under Regulation (EC) No 3508/92.

142. Through Regulation (EC) No 98/2003, the Commission implements the results of the 2001 reform of the POSEI schemes by establishing, for products covered by the specific supply arrangements, aid for supplies to the outermost regions, including the flat-rate minimum aid designed to take account of the additional transport costs and, for farm inputs and products intended for processing, the remoteness and insularity to be taken into account where aid in proportion to the refunds granted for similar products exported to third countries does not cover these additional costs.

2.8.1. Overseas countries and territories (OCT)

143. The new Council Decision (2001/822/EC) of 27 November 2001 on the association of the overseas countries and territories with the European Community ("Overseas Association Decision") was adopted on 27 November 2001.

144. During 2002, the Commission adopted the implementing rules for rice and sugar (Regulations (EC) No 174/2002 [43] and (EC) No 192/2002 [44]).

[43] OJ L 30, 31.1.2002, p. 33.

[44] OJ L 31, 1.2.2002, p. 55.

2.9. Information measures concerning the CAP

145. Council Regulation (EC) No 814/2000 [45] provides for information measures relating to the common agricultural policy, intended for both Member States and the outside world. Commission Regulation (EC) No 2208/2002 [46] (which replaces Commission Regulation (EC) No 1390/2000 [47]) lays down detailed rules for its application and introduces significant improvements to the scheme: simplification, transparency, better evaluation of the information actions proposed, better definition of the messages to communicate and means of distribution.

[45] OJ L 100, 20.4.2000, p. 7.

[46] OJ L 337, 13.12.2002, p. 21.

[47] OJ L 158, 30.6.2000, p. 17.

146. The purpose of the policy is to explain the issues surrounding the CAP, promote the European model of agriculture, keep farmers and other rural interests informed and raise public awareness of the implications and goals of the CAP.

147. Adoption of the Commission's proposal finances three types of measures:

- annual work programmes presented, in particular, by farmers' or rural development organisations, consumers' associations and environmental protection associations,

- specific measures to be implemented in particular by the public authorities of the Member States, the media and universities, and

- activities implemented on the Commission's own initiative.

148. Actions fall into two main categories:

- those submitted at the initiative of third party organisations for part-financing by the EAGGF which can be either programmes or specific actions,

- those at the initiative of the Commission and financed at a rate of 100% by the EAGGF.

2.9.1. Grants

149. Analysis of applications received from all countries in the Community of Fifteen in 2000, 2001 and 2002 shows a steady annual increase (from 66 to 145 to 199 of which 27, 54 and 40 were applications for part-financing of programmes and 39, 91 and 159 were applications for specific measures in each of the three years).

150. The majority of programmes part-financed were from Belgium, which reflects the presence in Belgium of a number of European umbrella organisations such as COPA, CEJA and AEFPR but figures for the specific actions reveal a wider distribution with significant numbers of actions financed in France, Spain and Italy. Similar trends can be seen in the amounts of visits to Brussels requested by French, Spanish and Italian groups and in the volume of letters and e-mail questions submitted to the services of DG Agriculture.

151. Individual organisations which were successful in obtaining part-financing of their information programmes include the traditional beneficiaries of the "pre 814/2000 information policy grants" such as COPA-COGECA, AEFPR and CEJA but also national consumer organisations, national journalists' organisations, European environmental organisations and rural development groups. A number of national member organisations of the European umbrella organisations were also successful, as were some provincial/regional organisations and academic bodies.

2.9.2. Actions at the Commission's initiative

152. The Commission was represented at various agricultural fairs throughout the EU: Grüne Woche in Berlin, Salon de l'Agriculture in Paris, the Salon Alimentaria in Barcelona, AGRIBEX in Brussels as well as the fairs held in Verona (Italy) and Hameelina (Finland).

153. An innovative aspect of the stands was the voluntary cooperation of national and local farmers' and interbranch organisations to present not only our documentation but also tangible experiences of quality agricultural production from these countries. This type of joint action demonstrates clearly the complementarity of the Commission's general information actions under Council Regulation No 814/2000 and actions provided for in the context of other regulations governing information on agricultural products.

154. Another partner was the Rural Carrefour network that accompanied Commission staff in providing information on the stand. The presence of a Commission stand at agricultural fairs provided a base for our participation in a number of other communication activities in the context of the fairs involving press and professional organisations.

155. Conferences were organised in Brussels for Agricultural Press and Rural Carrefours and a conference on Mountain Agriculture was co-financed between DG AGRI and DG REGIO. Two major information events were organised for leading members of the agricultural world as well as academics, consumers, the press and other citizens from all the candidate countries, including Turkey, in Riga and Prague.

156. The regular publ