REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGGF Guarantee Section expenditure - Early warning system No 3/2004

1. Overall outturn in monthly expenditure

The following tables show the overall outturn in monthly expenditure in relation to the expenditure profile. This situation corresponds to expenditure incurred in the Member States from 16 October to 31 January 2004.

1.1. Subheading 1a: Part of policy areas 05 (Agriculture), 11 (Fisheries) and 17 (Health and Consumer Protection)

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1.2. Subheading 1b: Policy area 05 (Agriculture) - Rural Development (article 05 04 01)

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2. Provisional utilisation of appropriations

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

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3. COMMENTS

3.1. The uptake of appropriations for March 2004

The uptake of appropriations under heading 1 of the budget for March 2004 (Member States' expenditure from 16 October to 31 January 2004) amounts to EUR 27 545,6 million, i.e. 61,5% of appropriations. Expenditure is

- EUR 66,0 million above the indicator for subheading 1a, and

- EUR 283,8 million under the indicator for subheading 1b.

3.2. Monetary factors

The dollar/euro rate

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

In accordance with the Council Regulation on budgetary discipline (Council Regulation (EC) No 2040/2000 of 26 September 2000), the letter of amendment to the 2004 agriculture budget was drawn up on the basis of the average dollar rate for July, August and September 2003, i.e. EUR 1 = $ 1,12. For the period 1 August to 31 January 2004 the average dollar rate was equal to EUR 1 = $ 1,18 i.e. at a level above the rate used for the establishment of the 2004 budget.

3.3. Market factors

Subheading 1a

For subheading 1a, the rhythm of execution is above the level of the indicator for the animal products sector while it stands below the level of the indicator for the plants products sector. For the plant products sector, this under-execution is primarily related to sugar, cereals, tobacco and to other plant products/measures. For the animal products sector, this over-execution is attributed to beefmeat and sheepmeat. Therefore, the following comments are due:

Article 05 02 01: Market measures for cereals // Divergence: -EUR 51 million (-9,4%)

// (expenditure: EUR 171 million)

(indicator: EUR 222 million)

This under-execution is primarily attributable to the lower level of aid payments declared by the Member States for starch intervention as compared to the level of the indicator. This is due to the fact that, because of the current favourable market conditions, the rate of the production refund for starch has been set at zero. If this situation persists, then, there might be an under-implementation of the budget's appropriations for this scheme by the end of the budget year.

Article 05 02 03: Direct payments for arable crops // Divergence: + EUR 95 million (+0,6%)

// (expenditure: EUR 16 803 million)

(indicator: EUR 16 708 million)

This over-execution is due to the acceleration of the rhythm of direct payments for arable crops as compared to the level of the indicator. Member States as of 31 January 2004, i.e.: the deadline for the payment of these aids, have already paid out 98.5% of the total aids due for this scheme which were estimated on the basis of their communication sent to the Commission on 15 September 2003.

Article 05 02 05: Sugar // Divergence: -EUR 236 million (-13,8%)

// (expenditure: EUR 474 million)

(indicator: EUR 710 million)

This under-execution by comparison to the level of the indicator is due to the reduced quantities of sugar exported with refunds. These exports stand at approximately 66% of the volume expected to have been exported as at this point in time.

Article 05 02 08: Fruit and vegetables // Divergence: + EUR 43 million (+2,7%)

// (expenditure: EUR 589 million)

(indicator: EUR 546 million)

This over-execution is due to the acceleration of the rhythm of payments of community aid in favour of the operational funds for the producers' organisations as compared to the uptake rhythm pointed out by the indicator as at this point in time. If this situation persists, then, there might be an over-implementation of the budget's appropriations for this scheme by the end of the budget year.

Article 05 02 10: Tobacco // Divergence: -EUR 37 million (-3,9%)

// (expenditure: EUR 523 million)

(indicator: EUR 560 million)

This under-execution is due to the slowdown of the rhythm of the payments for the tobacco premiums as compared to the level of the indicator at this point in time.

Article 05 02 11: Other plant products/measures // Divergence: -EUR 33 million (-4,2%)

// (expenditure: EUR 253 million)

(indicator: EUR 286 million)

This under-execution is due to the slowdown in the implementation of the POSEI programmes when compared to the level pointed out by the indicator.

Article 05 03 01: Milk and milk products // Divergence: -EUR 125 million (-4,4%)

// (expenditure: EUR 760 million)

(indicator: EUR 885 million)

This under-execution is due to two factors:

- the slowdown in the exported quantities of condensed milk and the subsequent lower payments for export refunds, and

- the payment by Italy of the first yearly instalment of her outstanding additional milk levy on the basis of Council Decision of 16 July 2003 (2003/530/EC). This payment leads to a reduction of the expenditure incurred for the other measures of the milk sector, thus, affecting the execution of the pertinent budget article as a whole.

Article 05 03 02: Beef and veal // Divergence: + EUR 255 million (+3,2%)

// (expenditure: EUR 3 193 million)

(indicator: EUR 2 938 million)

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

Article 05 03 03: Sheepmeat and goatmeat // Divergence: + EUR 246 million (+16,1%)

// (expenditure: EUR 1 219 million)

(indicator: EUR 973 million)

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

4. CONCLUSIONS

Implementation of appropriations at 31 March 2004

The uptake of appropriations for March 2004 (Member States' expenditure from 16 October to 31 January 2004) shows an over-execution for subheading 1a. This over-execution is primarily attributed to articles 05 03 02 and 05 03 03 of the budget and, at this point in time, it is expected to be temporary. The under-execution for subheading 1b invites no comment at this point in time.