REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGGF Guarantee Section expenditure - Early warning system No 4/2004

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 2003 to 29 February 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 four months of the 2004 budget year:

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3. Comments

3.1. The uptake of appropriations for April 2004

The uptake of appropriations under heading 1 of the budget for April 2004 (Member States' expenditure from 16 October 2003 to 29 February 2004) amounts to EUR 29 046,1 million, i.e. 64,9% of appropriations. Expenditure is approximately EUR 348,0 million under the indicator for both subheadings 1a and 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 2003 to 29 February 2004 the average dollar rate was equal to EUR 1 = $ 1,19 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 under the level of the indicator. Part of this under-execution (approximately 60%) is attributable to the plant products sector while the rest 40% is attributable to the slowdown of the implementation rhythm of DG SANCO's budget. For the plant products sector, this under-execution is primarily related to sugar, cereals, tobacco and to other plant products/measures. In the animal products sector, the budget relating to dairy products is under-implemented. The following comments are called for:

Article 05 02 01: Market measures for cereals // Divergence: -EUR 73 million (-13,4%)

// (expenditure: EUR 205 million)

(indicator: EUR 278 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 05: Sugar // Divergence: -EUR 224 million (-13,1%)

// (expenditure: EUR 590 million)

(indicator: EUR 814 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 currently stand at approximately 71% of the volume expected to have been exported as at this point in time. If this situation persists, then, there might be an under-implementation of the budget's appropriations for this article by the end of the budget year.

Article 05 02 08: Fruit and vegetables // Divergence: + EUR 29 million (+1,8%)

// (expenditure: EUR 645 million)

(indicator: EUR 616 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 38 million (-4,1%)

// (expenditure: EUR 596million)

(indicator: EUR 634 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 36 million (-4,6%)

// (expenditure: EUR 284 million)

(indicator: EUR 320 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 109 million (-3,8%)

// (expenditure: EUR 1 016 million)

(indicator: EUR 1 125 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 this budget article as a whole.

Article 05 03 04: Pigmeat, eggs and poultry, bee-keeping and other animal products // Divergence: -EUR 14 million

(-8,7%)

// (expenditure: EUR 46 million)

(indicator: EUR 60 million)

In order to stabilise the pigmeat market, the Commission introduced the private storage of pigmeat in late December 2003 and the payment of export refunds on fresh and frozen pigmeat exports as of the end of January 2004. Both of these measures have been discontinued due to the subsequent improvement in the market situation of the sector. However, the 2003 budget did not include appropriations for any of these schemes. Therefore, the Commission considers the current under-execution for this article to be temporary. If Member States make all the payments due for these measures, then, the credit appropriations foreseen in the budget for the pigmeat sector will be over-implemented.

4. Conclusions

Implementation of appropriations at 30 April 2004

The uptake of appropriations for April 2004 (Member States' expenditure from 16 October 2003 to 29 February 2004) shows an under-implementation for subheading 1a. A part of this under-implementation is due to DG SANCO. However, another part is primarily attributed to articles 05 02 01, 05 02 05 and 05 03 01 of the budget. At this point in time, with the exception of the under-implementation of the budget for article 05 02 05 (sugar), the under-implementation of the budget for articles 05 02 01 (cereals) and 05 03 01 (milk) is expected to be temporary. The under-execution for subheading 1b invites no comment at this point in time.