Proposal for a COUNCIL REGULATION amending Regulation (EEC) No 2759/75 on the common organisation of the market in pigmeat

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. For a long time the European Union market in pigmeat has been subject to cyclical movements, with periods in which the market has been in balance and prices have been satisfactory followed by periods when supplies have been plentiful and market prices have consequently been low. For some years now, this cycle has been more pronounced and periods of recession have been lengthening, endangering the cash flow situation of pigfarmers. The difficulties the sector is currently experiencing began in summer 1998 and have been going on for 20 months.

2. The common organisation of the market in pigmeat, established by Council Regulation (EEC) No 2759/75, is a very liberal organisation consisting in practice of two market support measures only, namely export refunds and private storage aid. Primary responsibility for achieving balance on the market and the resulting level of market prices rests with the pigfarmers who themselves decide on the volume of their output and, in that way, on the future of the sector. The two support measures referred to above can only mitigate the effects of a recession, but not prevent it.

Experience over the past four years with very high market prices in 1996 and 1997 and very low prices in 1998 and 1999 has clearly demonstrated the need for a regulatory mechanism that will enable producers' incomes to be stabilised by a system of levies to be collected during periods when the short-term economic situation is satisfactory and a system of payments to be made in times of recession. To reflect the major responsibility given to producers as part of the common organisation of the market in pigmeat, provision should be made for the self-financing of the new arrangements by producers and for arrangements to be included for the control of pigmeat production.

3. The purpose of this proposal is to incorporate a regulatory mechanism of this kind in the basic Regulation (EEC) No 2759/75. The main components of the proposal are the following:

-Member States will be authorised to establish a regulatory fund in their territory. Participation by pigfarmers will be on a voluntary basis and for a period of not less than five years,

-the regulatory funds will be financed by the pigfarmers themselves, on the basis of a levy paid in respect of each fattening pig. To meet the administrative costs incurred on setting up the fund, Member States may grant degressive launching aid. The funds may seek loans from banks on market terms,

-the regulatory mechanism will have two components: a levy threshold, triggering the collection by the funds of an amount in respect of each fattening pig, and a payment threshold, triggering the grant of an amount in respect of each pigfarmer. The two thresholds will be set by the funds and authorised by the Commission in accordance with the management committee procedure,

-where a fund must start a payment period without the necessary financial resources being available, the Member State concerned may grant it an interest-free loan. The loan must be reimbursed by the fund in full,

-where a regulatory fund has sufficient financial resources, it may suspend collection of the levy temporarily,

-upon becoming a member of a fund, the pigfarmers must declare the number of their fattening places. They must give an undertaking not to increase that number during their period of membership. However, where market prospects permit, Member States may be authorised by the Commission to derogate from that requirement.

2000/0076 (CNS)

Proposal for a COUNCIL REGULATION amending Regulation (EEC) No 2759/75 on the common organisation of the market in pigmeat

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles 36 and 37 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of the Economic and Social Committee,

Whereas:

(1) For a long time the European Union market in pigmeat has been subject to cyclical movements, with periods in which the supply of pigmeat has been in balance and prices have been satisfactory followed by periods when supplies have been plentiful and market prices have consequently been low. For some years now, this cycle has been more pronounced and the periods of recession have been lengthening, endangering the cash flow situation of pigfarmers. Steps should be taken, therefore, to amend Council Regulation (EEC) No 2759/75 [1], as last amended by Regulation (EC) No 3290/94 [2], and to authorise the Member States to establish a regulatory fund making it possible for pigfarmers, who participate on a voluntary basis, to cope with fluctuations in market prices. To ensure the satisfactory operation of the funds and in particular their financing, provision should be made for a minimum period of participation and for the lodging of a security by the pigfarmers concerned.

[1] OJ L 282, 1.11.1975, p. 1.

[2] OJ L 349, 31.12.1994, p. 105.

(2) In order that the funds may be established rapidly and effectively at national level, use should be made of existing bodies, if any. The participation of pigfarmers in their management and administration must be ensured. The funds will adopt the arrangements necessary for their operation and inform the Commission and the other Member States thereof.

(3) Financing for the funds will be provided by a levy paid by participating pigfarmers in respect of each fattening pig produced. In order to cover the administrative costs of setting up the funds, Member States may grant degressive launching aid. To supplement their financing, the funds may seek loans from banks and other institutions on market terms.

(4) The principal component of the fund arrangements will be the regulatory mechanism because it establishes a levy threshold requiring an amount to be paid to the fund, during periods when market prices are satisfactory, in respect of each fattening pig, and a payment threshold triggering the grant of an amount by the fund, during periods of recession, to farmers in respect of each fattening pig. The two thresholds will be set by the funds in the light of market factors and their financial situation. In view of its role as the principal component in the operation of the funds, the regulatory mechanism must be authorised by the Commission in accordance with the procedure laid down in Article 24 of Regulation (EEC) No 2759/75. By adjusting the levy amounts and payments it should be possible for the funds to take account of the structure of the sector and improve it.

(5) In a future recession it may happen that, in the period immediately following their establishment, the funds will have to start making payments without having the opportunity to collect the necessary financial resources. In that case, the Member State concerned must be authorised to grant an interest-free loan that will allow the fund to carry out its task. This loan must be reimbursed. Where the funds have sufficient financial resources to allow them to act in the event of a future recession, they may suspend the collection of the levy temporarily.

(6) The establishment of the funds in the Member States concerned must be mirrored by certain arrangements for the control of pigmeat production in the European Union. Pigfarmers who participate in the funds will benefit from certain assurances regarding their income from fattening pigs. It is therefore reasonable to require them to comply with production rules for improving the balance of the market and ensuring the satisfactory operation of the funds. However, provision should be made for a derogation from this provision where market prospects permit,

HAS ADOPTED THIS REGULATION:

Article 1

The following Title Ia is inserted in Regulation (EEC) No 2759/75 after Article 7:

"Title Ia

Regulatory fund

Article 7a

1. The Member States are authorised to establish a regulatory fund for pigfarmers whose pigs are fattened in their territory. The purpose of the fund shall be to assist pigfarmers in coping with fluctuations in market prices.

2. Pigfarmers shall participate in the funds on a voluntary basis either directly or indirectly through producer groups or any other collective body of which they are members. Pigfarmers and groups participating in the funds shall give an undertaking to comply with the rules laid down by the funds. Compliance with the rules shall be ensured by the lodging of a security.

3. Pigfarmers shall participate in the funds for a minimum of five years in respect of all their production units in the territory of the Member State concerned.

Article 7b

1. The regulatory funds shall be organised and administered by existing national bodies or bodies set up for the purpose. Pigfarmers shall be represented in the management of the funds and their supervisory bodies.

2. The regulatory funds shall adopt the necessary arrangements and in particular the conditions of membership, the regulatory mechanism and the procedure governing levies and payments.

Article 7c

1. The regulatory funds shall be financed by the pigfarmers themselves, through the collection of a levy in respect of each fattening pig, paid by the pigfarmers or by the producer group through which they market their pigs.

2. To facilitate the establishment of a regulatory fund, Member States may grant aid to meet the administrative costs incurred during the launch of the fund. To that end, eligible expenditure shall include the rental of premises, the purchase of office equipment, including computer hardware and software, administrative costs, including personnel costs, fixed costs and miscellaneous charges. The aid amount may not exceed 100 % of the costs incurred during the first year, reduced by 20 percentage points for each subsequent year, so that in the fifth and last year it amounts to 20% of the real costs.

3. In order to obtain the resources needed to operate their regulatory fund, the funds may borrow from banks and public or private institutions. In that case, the interest rate on loans shall be the market rate and may not include interest subsidies constituting State aid.

Article 7d

1. The regulatory mechanism applied by the funds shall comprise:

-- a "levy threshold" triggering the payment to the funds of a levy in respect of each fattening pig by pigfarmers during periods when price levels are satisfactory,

-- a "payment threshold" opening entitlement to the payment, by the funds, of an amount in respect of each fattening pig to pigfarmers during periods of recession.

2. The funds shall forward to the Commission, through the competent authorities, the regulatory mechanism and in particular the thresholds referred to in paragraph 1, the level of which shall be set taking into account the market price for standard quality slaughtered pigs in the Member State concerned, the production costs in that country, the financial situation of the fund and the situation of the Community market in pigmeat. The Commission shall authorise the mechanism in accordance with the procedure laid down in Article 24.

3. The regulatory funds may adjust the amounts granted in respect of each fattening pig and the number of eligible pigs per farmer in the light in particular of the size and structure of the pig farms in the Member State concerned. The levy may also be adjusted.

Article 7e

1. In order to prevent funds from failing to operate for lack of financial resources during a three-year period from the time they are established, Member States may, where strictly necessary, grant the regulatory fund an interest-free loan. Such loans shall be reimbursed by the fund in full within a period of five years. Member States shall inform the Commission of the amount of the loan and its method of calculation. The Commission shall inform the other Member States thereof.

2. Where the regulatory funds have adequate financial resources, they may suspend collection of the levy temporarily. Interest income, if any, available to the funds must be used for their statutory objectives.

Article 7f

Upon becoming a member of a regulatory fund, pigfarmers must declare the number of their fattening places within the territory of the Member State concerned. They must give an undertaking not to increase that number during the whole of their period of membership. However, where market prospects permit, a Member State may, at its request, be authorised by the Commission, in accordance with the procedure laid down in Article 24, to derogate from this requirement.

Article 7g

1. Member States shall adopt the measures necessary to apply this Title and shall determine in particular the procedures for establishing and managing the regulatory funds.

2. They shall notify the Commission of the provisions adopted under this Title and of any amendments thereto. The Commission shall notify the other Member States thereof.

Article 7h

Detailed rules for the application of this Title shall be adopted in accordance with the procedure laid down in Article 24."

Article 2

This Regulation shall enter into force on the third day following its publication in the Official Journal of the European Communities.

It shall apply from 1 July 2000.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

For the Council

The President

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