COMMISSION REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL - Early warning system No 3/2002

TABLE OF CONTENTS

1. Overall out-turn in monthly expenditure

2. Provisional utilisation of appropriations

3. Comments

4. Conclusions

1. Overall outturn in monthly expenditure

The following tables show the overall out-turn 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 2002.

1.1. Subheading 1a: CAP

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1.2. Subheading 1b: Rural Development

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2. Provisional utilisation of appropriations

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3. COMMENTS

3.1. The uptake of appropriations for March 2002

The uptake of appropriations under heading 1 of the budget for March 2002 (Member States' expenditure from 16 October 2001 to 31 January 2002) is EUR 26 329,6 million, i.e. 59,5% of appropriations. Expenditure is

- EUR 257,3 million below the indicator for subheading 1a (traditional EAGGF Guarantee Section expenditure and veterinary expenditure), and

- EUR 23,0 million below the indicator for subheading 1b (rural development).

3.2. Monetary factors

The dollar/euro rate

The expenditure indicated under the above point takes account of the movement in the Euro/dollar 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 2001 agriculture budget was drawn up on the basis of the average dollar rate for July, August and September 2001, i.e. EUR 1 = $ 0,89. For the period 1 August 2001 to 31 January 2002 the estimated average dollar rate has remained at approximately the same level.

3.3. Market factors

Subheading 1a

For subheading 1a, the overall budget execution was under the level foreseen by the indicator. However, this execution was not homogeneous amongst the three categories of expenditure concerned. Specifically:

- for plant products, there was an over-execution as compared to the level of the indicator which was, primarily attributable to expenditure on arable crops,

- for animal products, the execution was under the level of the indicator and it resulted, mainly, from under-spending for beef and veal as well as for sheep- and goat-meat,

- for ancillary expenditure, the situation was similar to the one for animal products with the main under-spending attributable to veterinary and plant health measures.

The observed overall divergence is not significant (EUR -257,3 million equal to -0,7% of the budget). However, the divergence for certain individual chapters is more important, thus, inviting the following explanations:

Chapter B1-10: Arable crops //

Divergence: +EUR 324 million (+1,8%)

// (expenditure: EUR 17 103 million)

(indicator: EUR 16 779 million)

At the start of the financial year, the majority of payments under this chapter relate to payments for direct aids which have to be made in the period from 16 November 2001 to 31 January 2002. The over-execution for the third month in a row is mainly attributable to the acceleration in the rhythm of payment of the aids for small producers and for set-aside when compared to the level resulting from the indicator because Member States have been much better able to respect the mandatory payments' deadline.

Chapter B1-11: Sugar // Divergence: +EUR 40 million (+2,9%)

// (expenditure: EUR 597 million)

(indicator: EUR 557 million)

This over-spending as compared to the indicator is attributable to the export of the quantities of sugar adjudicated in the period from mid-September to mid-October 2001 at refund rates exceeding the average rate retained in the budget.

Chapter B1-12: Olive oil // Divergence: -EUR 54 million (-2,3%)

// (expenditure: EUR 1 791 million)

(indicator: EUR 1 845 million)

The indicator was undershot because EL delayed the payment of advances for the production aid for olive oil. The situation is expected to be regularised over the coming months on the basis of the estimated quantities to be subsidised under this measure.

Chapter B1-14: Fibre plants and silkworms // Divergence: -EUR 45 million (-4,7%)

// (expenditure: EUR 640 million)

(indicator: EUR 685 million)

The indicator was undershot because EL delayed the payment of advances for the aid for cotton. The situation is expected to be regularised over the coming months on the basis of the estimated quantities to be subsidised under this measure.

Chapter B1-16: Wine // Divergence: -EUR 83 million (-5,9%)

// (expenditure: EUR 238 million)

(indicator: EUR 321 million)

The under-spending is related to delays in payments for distillation and for restructuring aids in certain Member States (E, F and P).

Chapter B1-17: Tobacco // Divergence: -EUR 39 million (-4,0%)

// (expenditure: EUR 569 million)

(indicator: EUR 608 million)

The under-spending is related to delays in the payments of the aids in certain Member States (EL and E).

Chapter B1-21: Beef and veal // Divergence: -EUR 107 million (-3,3%)

// (expenditure: EUR 2 681 million)

(indicator: EUR 2 788 million)

The under-spending is primarily attributable to the delays in the payment of the special purchases scheme in FR as well as to the smaller technical, financial an other costs for beef intervention where stocks have remained at approximately 0,25 million t since mid-December.

Chapter B1-22: Sheepmeat and goatmeat // Divergence: - EUR 87 million (- 12,9%)

// (expenditure: EUR 266 million)

(indicator: EUR 353 million)

The under-spending is primarily due to the fact that higher than foreseen market price levels for sheep- and goat-meat led to the fixing of the ewe/goat premium at a level lower than the one foreseen when the budget was established. Consequently, the Commission estimates that savings of approximately EUR 86 million can be expected by the end of the year for this chapter of the budget.

Chapter B1-30: Non-Annex I products // Divergence: -EUR 22 million (-5,3%)

// (expenditure: EUR 109 million)

(indicator: EUR 131 million)

The under-spending is due to large exports of processed agricultural products using milk and dairy products for which the refund rates for the period concerned were lower than those used in the budget, notably for skimmed milk powder.

Chapter B1-32: Outermost regions and Aegean islands // Divergence: - EUR 25 million (-10,3%)

// (expenditure : EUR 62 million)

(indicator : EUR 87 million)

The observed under-execution is primarily due to temporary implementation delays of the POSEIDOM, POSEICAN, POSEIMA programmes as compared to the results provided by the indicator.

Subheading 1b

Chapter B1-40:Rural development // Divergence: -EUR 23 million (-0,5%)

// (expenditure: EUR 677 million)

(indicator: EUR 700 million)

The discrepancy by comparison to the indicator is minimal (= 0,5%). It is mostly attributable to implementation delays of programmes relating to less-favoured areas and to the new agri-environmental, pre-retirement and forest protection schemes.

4. CONCLUSIONS

Implementation of appropriations in March 2002

The uptake of appropriations for March 2002 (Member States' expenditure from 16 October 2001 to 31 January 2002) is EUR 26 329,6 million, i.e. 59,5% of appropriations. Expenditure is EUR 257,3 million below the indicator for subheading 1a, and EUR 23,0 million for subheading 1b.

The overall discrepancy between actual expenditure and the indicator for both subheadings is insignificant. However, the discrepancies for certain individual chapters are more important. While some of these discrepancies are expected to be temporary, in some chapters for instance in the sheep- and goatmeat and in the beef sectors this under-execution should be confirmed by the end of the year, thus leading to an overall underspending of the 2002 budget.