%flg££- _ i^&^tiy 
COMMISSION OF THE EUROPEAN COMVIUNITIES 
C0M(93) 538flnal 
Brussels, 5 November 1993 
REPORT FROM THE COMMISSION 
ON THE 
IMPACT ON EAGGF GUARANTEE SECTION EXPENDITURE 
OF MOVEMENTS OF THE DOLLAR/ECU EXCHANGE RATE <1> 
1993 FINANCIAL YEAR 
A 
REPORT 
on the impact on EAGGF Guarantee Section expenditure of movements 
of the dollar/ecu exchange rate In 1993(1) 
I. INTRODUCTION 
The value of the dollar affects a major percentage of EAGGF Guarantee 
Section expenditure. Most production aids and almost all export refunds 
are fixed on the basis of the gap existing between Community prices, 
expressed in ECU, and world prices, generally expressed in dollars 
(USD). 
Other things being equal, a change in the value of the dollar in 
relation to the ECU necessarily implies a change in the gap between 
Community prices and world prices and consequently a change in the 
production aids and export refunds concerned. If the dollar rises, the 
gap diminishes, leading to a reduction in expenditure; if the dollar 
falls, the gap widens, raising expenditure. 
The European Council of 11 and 12 February 1988, in its conclusions, 
expressed the wilt to take explicit account of the impact of the change 
in the dollar on agricultural expenditure. 
On the basis of that guideline, the Council adopted, by its Decision of 
24 June 1988 concerning budgetary discipline^2), enacting terms 
providing for the Inclusion of ECU 1 000 million in a reserve of the 
general budget of the European Communities "as a provision for covering 
developments caused by significant and unforeseen movements in the 
dollar/ecu market rate compared to the dollar/ecu rate used in the 
budget". The latter is equal to the average market rate during the 
first three months of the year preceding that of the budget year. 
If the average value of the dollar in the period from 1 August of the 
preceding year to 31 July of the current year falls as compared with the 
rate used in the budget, the additional budget costs are financed by a 
transfer from the monetary reserve. Equally, savings of up to a maximum 
of ECU 1 000 million in the Guarantee Section when the dollar 
strengthens are to be transferred to the monetary reserve. 
Recourse is to be had to the monetary reserve when the said expenditure 
(or, as the case may be, the saving) exceeds a margin {franchise) of 
ECU 400 million. Similarly, the amount of the transfer relates to that 
fraction of the impact exceeding the margin (franchise) of ECU 400 
m i11i on. 
(1) Pursuant to the Council Decision of 24 June 1988 concerning bugetary 
discipline and in particular Articles 9 to 13 thereof (0J No L 185, 
15.07.1988, p.29). 
(2) 0J No L 185, 15.07.1988, p.29 
2 -
The factors for deciding whether a transfer should be proposed from or 
to the reserve and the amount thereof are to be provided by the 
Commission in a report which it is required to forward in October each 
year to the budget authority. 
This report, relating to the impact of the dollar on expenditure in the 
1993 financial year, is the result of the sixth application of the 
Counc iI Dec i s i on. 
II. IMPACT OF THE DOLLAR ON EAGGF GUARANTEE SECTION EXPENDITURE IN 
13& 
To gauge the impact of the dot I ar/ecu rate on the 1993 financial year, 
consideration must be given, pursuant to the Council Decision, to the 
gap between the average rate recorded for the dollar between 1 August 
1992 and 31 July 1993 and the rate used in the 1993 budget. The rate 
used to assess appropriations for the 1993 financial year is 
$ 1 - ECU 0,79. In accordance with the Council Decision, this 
corresponds to the average rate in the first three months of the year 
preceding the financial year in question (January, February and March 
1992). 
The following table gives the monthly exchange rate gaps recorded in the 
period under review. 
a 
August 
September 
October 
November 
December 
January 
February 
March 
April 
May 
June 
July 
Average 1/8/92-31/7/93 Recorded 
rate 
$ 1 - ECU 
b 
0.9135 
0.7220 
0.7552 
0.8073 
0.8073 
0.8250 
0.8459 
0.8484 
0.8190 
0.8217 
0.8444 
0.8785 
0.8072 Budget 
rate. 
$ 1 - ECU 
c 
0.7900 
0.7900 
0.7900 
0.7900 
0.7900 
0.7900 
0.7900 
0.7900 
0.7900 
0.7900 
0.7900 
0.7900 
0.7900 Gap 
in ECU 
d - b-c 
- 0.0765 
- 0.0680 
- 0.0348 
+ 0.0173 
+ 0.0173 
+ 0.0350 
+ 0.0559 
+ 0.0584 
+ 0.0290 
+ 0.0317 
+ 0.0544 
+ 0.0885 
+ 0.0172 Gap 
as % 
e 
- 9.7 
- 8.6 
- 4.4 
+ 2.2 
+ 2.2 
+ 4.4 
+ 7.1 
+ 7.4 
+ 3.7 
+ 4.0 
+ 6.9 
+ 11.2 
+ 2.2 
Over the period under consideration the average dollar rate rounded off 
was $ 1 - ECU 0.81, 2.5% above the budget rate. 
- 3 -
Annex 1 shows the estimated size of the savings made as a result of the 
2.5% fall in world prices in dollars, converted into ECU using an 
average switchover coefficient of 1.187295 for the financial year. 
These savings total ECU 182 million and break down by sector as follows: 
m ECU 
Cereals and rice 87 
Sugar 14 
Mi Ik products 44 
Pig meat 5 
Eggs and poultry 7 
Oilseeds 2 
Protein plants 16 
Cotton 7 
TOTAL 182 
It should be noted that, like last year, in the case of certain products 
(skimmed milk powder, beef and veal) the refund rates applied during the 
period under review remained steady despite the fluctuation of the 
do Ilar. 
As a consequence, there is no need to evaluate the impact of the dollar-
rate changes on refunds for these products. 
The depreciation of the ECU against the dollar which gave rise to these 
savings is only one aspect of the monetary developments that led to 
disturbances of the currency markets during the 1993 financial year. 
The impact, through the switchover mechanism, of the depreciation of 
certain Community currencies resulted in additional EAGGF Guarantee 
Section expenditure estimated at ECU 265 million (see Annex II). 
The savings achieved as a result of the rise in the average exchange 
rate of the dollar were thus more than offset by the effects of currency 
realignments in September and November 1992 and in January and May 1993, 
so that the net impact of monetary movements on expenditure was an 
increase of around ECU 83 million (ECU 265 million - ECU 182 million). 
It should be noted that the additional costs arising from the change in 
the switchover have already been included in the overall cost of 
currency realignments for 1993, provided for in Supplementary and 
Amending Budget No 1/1993. 
Since the financial impact of movements of the dollar/ecu exchange rate 
on EAGGF Guarantee Section expenditure was within the ECU 400 million 
margin, there is no need to have recourse to the monetary reserve. 
ANNEX 
CALCULATION OF THE IMPACT OF THE DOLLAR ON THE COMMUNITY BUDGET : 1993 FINANCIAL YEAR 
I. CALCULATION OF THE GAP IN RATES 
1. RATE USED IN THE 1993 BUDGET 
2. RATE RECORDED 
3. GAP IN RATES (IN ECU) 
4. GAP IN RATES (X) 1 $ 
1 $ 
1 $ 0.790 ECU 
0.810 ECU 
0.020 ECU 
2.532* 
I I.CALCULAT ION OF IMPACT OF GAP IN RATES ON THE 1993 BUDGET 
AVERAGE WORLD 
PRICE 
RECORDED 
( % n ) TECHNICAL 
ADJUSTMENT 
COEFFICIENT AVERAGE WORLD 
PRICE USED 
( $ /T ) AVER.WORLD PRICE CONVERTED INTO ECU 
AT BUDGET RATE 
1$ - ECU 0.79 
(CORR. FACTOR -
1.187295 
(ECU/T) (1) AT REC. RATE 
1$ - ECU 0.81 
(CORR. FACTOR • 
1.187295 
(ECU/T) (1) UNIT IMPACT 
OF GAP IN 
RATES 
- 2.532 X 
(ECU/T) QUANTITIES 
CONCERNED 
1000 T TOTAL BUDGET IMPACT 
m ECU (A) DOUBLE RATE m ECU (B) 
d - b x c g - • - ( i - g x h k - I x J 
A. REFUNDS 
CEREALS AND RICE 
- COMMON WHEAT 
- DURUM WHEAT 
- BARLEY 
- OTHER CEREALS 
- STARCH 
- RICE 5MILLED EO.) 
SUGAR 
MILK PRODUCTS 
- BUTTER 
- BUTTEROIL 
- SKIMMED-MILK POWDER 
- OTHER IN MILK EOUIVAL. 
BEEF ANO VEAL 
- FRESH MEAT 
- FROZEN MEAT 
PIGMEAT 
- CUTS ANO SAUSAGES 
EGGS ANO POULTRY 
- EGGS 
- POULTRY 122 
124 
9« 
91 
100 
280 
250 
1470 I 
1770 
169 
800 I 
650 I 
750 I 1.00 
1.00 
1.00 
1.00 
1.60 
1.00 
1.00 
1.00 
1.00 
1.00 
1.00 
0.50 
0.50 
0.50 
0.50 
0.75 122 
124 
96 
91 
160 
280 
250 
1470 
1770 
0 
169 
0 
0 
400 
325 
563 81.2 
82.5 
63.9 
60.5 
106.5 
186.3 
166.3 
978.1 
1177.7 
0.0 
112.4 
0.0 
0.0 
266.2 
216.2 
374.6 83.2 
84.6 
65.5 
62.1 
109.2 
191.0 
170.6 
1002.9 
1207.5 
0.0 
115.3 
0.0 
0.0 
272.9 
221.7 
384.1 -2.0 
-2.1 
-1.6 
-1.6 
-2.7 
-4.7 
-4.3 
-24.8 
-29.8 
0.0 
-2.9 
0.0 
0.0 
-6.7 
-5.5 
-9.5 19150 
3100 
9400 
3500 
2500 
ISO 
2750 
105 
99 
10675 
580 
110 
555 -38.3 
-6.5 
-15.0 
-5.6 
-6.8 
-0.7 
-11.8 
-2.6 
-3.0 
0.0 
-31.0 
0.0 
0.0 
-3.9 
-0.6 
-5.3 1.187 
1.167 
1.192 
1.190 
1.19 
1.163 
1.195 
1.196 
1.196 
1.194 
1.190 
1.202 
1.202 -45 
-8 
-18 
-7 
-8 
-1 
-14 
-3 
-4 
0 
-37 
0 
0 
-5 
-1 -157 
B. AID 
OILSEEDS 
- RAPESEEO 
- SUNFLOWER 
- SOYA BEANS 
- LINSEED 
PROTEIN PLANTS 
- PEAS (HUMAN CONSUMP.) 
- PEAS (ANIMAL CONSUMP.) 
- LUPINS 
- DRIED FODDER 
FIBRE PLANTS 
- COTTON 228 I 
250 I 
195 I 
195 I 
113 I 
1191 I 1.00 
1.00 
1.00 
1.00 
1.00 
0.45 
0.60 
0.75 
0.32 (2) 
(2) 
(2) 
228 
250 
88 
117 
85 
381 151.7 
166.3 
58.6 
77.8 
56.6 
253.5 155.5 
170.6 
60.0 
79.8 
58.0 
259.9 -3.8 
-4.3 
-1.4 
-2.0 
-1.4 
-6.4 375 
170 
3462 
26 
5376 
989 0.0 
0.0 
0.0 
-1.4 
-0.7 
-4.8 
-0.1 
-7.5 
-6.3 1.191 
1.191 
1.191 
1.173 
1.191 
1.191 
1.195 
1.182 
1.167 0 
0 
0 
-2 
-1 
-6 
0 
-9 
-7 -25 
TOTAL A+fl -151.9 I 
N.B. : ON THE BASIS OF THE FIGURES IN THE TABLE A CHANGE IN THE RATE OF THE DOLLAR OF 10X WOULD LEAD TO A CHANGE IN EXPENDITURE OF ECU 718.8 MILLION. 
(1) THE CORRECTING FACTOR REPRESENTS THE DIFFERENCE BETWEEN THE "GREEN" CENTRAL RATES OF THE ECU (AGRICULTURAL ECU) AND THE CENTRAL RATES OF THE NORMAL ECU. 
(2) CHANGES IN THE WORLO MARKET PRICE REMAINED WITHIN THE 8% MARGIN AND THE IMPACT OF THE DOLLAR CHANGES IS THEREFORE ZERO. 
ANNEX II 
CALCULATION OF THE IMPACT ON WORLD PRICES OF THE CHANGE IN THE CORRECTION FACTOR : 1993 FINANCIAL YEAR 
AVERAGE WORLD I TECHNICAL 
PRICE I ADJUSTMENT 
RECORDED I COEFFICIENT 
( $ /T ) I AVERAGE WORLD 
PRICE USED 
( $ /T ) AVER.WORLD PRICE CONVERTED INTO ECU 
AT BUDGET RATE 
1$ - ECU 0.79 
(CORR. FACTOR -
1.145109 
(ECU/T) (1) AT BUDGET RATE 
1$ - ECU 0.79 
(CORR. FACTOR -
1.187295 
(ECU/T) (1) UNIT IMPACT 
OF GAP IN 
RATES 
(2) 
(ECU/T) QUANTITIES 
CONCERNED 
1000 T TOTAL BUDGET IMPACT 
m ECU (A) DOUBLE RATE m ECU (B) 
d - b x c g - • - 1 I - g x h x J 
A. REFUNDS 
CEREALS AND RICE 
- COMMON WHEAT 
- DURUM WHEAT 
- BARLEY 
- OTHER CEREALS 
- STARCH 
- RICE (MILLED EO.) 
SUGAR 
MILK PRODUCTS 
- BUTTER 
- BUTTEROIL 
- SKIMMED-MILK POWDER 
- OTHER IN MILK EOUIVAL. 
BEEF AND VEAL 
- FRESH MEAT 
- FROZEN MEAT 
PIGMCAT 
- CUTS ANO SAUSAGES 
EGGS ANO POULTRY 
- ECGS 
- POULTRY 122 I 
124 I 
96 I 
91 I 
100 I 
280 
250 
1470 I 
1770 I 
169 I 
800 
650 I 
750 I 1.00 
1.00 
1.00 
1.00 
1.60 
1.00 
1.00 
1.00 
1.00 
1.00 
1.00 
0.50 
0.50 
0.50 
0.50 
0.75 122 
124 
96 
91 
160 
280 
250 
1470 
1770 
0 
169 
0 
0 
400 
325 
563 84.2 
85.5 
66.2 
62.8 
110.4 
193.2 
172.5 
1014.1 
1221.1 
0.0 
116.6 
0.0 
0.0 
276.0 
224.2 
388.4 81.2 
62.5 
63.9 
60.5 
106.5 
186.3 
166.3 
978.1 
1177.7. 
0.0 
112.4 
0.0 
0.0 
266.2 
216.2 
374.6 3.0 
3.0 
2.3 
2.3 
3.9 
6.9 
6.2 
36.0 
43.4 
0.0 
4.2 
0.0 
0.0 
9.8 
8.0 
13.8 19150 
3100 
9400 
3500 
2500 
150 
2750 
105 
99 
10675 
580 
110 
555 57.5 
9.3 
21.6 
8.1 
9.8 
1.0 
17.1 
3.8 
4.3 
0.0 
44.8 
0.0 
0.0 
5.7 
0.9 
7.7 1.187 
1.167 
1.192 
1.190 
1.19 
1.163 
1.195 
1.196 
1.196 
1.194 
1.190 
1.202 
1.202 68 
11 
26 
10 
12 
1 
20 
5 
5 
0 
54 
0 
0 229 
0\ 
B. AID 
OILSEEDS 
- RAPESEED 
- SUNFLOWER 
- SOYA BEANS 
- LINSEED 
PROTEIN PLANTS 
- PEAS (HUMAN CONSUMP.) 
~ PEAS (ANIMAL CONSUMP.) 
- LUPINS 
- DRIED FODDER 
FI8LE PLANTS 
- COTTON 228 I 
250 I 
195 I 
195 I 
113 I 
1191 I 1.00 
1.00 
1.00 
1.00 
1.00 
0.45 
0.60 
0.75 
0.32 228 
250 
88 
117 
85 
381 157.3 
172.5 
60.7 
80.7 
58.6 
262.8 151.7 
166.3 
58.6 
77.8 
56.6 
253.5 5.6 
6.2 
2.1 
2.9 
2.0 
9.3 375 
170 
3462 
26 
5376 
989 0.0 
0.0 
0.0 
2.1 
1.1 
7.3 
0.1 
10.8 
9.2 1.191 
1.191 
1.191 
1.173 
1.191 
1.191 
1.195 
1.182 
1.167 0 
0 
0 
2 
1 
9 
0 
13 
11 36 
TOTAL A+B 221.8 I 265 I 
(1) 
(2) THE CORRECTING FACTOR REPRESENTS THE DIFFERENCE BETWEEN THE 
CHANGES IN CORRECTION FACTOR "GREEN" CENTRAL RATES OF THE ECU (AGRICULTURAL ECU) ANO THE CENTRAL RATES OF THE NORMAL ECU. 
- 6 -
EXPLANATORY REMARKS TO THE ANNEX 
Column (a) of the table gives all the budget headings which are affected 
explicitly and directly by movements in the value of the dollar. 
Column (b) gives estimated average world prices in dollars for the 
period concerned. They correspond either to average selling prices of 
Community products when exported or to prices used for the calculation 
of the var ious aids. 
These prices are multiplied by an adjusting coefficient [column (c)] 
indicating the weighting of the world price used to determine an aid or 
refund. By way of example, 1.6 times the world price for maize is used 
in the determination of the production refund for starch while only 45% 
of the world price for soya cake is used to calculate the production aid 
for peas intended for animal consumption. 
Column (d) gives average world prices corrected by the adjusting 
coefficient while columns (e) and (f) give the same prices converted 
into ECU using the exchange rate adopted in the budget [column (e)] and 
the recorded exchange rate allowing for the correction factor 
(switchover) [column (f)]. The unit impact of the higher value of the 
dollar is given in column (g) in ECU per tonne. This unit amount 
multiplied by the estimated quantities qualifying for aids and/or 
refunds during the period under review gives the impact in million 
agricultural ECU [column (I)] and in million budget ECU [column (k)]. 
Evolution of switchover coefficient 
Switchover coefficient 
1.08.1992 - 12.09.1992 1.145109 
13.09.1992 - 16.09.1992 1.154338 
17.09.1992 - 22.11.1992 1.157346 
23.11.1992 - 31.01.1993 1.195066 
1.02.1993 - 13.05.1993 1.205454 
14.05.1993 - 31.07.1993 1.207509 
Average 1.8.1992 - 31.7.1993 1.187295 
&£' 
ISSN 0254-1475 
COM(93) 538 final 
CUMENTS 
EN 03 
Catalogue number : CB-CO-93-575-EN-C 
ISBN 92-77-60620-7 
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