Proposal for a COUNCIL DECISION adjusting, for the fifth time, the system of aid for cotton introduced by Protocol 4 annexed to the Act of Accession of Greece
Date: 1995-03-01
Institutions: European Commission
Subjects: Greece, accession to the European Union, aid system, cotton, production aid, protocol to an agreement

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

'COM (9 5.) 3 5 > final 

Brussels,  01.03.1995 

95/  0061(CNS) 

Report  on  the  operation  of  the 

system  of  aid  for  cotton 

(pursuant  to  A r t i c le  5 of  Council  Regulation  (EEC)  No 
2052/92  .) 

Proposal  for a 

; 

COUNCIL  DECISION 

adjusting,  for the fifth  time, the system of aid for cotton 
introduced  by Protocol  4 annexed  to the Act of Accession of  Greece 

'  - 

. .. 

' 

Proposal  for a 

COUNCIL  DECISION 

laying  down  the general  rules for the system  of aid for cotton 
and  repealing  Regulation  (EEC)  No 2169/81 

(presented  by the  Coa«1ss1on) 

Report  on  the  operation  of  the 

system  of  aid  for  cotton 

(pursuant to Article 5 of Council Regulation  (EEC) No 
2052/92 ) 

Ax. 

CONTENTS 

1.  THE COTTON MARKET 

1.1. 
1.2. 
1.3. 
1.4. 

Background 
World market 
Community production 
Community trade 

2.  SOCIO-ECONOMIC ASPECTS 

2.1. 
2.2. 
2.3. 
2.4. 
2.5. 

Economic importance and production regions 
Production structures 
Costs and margins 
Cotton and the environment 
Operators in the sector 

3.  OPERATION  OF THE AID SYSTEM 

3.1. 
3.2. 
3.3. 
3.4. 
3.5. 

Production aid and the minimum price 
The stabilizer mechanism 
Aid to small producers 
Problems of control 
Budgetary expenditure 

4.  CONCLUSION/PROPOSALS 

/'b 

1.  THE COTTON MARKET AND PRODUCTION STRUCTURES 

1.1. Background 

The cotton plant ("Gossypium") is grown as an annual 
plant in sufficiently hot regions. Its fruit is a 
capsule containing oilseeds surrounded by textile 
fibre. Ginning separates the seeds and fibres. The seed 
can then be pressed to extract the oil (edible) and to 
produce cake (for animal feed). The fibre (ginned 
cotton) is processed essentially by the textile 
industry. 

1.2. The world market 

Since the principal use of cotton is as textile fibre 
and there is no international trade in unginned cotton 
and that in cotton seed is insignificant; any analysis 
of the world market must concentrate on fibre (ginned 

. cotton). 

World area under cotton has varied between  30 and 34 
million hectares since the beginning of the 1960s. 
World production of ginned cotton, on the other hand, 
has almost doubled in thirty years, reaching an average 
for the 1991/93 to 1993/94. marketing years of 
18,5 million t.  In September 1994, the USDA forecast 
that production in 1994/95 would be 18,8 million t. 

The principal producer countries are China, the United 
States, India, Pakistan, and Ouzbékistan  as can be 
seen from the following table (Community production is 
given for comparison). 

Principal producer countries 

Average 
91/92-93/94 
(mio t) 

World 
share 
(%) 

1994/95 
forecast 
(mio t) 

China 

United States 

India 

Pakistan 

Ouzbékistan 

European Union 

Total of above 

World total 

4.6 

3.6 

2.2 

1.7 

1.4 

0.3 

13.8 

18.5 

(Sources : USDA, DG VI for EU) 

25 

20 

12 

9 

7 

1.7 

75 

100 

4.4 

4.1 

2.3 

1.6 

1.3 

0.4 

14.1 

18.8 

In the United States, the cotton belt extends from 
South Carolina to California. Cotton production is 
covered by a programme in the same way as wheat and 
maize. The figure fixed in the ARP ("Acreage 
Reduction Programme") for cotton in 1994 was 11%. 

International trade in cotton is considerable, 
reaching 5,8 million t or 32% of world production 
(average 1991/92 to 1993/94). The principal exporters 
are the United States (23 % of the world market), 
Ouzbékistan (21  % ),  the countries of the African 
franc area (8  % ),  Australia  (7 %) and Pakistan  (4 %) 
and the main importers are the European Union, 
southeast Asia, Russia and Japan. China, the world's 
largest producer,, alternates between being an 
importer and an exporter nation. 

There is only one forward market for cotton and that, 
characteristically for the American situation, is in 
New York. However, the most widely used indicator of 
world prices is the Cotlook A index (Cotlook is a 
specialized information agency based in Liverpool). 
The index, expressed in US cents/pound is the average 
of the five lowest spot prices from a range of very 
varied, representative locations,  CIF North Europe. 
It refers to a fibre 28 mm  (1-3/32") long of grade 
no  5 - "white middling" (grade is an index of 
overall visual quality). 

The world price for cotton is very volatile over any 
timescale. For example, the weekly average Cotlook A 
index varied between 52 and 86 cents /pound over the 
period from August 1992 to July 1994. 

This volatility, more marked for cotton than for 
other agricultural raw materials, is explained by the 
hazards of trade but principally by the hazards of 
production: water supply (too much or too little), 
temperature, attacks by parasites are to a great 
extent matters of chance in many production regions. 

Ï 

1.3.Community production 

1.3.1.Areas 

Following the cessation of the very limited 
production in Italy, Greece and Spain are currently 
the only Member States producing cotton. Cotton is 
produced in those countries almost solely on 
irrigated land. 

Changes in areas in those two Member States and total 
areas are shown in the graph on the following page 
(page i). Planting at Community level appeared to be 
under control during 1989 to 1991 after a peak in 
1988, but began to grow again from 1992. The area 
under cotton in 1994 is estimated at 423 000 ha. 

Developments in Greece and Spain diverge, at least 
from 1988. The area is growing in Greece, reaching 
383 000 ha in 1994, although in Spain developments 
are irregular:  a maximum of 135 000 ha in 1988,  a 
minimum of 32 000 ha in 1993 and a slight increase to 
40 000 ha in 1994. In the years 1993 and 1994, Spain 
suffered from water shortages during the sowing 
period, and irrigated crops were prohibited in 
certain areas. The basic trend, however, is a 
relative fall in the under cotton in Spain compared 
with that in Greece. Before accession, the average 
area in Spain was  54 700 ha (1983-85 average). 

1.3.2. Yields 

Unginned cotton yields show neither an upward nor a 
downward trend at national or community level. This can 

' be seen in the graph given on the following page 

(page ii), showing developments since 1982. The average 
yields are given in the following table: clipped average 
- 1989 to 1993 (lowest and highest figures excluded)• 

Average per hectare yields 1989-1993 
(t/ha, unginned standard quality cotton) 

Greece 

Spain 

E.U. 

2.72 

3.06 

2.80 

N.B. The standard quality used for calculation is 
that used since 1992/93: 3% impurities, 10% humidity. 

The unginned cotton fibre and seed yields are very 
stable and are around 32 % and 54 % respectively both 
in Greece and Spain. The standard quality is based on 
these yields (see 3.1. on the price arrangements and 
aid). 

h 

COTTON.XLS 

EU cotton area 

«Spain 
O Greece 

1983/84 

1984/85 

1985/83 

'  "198678/ 

'  1987/88 

1988/89  - 

1989/90 

199051 

1991/92 

1992/93 

1993/94 

1994/95 

^f 

14/09/94 

COTTON.XLS 

4000 

EU cotton yield (standard quality) 

A  Qreect 
••-!—Spain 

•  • - . « •• 

EU 

1982/83 

1983/84 

1984V85 

1985/86 

1989/9fr 

1990/91 

1991/92 

1992/93 

1993/94 

1994795 

(Tv 

1.3.3. Production  (unginned  cotton) 

The remarks made regarding changes in areas  apply 
mutatis mutandis to production as shown in the 
table given below: 

-  apparent control of community production  during 
the years  1989 to 1991 after a peak in 1988, 

^ then a sharp increase in 1994 to a record  level 

of  1 170 000 t ; 

-  developments  diverge  in Greece and Spain: 

almost continual increase in Greece, reaching 
1  050 000 t in 1994, the decline in Spain being 
particularly marked over the last two years, 
with production of only  120 000 t in  1994  (it 
should be noted that yields were normal in  1993 
and  1994 in Spain but areas were reduced  owing 
to water  shortages at the time of sowing - see 
1.3.1.). 

COMMUNITY COTTON PRODUCTION ( t ) 
on the basis of the quantities  eligible for aid in terms of 
standard  quality 
(10% humidity, 3%  impurities) 

MARKET-ING 
YEAR 

PRODUCT. 
GREECE 

PRODUCT. 
SPAIN 

PRODUCT. 
ITALIAN 

TOTAL 
PRODUCT, 

1986/87 

622754 

1987/88 

559963 

1988/89 

751521 

1989/90 

827118 

1990/91 

662008 

1991/92 

670940 

1992/93 

760685 

265364 

256523 

357753 

197332 

262835 

260725 

223932 

1993/94 

985676 

98883 

1994/95  (e) 

1050000 

120070 

0 

0 

92 

27 

32 

0 

0 

0 

0 

888118 

816486 

1109367 

1024477 

924875 

931665 

984617 

1084559 

1170070 

1.3.4. Production - short-term  forecasts 

Short-^erm  production  forecasts  were  based  on  the 
following  hypotheses,  assuming  no  change  to  the 
current support  system: 

- 

- 

stabilization  of  area  in  Spain  at  80 000 ha 
(normal water  supply  situation); 
continuation  of  the  upward  trend  in  areas  in 
Greece  (trend  over  the  period  1986-94  under  the 
stabilizer) ; 
use  of  the  average  historical  yield  over  the 
period  1989-93  of  2,8 t/ha  in  the  absence  of  any 
clear trend. 

7 

The  relevance  of  these  hypotheses  will  be  explained 
later in the report, particularly . in--the; microeconomics . 
analysis and the analysis of the stabilizer system with 
cut-off. 

Under  these  conditions,  the  community  area  down  to 
cotton  could  increase  from  423 000 ha  in  1994  to 
540 000 ha  in  2000,  an  increase  of  28 %  ; production 
would increase from 1170 000 t in 1994 to 1 520 000 t 
in 2000, an increase of  30 %. That would also mean an 
increase of 30 % in budgetary expenditure to almost ECU 
1 billion (see 3.5.). 

Leaving  aside  environmental  problems  (see  2.4.),  such 
an increase, although large, is not impossible from the 
point  of  view  of  land  use,  since  the  main  competing 
irrigated  crops are  on a downward trend: particularly 
maize,  but  also tpbacco,  fruit  (particularly peaches) 
and  vegetables.  It  also  assumes  adequate  ginning 
capacity  which  would  appear  possible,  even  if  only 
through extending the period of operation. 

1.4. Community trade (ginned cotton) 

The ,European  Union  has  a  significant  shortfall  in 
ginned cotton  (fibre). Average imports over the period 
1991-93  were  925 000 t  and  exports  107 000 t  (source 
EUI^Siy^T-COMEXT/). As production increases, however, the 
external  trade " balance  is  improving• at  the  rate  bf 
45 000 t' per year,  as  shown  in the graph  on the, next 
page (page iii). 

The  supply  balance  for  the  period  1991-93  (1990 
production  has  been  included  in  1991^  etc. ) is giifren 
below. 

Supply balance for ginned cotton 
1991-93 average 

Production 

Imports 

Exports 

Apparent consumption 

(000 

t) 

296 

925 

107 

1114 

The  average  rate  of  self-sufficiency  was  therefore 
27 % during the period  1991-93•  ït is increasing and 
should  reach 45 % by  2ÔO0 ir the production forecast 
(and  budgetary  expenditure) made  above  (see  1.3.4.) 
are  accurate  and  per  capita  apparent  consumption 
remains stable at 3 kg. 

i 

For reference, ginned cotton (CN code 5201 00, cotton, 
not  carded  or  combed)  is  imported  free  from  customs 
duties. 

The European Union's principal external suppliers are 
the  former  Soviet  Union  (Ouzbékistan),  from  which 
supplies  are  increasing,  the  United  States  and  the 
franc  zone  in  Africa  (see  graph  on  next  page, page 
iv) •  The  principal  export  markets  are  Brazil  and 
eastern Europe. 

The  average  value  of  imports  into  the  Union  is 
ECU 1244/t  (1991-93  average) while  the  average value 
of exports  from the Union  is ECU 1163/t. This slight 
difference reflects an absolutely correct valuation of 
community production. The detailed study of these unit 
values,  by  origin  and  destination,  gives  other 
information, in particular: 

- 

- 

American  cotton  exported  to the  European  Union 
has  a  high  unit  value,  reflecting  its  high 
, quality; 

recently  the  poorest  quality  Community  cotton 
has been exported to Brazil. 

Within  the  Community,  Greece  is  naturally  the  main 
supplier, while  Italy,  Germany  and  Portugal  are  the 
main purchaser Member States. 

7 

0001 

•1200 

1000 

600 

400 I 

200 

EXTERNAL  TRADE 

COTTON  (OOOt) 

IMPORTS 

^ 32000t/year 

EXPORTS 

0 *-
1986 

>••••  -:\. 

:;. 

- 

1988 

I 
1990 

t 

A 
J 
1992 

1994 

1996 

1998 

2000 

ORIGIN OF COTTON IMPORTS INTO THE COMMUNITY OF TWELVE 

(average of 925 000 t in 1991-93) 

ORMER SOVIET UNION 

FRICAN FRANC ZONE 

USA 

SYRIA 

TURKEY 

ARGENTINA 

PARAGUAY 

AUSTRALIA 

PAKISTAN 

OTHERS 

0 

10 

20 

15 
% TOTAL 

25 

30 

35 

TV 

-if 

2. 

SOCIO-ECONOMIC ASPECTS 

2.1.  Economic importance and production regions 

Although textile fibres  (principally cotton, but also 
flax  fibre)  account  for  pnly  à  small  percentage  of 
final  agricultual  community  production  ( 0.5 % ),  they 
are  of  greater  importance  in  the  Member  States  and 
regions in which they are grown. , 

In  Greece,  cotton  accounted  for  9.3  %  of  final 
agricultural production  in  199 2,  a  figure  comparable 
to  that  of  olive  oil.  The  figure  is  higher  in  the 
three large production régions (NUTS 2) : 
- 
- 
. ••- 

Thessaly ; 
Macedonia-Thrace (three NUTS 2 regions) ; 

Sterea Ellada 

In  Spain,  the  percentage  is  0,9 %  (1989-91  average) 
but  rises  to  3,9 %  in  Andalusia  (NUTS 2), the  main 
production  region,  while  above  Murcia  and  Valencia. 
Within Andalusia, production is mainly concentrated in 
the  provinces 
(NUTS 3)  of  Seville  (11,6 %  of 
agricultural production) and Cordoba (5,6  % )• 

2.2.  Production structures 

The regular  inquiry  into  structures  does not provide 
specific  information  on  cotton  which  is  included  in 
industrial  crops*  There  are,  however^  two  sources. 
They both pose certain problems but have the advantage 
of being to a certain extent complementary. 

ft 

-  statistics on the system of aid in favour of small 
producers : additional  aid  per  hectare  is  paid  to 
producers  sowing less than 2,5 ha with cotton  (see 
3.3.);  this  special  system  has  created,  however, 
particularly in Greece, a growth of small producers 
which  throws  doubt  on the  statistical conclusions 
which can be drawn; 

^  -  FADN  ( Farm  Accountancy  Data  Network )  statistics, 
these only cover farms exceeding a minimum economic 
size, which reduces their scope as regards cotton. 

There is also a considerable contrast in structures in 
Greece and Spain. 

In Greece: there are said to be around  100 000 small 
cotton  producers  in  thé  1993/94  marketing  ;yeâr, 
accounting  for  53 %  of  the  area.  It  is  highly 
probablethat  this  -figure  is  too  high  owing  to  a 
division  of  applications  for aid  for small producers 
given  that  the  area  farmed by  "small  producers" has 
tripled  in  four  years.  *Phe  FADN  (lSt89-91  average) 
shows  45 000 farms  producing  cotton, with  an  average 
arable area of 4,3 ha and an average area under cotton 
of  2,5 ha, but this includes only 44% of Greek areas 
under  cotton  because  of  the  minimum  economic  size 
criterion.  Curiously,  despite  the  fact  that  the 
figures  refer  to  different  years,  the  two  sources 
cover almost the total area. 

Ai 

Structures  in  Greece  are  very  small  and  highly 
specialized  in cotton production. 

cotton 

produce 

FADN  figures  permit  a more  profound  regional  analysis 
in  Greece.  In  the  Sterea  Ellada  region^  holdings 
producing 
cotton 
represents  around  five  sixths  of  the  arable  land.  In 
Thessaly  there  is  also  a  trend  towards  single  crop 
farming,  with  cotton  representing  an  average  of  two 
thirds  of  the  arable  area  of  the  holdings  concerned. 
This  trend  is much  less marked  in Macedonia-Thrace, a 
large  cotton  production  region  but  where  maize 
dominates. 

little 

else: 

In Spain, more precisely,  in Andalusia, the  growth  in 
the  number  of  small  producers  remains  small: 3 800 in 
1993/94,  accounting  for  16 %  of  the  area  (as  against 
13 % on the  introduction  of  the  system).  FADN  figures 
(1989-91  average)  show  11 000  holdings  producing 
cotton,  with  an  average  arable  area  of  14 ha  and  an 
average area under cotton of 8,6  ha. FADN  figures here 
include  almost  all  the  area  under  cotton.  Structures 
are  therefore  significantly  larger  in  Spain  than  in 
Greece,  but  specialization  in  cotton  is  also  very 
strong. 

2.3 

Costs and margins 

FADN figures up to  1991, permit a comparative  analysis 
of competing  regions  and  crops. The  figures  are  given 
in  the  table  on  the  next  page  (page v) • An  initial 
analysis  has  been  made  of  the  criterion  -  costs/cash 
margin,  with  cash  costs  covering  specific  costs  and 
overheads,  in  particular  harvest  costs,  but  not 
depreciation  or  labour  costs, whether  waged  or  not. 
The  figures  given  are  1989-91  averages  and  are 
expressed in trade  ecus. 

The  margin  is  highest  in  Thessaly,  at  ECU  2200/ha. 
Cotton  .production  in  the  region  is  much  more 
profitable  than  that  of  maize,  the  main  competing 
crop,  for which  the  margin  is  around  ECU  1700/ha.  In 
Macedonia-Thrace,  the  margins  for  cotton  and  maize 
are  ECU  1600/ha  and  ECU  1500 /ha  respectively,  and 
therefore  much  closer.  This  explains  the  structural 
differences  between  these  two  large  production 
regions:  specialization  in  cotton  in  Thessaly, 
dominance of maize in Macedonia-Thrace. 

In Andalusia, cash margins are lower than in Greece at 
ECU 1400/ha  for  cotton  and  ECU 1100/ha  for  maize. 
Despite  slightly  higher  yields,  cotton,  in  absolute 
terms,  is  less  profitable  in  Andalusia  than  in 
Thessaly  and  Macedonia-Thrace.  This  is  due  to  higher 
production  costs  and  a  more  favourable  agromonetary 
situation  in  Greece  than  in  Spain  during  the  period 
examined. The  relative  level  of  cotton/maize margins, 
as  in  Greece,  makes  cotton  more  attractive  and 
explains the preference of farmers for cotton when the 
water supply  situation is suitable. 

rt 

08.09.1994 

(D:\DATA\123\C0*F0N\RICA) 

COMPARAISON  OF CASH MARGIN  OF COTTON  AND MAIZE  IN THE MAIN { 
REGIONS OF COTTON'S PRODUCTION 

moyenne 1989-1990-1991 

FARMS •:, 
REPRESENTED 

fSAMPLES 
FARMS' 

AVERAGE 
AREA .._ 
(hâ)'" 

AREA 
PRODUCT 
(ha) 

ÈTOTAL  TOTAL 
AREA  , PRQDUCTIONyiELD 
(ha)  C) 
' (t) 

AVERAGE I OUT  IT 
;/na 

(t/ha) 

[  TOTAL 
.CASH 
COSTS 

CASH 
MARGIN 
ECU/ha 

GREECE  ., 
cotton 
maize 

MACED-THRACE 

c o t t on 
maize 

THESSALIE 

cotton 
maize 

STEREAELLADA 

cotton 
maize 

SPAIN- 

-.'; 
c o t t on 
ma£ze_ 
ANDALOUSIE" 
cotton 
maize 

45402 
116541 

21638 
54393 

15651 
13335 

7052 

11355 
90522 

11070 
4070 

1152 
1537 

.498 
818 

425 
162 

7.8 
7.0 

7.9 
7.2 

6.3 
7.5 

213 

11.2 

135 
812 

129 
32 

1-7.-1 
14.2 

17.4 
18.2 

2.5 
.1Ï9 

2.1 
2.1 

2.5 
2.1 

4.0 

8,6 
3.0 

8.7 
5.6 

4.3 
3.5 

4.5 
2.9 

3.8 
3.0 

6.18 
19.82 

4.54 
22.90 

7.05 
23.47 

2.50 
10.62 

2330.8 
2039;7 

597.7 
494.7 

1733.1 
•1545.0 

2.19 
11.04 

2228.2 
2066.4 

586.7 
546.3 

1641.5 
1520.1 

2.90 
11.13 

2902.0 
2262.7 

674.7 
Ç46.5 

2227.3 
1716.2 

4.7 

9>86 

2.51 

1744.4 

492,0 

1252.4 

14.0 
8.3 

14.3 
15.8 

26.02 
23.47 

26.56 
50.73 

3.04 
7.77 

3.04 
8.96 

2722;6 
1517.2 

1287.3 
577.5 

1435.3 
939.7 

2724.9 
1766.6 

1290.7 
643.5 

1434.2 
1123.2 

Source :  RICA 

t*»)TOTAL  AREAS  » 
+  SUNFLOWER  + 

CERALES  AREA  +  COTTON 
NO  PERENNES  PLANTS 

' 

+  POTATOES  +  SUGAR  BEET 

There is no reason to think that the profitability of 
cotton  fell  significantly  after  1991,  since  yields 
were  normal.  The  fall  in  areas  was  probably  due  to 
water  supplies  being  less  than  expected  and  to  the 
attraction  of  sunflower  seed  under  the  new 
arrangements for oilseeds, particularly in 1993. 

This  analysis  shows  the  microeconomic  bases  for  the 
rapid  development  of cotton  in Greece. It  also shows 
its  reduced  attractiveness  in  Spain,  although  if 
normal  water  supply  conditions  return,  there  is  no 
reason to expect structural decline. 

2.4.  Cotton and the environment 

The relationship between cotton and the environment is 
extremely varied. On the one hand, cotton is the main 
plant  textile  fibre.  It  has  a  better  image  than 
competing synthetic fibres, particularly thanks to its 
being  a  "natural"  product.  On  the  other  hand, 
production  of  cotton  does  pose  certain  environmental 
problems, as is the case with many intensive crops. 

The most  important  effect of the trend towards  single 
crop  farming  of  cotton,  described  above,  in  certain 
production  regions,  the  fact  that  cotton  is  an 
irrigated  crop,  and  the  lack  of  crop  rotation  in 
certain  areas  is  the  risk,  over  the  long  term,  of 
exhausting the soil and increasing the danger of plant 
health  problems.  Irrigation,  whilst  not  solely  for 
cotton,  causes  problems  of water management,  both  in 
Greece and in Spain. 

There  is  also  the question  of inputs, fertilizer and 
pesticides,  which  cotton  is  reputed  to  consume  in 
large  quantities.  In  fact,  on  the  basis  of  cost 
statistics  supplied by the FADN, the  levels  of these 
two inputs are at comparable levels for cotton and for 
other intensive crops  (such as irrigated maize, wheat 
in  the  cereal  producing  regions  in  the  north, etc). 
The  use  of  a  defoliant  on  mature  cotton  plants  to 
facilitate  mechanical  harvesting  is the  most  obvious 
use of inputs. 

At the ginning stage, there can also be problems with 
the  disposal  of  byproducts,  which  are  often  simply 
burned  in the  open air, thus resulting  in pollution. 
The chemical treatment applied to cotton fibres in the 
textile industry can also pose environmental problems. 

of 

cotton 

successful 

experiments 

Following 
organic 
countries, 
production 
particularly in the United States, Paraguay, Egypt and 
India, interest  has grown for this type of production 
in Greece where producers have requested the right to 
market  "organic"  cotton.  This  type  of  production, 
however,  requires  considerably  more  manpower  than 
traditional methods. 

several 

with 

in 

h 

There, have also been experiments in the United States on the 
production  of  naturally  coloured  cotton,  of  value  in  the 
high-quality  clothing  industry:  this  avoids  the  need  for 
polluting treatments  in the industry itsel£. 

2.5...  Operators in the sector •••• ;.-,-;  . 

Downstream  from  agricultural  production  proper,  thé 
principal  operators  are ; the  producers•'?  organizations 
and the ginning undertakings. A brief outline of these 
two  groups  will  be  given;  passing  oyer  the  textile 
sector  further  downstream^  principally  spinning  and 
weaving* 

Producer groups 

During  the  1980s,  the  Community  encouraged  the 
establishment  of producer groups in the cotton  sector. 
Start-up  aid  was  provided  as  was  investment  aid, 
mainly  for the purchase of harvesting  machinery. 

Most  producers  now have harvesting  machinery,  both  in 
Greece and Spain. Producer groups still have a role in 
managing  the  pool  of  equipment.  On  the  other  hand, 
they  do  not  appear  very  active  in  concentrating  and 
adjusting 
be 
recognized, however,  that  this  role  can  be  played  by 
industry  downstream  (cooperative  or  otherwise)  more 

supply  from  producers.  It  must 

' ...;..».,,,,;-..easily:;.;,inthis  sector  than  in  others,  such  as  the 

fruit  and  vegetable  sector,  since  prices  are  stable, 
the  product  relatively  uniform  and  producers  are 
competitive. 

Ginning  undertakings 

Ginning  is  an  industrial  activity  with  a  very  low 
level  of  value  added  and  is  largely  dependent  on 
community  support.  Cooperative  undertakings  account 
for  around  one  third  of  capacity  in  both  producer 
Countries. 

no 

are 

speaking, 

Generally 
particular 
there 
difficulties  for the sixty odd undertakings  in Greece, 
given the growth in production. In Spain, on the other 
hand,  competition  is  cufrrently  fierce  owing; to  the 
small  harvests  in  1993  and  1994. There  are  s£ill  32 
undertakings,  with  considerable  overcapacity.  Working 
at the average rate, all Spanish production could have 
been  ginned  in  15  days  in  1994,  although  operations 
can  easily  be  spread  over  three  to  four  months,  and 

'.' more if ' necessary... .•:•; 

.  . . 

w'-:-; 

u 

3. 

OPERATION OF THE SYSTEM OF AID 

3.1.  Production aid and the minimum  price 

explicitly 

Although  cotton  does  not  figure  in  Annex  II  to  the 
Treaty,  Protocol  No 4  of  the  Act  of  Accession  of 
agricultural 
Greece 
recognizes 
character  of  cotton  production  and 
introduces 
production  aid.  This  was  supplemented  by  Protocol 
No  14  to  the  Act  of  Accession  of  Spain  and  Portugal. 
The  aid  is  intended  to  support  producer  incomes  but 
its operation is based on the ginning enterprises. Aid 
is  paid  to  such  undertakings  provided  that  the 
producer  has  been  paid  at  least  the  minimum  price 
(fixed by the Council). 

the 

Productionn  aid,  fixed  at  least  monthly  by  the 
Commission,  is the difference  between  the  guide  price 
for  unginned  cotton,  fixed  annually  by  the  Council, 
and  the  price  recorded  on  the  world  market.  In  the 
absence  of  quotations  for  unginned  cotton,  the 
Commission  must  "reconstitute"  a  world  price  on  the 
basis, per  100 kg: 
-  of 32 kg of ginned cotton  (fibres) ; 
-  of 54 kg of cotton seed, calculated  on the basis of 

other oilseeds; 

-  of 

standard 
A ECU 14.25/100 kg . 

ginning 

cost 

calculated 

at 

It  should  be  noted  that  fibres  generally  represent 
more  than  90 %  of  the  total  value  of  fibres  and 
seeds. 

The  world  price  used  for  fixing  the  aid  is  a  spot 
price,  i.e.,  forward  prices  are  not  used  in  view  of 
the  technical  difficulties  in  establishing  them  ( see 
1.2.).  Nevertheless, the  aid  can  be  fixed  in  advance 
of or even after cotton is placed under control in the 
. ginning  plants. Advanced  fixing  enables  operators  to 
sell for future delivery knowing in advance the amount 
of  aid  they  will  receive,  and  if  they  can  sell  for 
future delivery at a higher price than the spot price, 
they  gain  because  of  the  fixed  nature  of  the  aid. 
Fixing after delivery is a further facility, although, 
curiously, ginners who have so far made use of it have 
generally misread market trends, which has been to the 
benefit  of  the  Community  budget.  For  cotton,  the 
problem with these operating  facilities  is not so much 
their  existence  as  the  lack  of  speedy  information 
about  them  on  which  the  Commission  could  take  any 
measures  necessary  (Commission  staff  examine  changes 
in world prices on a daily  basis). 

il 

THE  STABILIZER  MECHANISM  SINCE  THÉ  ACCESSION  OF  SPAfN 

Marketing y e ar  M GQ 

REDUCTION OF G U I DE P R I CE  , MAXIMUM  L I M IT 

DIFFERENCE at e nd  A D J U S T ED  M GQ 

of n a r k e t i n g y e ar  V 

(tonnes) 

(tonnes) 

*GQ  (+  or 
•••Je/ 

-) 

MGQ  (+  or 

-) 

•

*

•- 

•• 

• 

MGQ(+ or  -)  X 

>GQ 
X'-  • 

(+  or 

-) 

MGQ  (+  or 
•!x 

MGQ  (+  or 
lx-v 

-) 

-) 

(tonnes) 

1986/87 

752000 

(Est; P r o d. .-* iMQQy»0'.S''•;;  ^ 

. 

1 5 0 00  r 

••?•,:''••;:;:.. 

1987/88 

752000 

(Est. E t o d. - H S Q ) * 0 .5 

1 5% cut-off 

isooo 

1988/89 

752000 

(Est.Prod.-MOQ)*0.5 

2 0% c d > q ff 

1 5 0 00 

.•/•,.'.': !".';••.•.• 

1989/90 

752000 

( E s t . P r o d .-  M G Q ) » 6 .S 

2 5%  cut-off 

15000 

1990/91 

752000 

(Est.Prod. -  M Q Q ) » 0 .5 

2 5%  cut-off 

15000, 

1991/92 

752000 

(Est. Prod.  -  M Q Q ) * 0 .5 

15000 

1992/93 

701000(1) 

(Est. Prod.  -  M G Q ) » 0 .5 

15000 

1993/94 

701000 

(Est.Prod.  -  M G Q ) » 0 .5 

1 5 0 00 

1994/95 

701000 

(Est. Prod. -  M Q Q V » 0 .5 

M GQ 

1995/96 

701000 

(Est. P r o d. -  M B Q » 0 .5 

M GQ 

M a x.  redaction  of 
1 5% 
(all  penalties) + 5% 
carryover 
3%  threshold  of  X 
(2) 

X 

15%  cut4xff^ :: 
5% carry-over 
3%  threshold  of  X 

X 

18.5%  c u t - o ff 
7% carry-over 
3%  threshold  of  X 
>  ••/•  > ' . ;• 

.  <?) 

20%  c u t - o ff 
7% carry-over 
3%  threshold  of  X 
m 

X 

X 

(1)  :  Adjustment  of  the  M GQ  following  adjustment  of  the 

standard  quality. 

( 2 ): T he threshold  only  applies to production  below t he cut 
off../; 

.'/•:••-';.• *;?,>:::^  ; ' 

•'•'•/:.:v  ' 

Est.  prod, s  production  estimated  at beginning  of  marketing 
year 

.:.;:v,;/,.;r .••' 

..;'; •'••'•., 

Actual  production:  production  recognized as eligible  for  aid 
at end of marketing  year 

Xt  actual  production  less  estimated  production 

MGQ: 

adjusted  MGQ 

/* 

COTTON.XLS 

300 

Cotton Nominal Producer Price Index (1986/87=100} 

•Greece (Ora) 
•Spain (Pta) 
•EU  (gECU) 

1986V87 

1987/88 

1989/90 

199CV91 

1991/92 

1992/93 

1993/94 

1994/95 (e) 

30/09/94 

0 

Compliance  with  a  minimum  price  is monitored  for  all 
deliveries  from  an  individual  producer  to  a  given 
plant on leaving the farm. It is adjusted, not only on 
the basis  of the water  and  impurity content, but  also 
on the basis  of the  fibre quality  (length  and  grade), 
which  requires  sampling  and  the  application  of  a 
(Community)  scale  of  increases  and  reductions  for 
cotton above and below the standard quality. 

Official  prices  for the  1994/95 marketing  year  before 
application of the stabilizer  (see next paragraph) are 
as follows : 

-  guide price: A ECU  101,46/100 kg 
-  minimum price: 

A ECU  96,39 /100 kg 

3.2. 

The stabilizer mechanism 

Since  its  introduction  in  1981,  the  production  aid 
for cotton has been covered by a stabilizer mechanism 
based  on  a  community  maximum  guaranteed  quantity 
(MGQ).  Since  the  accession  of  Spain  (1986/87 
marketing  year, the  rules  of  these arrangements  have 
been  amended  almost  every  year.  A  description  of 
those  changes  is  given  on  the  next  page  (page v i ). 
The arrangements  are currently  as follows: 

MGQ of 701 000 t ; 
reduction  in  the  guide  price  corresponding  to 
50  % of the  overrun  of  estimated  production  of 
the MGQ ; 
reduction  in  the  minimum  price  by  the  same 
amount; 
correction  possible  the  following  year  on  the 
basis of actual production; with a threshold of 
3 % of the gap; 
maximum  reduction  (cutoff)  of  18,5 %  of  the 
guide  price  for the  current marketing  year  and 
7 % for next year. 

- 

- 

- 

The  system  is  similar  in  certain  respects  to  that 
used  for oilseeds between  1988/89 and 1991/92 but has 
the  fundamental  difference  of  having  a  cutoff, which 
is  now  regularly  reached.  This  has  meant  that 
production  has  not  fallen  (see  1.3.  above)  and 
budgetary  expenditure  has  continued  to  increase  (see 
3.5.  below)• 

The MGQ of  752 000 t fixed  for 1986/87 resulted  from 
the addition of the quantities  for two Member States: 

567 000 t for Greece, the previous MGQ; 

-  185 000 t  for  Spain,  the  quantity  referred  to 
in  the  Act  of  Accession,  as  a  form  of  "right 
to produce" for Spain. 

Subsequently,  the  standard  quality  having  changed, 
the MGQ was adjusted to  701 000 t from 1992/93. 

The table  on the  next page  (page  vii) shows  changes 
in  actual  official  prices,  i.e.  the  prices  after 
application  of  the  stabilizer,  from  1986/87  and  the 
reconstituted world price. It shows the importance of 
the  world  price  and  of  aid  in  producers'  incomes. 
They  currently  account  for  around  1/3  (around  A  ECU 
250/t and 2/3  (A ECU 500/t) of income respectively. 

To  show  the  impact  of  monetary  and  agrimonetary 
effects, the following page  (page viii) shows changes 
in  the  actual  minimum  price  in  national  currency  at 
current  prices•  The  stabilizer  did  not  prevent  the 
minimim price in Greece increasing by a factor of  2.7 
between  1986/87  and  1994/95  and  the  same  price  in 
Spain from remaining  at the same level. If account is 
J  taken  of the  difference  in  inflation rates, however, 

the gap is reduced. 

It  should  not be  forgotten that the monetary  effects 
are  the  same  for  all  products  covered  by  a  market 
organization  and  are  not  therefore  specific  to 
cotton. Neither  do they  explain the relative  decline 
of  cotton  production  in  Spain  to  that  in Greece.  In 
both countries, it  is the relative  levels of  support 
for crops which explain changes in production. 

The current level of aid  is around 

A ECU  1400/ha. 

3.3.  Aid to small producers 

A  special  aid  scheme  for  small  cotton  producers  was 
introduced  in the  1989/90 marketing  year  in order  to 
partly offset the effects of the stabilizer for those 
producers  and  following  the  introduction  of  the 
system  of  aid  for  small  olive  oil  producers •  Small 
producers  were  assumed  to  be  unable  to  benefit  from 
the economies resulting  from mechanization. 

Cotton  producers  eligible  for a particular  marketing 
year  for  aid  for  small  cotton  producers  are  those 
with  an  area  of  not  more  than  2,5 ha  under  cotton. 
The  basic  additional  aid  is  ECU 250/ha  up  to  a 
maximum guaranteed  area of 73 000 ha, calculated on a 
historical  basis,  in  order  to , ensure  absolute 
budgetary  neutrality. 

Over the years, this  aid  has resulted  in an  increase 
in  the  number  of  small  producers  by  producing  a 
division in applications, particularly  in Greece, and 
therefore  an  increase  in  the  area  concerned,  which 
has  increased  from  21 %  in  1989/90  to  50 %  in 
1993/94.  The  position  during  the  latest  year  of 
application was as follows: 

\7. 

System of aid for small producers in 1993/94 

Number of 
producers 

Area 
concerned  under 
cotton 

% of  area 

Greece 

Spain 

E.U. 

99 000 

187 000 

3.2 

3 800 

5 200 

16.5 

102 800 

192 200 

50.1 

This development  of the system brought actual aid to A 
ECU 94/ha in  1993/94, representing only around  4 % of 
the income of the producers concerned. 
The argument "that,small producers lack mechanization is 
no longer valid since producers use harvesting machines 
in common through producer groups. 

3.4. Problems of control 

The keys to management of the cotton arrangements are: 
the area declaration submitted by producters ; 
the contract between the producer and the ginner, 
with tfye undertaking, to respect the minimum price; 
the bringing  of unginned  cotton under control in 
the ginning plant, with determination of quality ; 
goods in/gooas out records at the ginning plant. 

In  theory,  this  system  of  management  should  ensure 
adequate control. It  enables the origin of each batch 
of unginned cotton to be traced and the plausibility of 
quantities to be checked given the areas concerned. 
The Commission takes the, view that the operation of the 
system is generally  satisfactory in Spain. This is not 
the case  for Greece  however, where attention  has been 
drawn, particularly  since  the  1991/92 marketinc year, 
to an increase, in the quantities eligq-b^e for aig. which 
appears excessive when compared with initial estimates. 
The Commission's principal criticisms of management of 
the system in Greece are: 
-  the  almost  total  absence  of  checks  on  individual 
-  the lack of checks on implausible yields; 

areas ; 
the  existence  of  intermediaries  between  producers 
and  ginners, with  numerous  cases  of  falsification 
of crop declarations; 
shortcomings  in the procedures  for bringing cotton 
under control, wh,ich can  lead  to  falsification  of 
the quantities eligible ; 
management  of  the  system  by  a  body  (the  Cotton 
Board)  whose  status  is  unclear  and  which, 
furthermore, takes 1 % of aid ; 

-  lack of cooperation from the Greek authorities. 
The situation was considered sufficiently alarming for 
the Commission to announce its intention of refusing.to 
clear the 1991 accounts for Greece for cotton, refusing 
25 % of  expenditure  and  100 % if  cooperation  was  not 
forthcoming• 
There have been no complaints  from producers  regarding 
lack of compliance with the minimum price. 

. , 

. 

^ 

3-5- Budgetary  expenditure 

Budgetary  expenditure  on  cotton  is  accounted  for  by 
production aid  (paid per tonne) and the special aid  for 
small  producers  (paid  per  hectare).  The  former, 
included  in Chapter  1-14  - Fibre Plants, is by  far ^.he 
largest,  amounting  to  an  average  of  B ECU 68T7 million 
over the period  1991-93. The  latter, which  comes  under 
only 
Chapter  1-38 
B EcU 21 million  per year,  thanks  to  the  maximum 
guaranteed  area  mechanism  which  ensures  absolute 
udgetary  neutrality. 
The  following  table  shows  expenditure  on  production 
aid since 1986. 

Development, 

Rural 

is 

- 

Expenditure on production aid 

1986 

1987  1988  1989  1990  1991 1992  1993  1994 

(B 

ECU  Mio) 

(budget) 

532 

479  472 

571  540  488  742 

831  760 

(Source 

DG  VI) 

The  existence  of  the  maximum  guaranteed  quantity  has 
not  permitted  stabilization  of  expenditure  because  of 
the cutoff for reductions applicable to official prices 
and aid. 
As  was  seen  in  1.3.4.  on  medium-term  production 
forecasts,  if  the  support  system  remains  unchangedf 
budgetary  expenditure  will  be  almost  ECU 1 billion  in 

it, 

4. 

CONCLUSION/PROPOSALS 

It  emerges  from  this analysis that  the existing aid  system  on  the maximum  guaranteed 
quantity  has not  succeeded  in  its  objective  of limiting  support  to  the  quantity  foreseen 
because of the limit on  the aid  reductions  and  yet  that the system is perceived  to  be  unfair 
because  expansion  in  one  producing  member state  has  led  to  aid  reductions  in  both 
member  states. Against  this background  it  is  not  surprising  that  the  Council  in December 
1993 noted that the Commission  intended  to reflect  "on the specific  problems  of the cotton 
sector  in the spirit of fair management". 

Possible solutions 

One  solution  which  has been examined by the Commission would  be  to integrate  cotton 
into  the compensation scheme for  arable  producers alongside  cereals,  proteins  and oilseeds. 
The Commission  does  not,  however,  consider that this solution would  be appropriate.  The 
level of aid  for cotton expressed  in terms of aid per hectare far exceeds  that  of other arable 
crops  - around  1700 ECU/ha  compared  with  540 ECU/ha(*} for  irrigated  maize.  Thus  the 
discipline of the base area would  not,  of itself,  provide  a  sufficient  budgetary protection and 
it  would  be  necessary 
for  cotton. 
Furthermore,  given  the high proportion which labour and other  inputs represent  in  the total 
value of the cotton, there would be  a  strong temptation  for producers to claim the area aid 
on the basis of low  or minimum cultivation, in other words, to cultivate the aid. 

to  apply  a  separate  Maximum  guaranteed  area 

The  Commission,  therefore,  has concluded  that the basic structure  of the  aid system should 
be retained, subject to a number of  adaptations as explained in the following paragraphs. 

PROPOSALS 

Level of support 

The volume of aid provided in  1992, which was the point of departure for the reform  of other 
sectors, should be regarded as the basis for future support in this sector. 

Small producers scheme 

As  small  producers are able to benefit from mechanisation by  working collectively  and  as it 
is evident that the effect  of the  scheme  has been  to distort production  structures in Greece, 
this scheme should be ended  and the budgetary cost of this scheme should be integrated  into 
the  total  value of support for the sector. The total support for  the sector, for large and small 
producers combined, was 762.9 MECU in 1992. 

n  respectively 1400 and 450 in "old" green ECU. 

17 

IS 

Revised MGQ and distribution between producing member states 

The  MGQ  should be split between the two producing member  states,  in accordance  with 
their  average production  in the last  period  of  three  consecutive  years  in  which  climatic 
conditions can  be  regarded  as having been normal, i.e. the years 1990/91 -  1992/93. Average 
Community production  in this period was 947,000 tonnes, of which 698,000  tonnes were in 
Greece and 249,000  in Spain. 

Revised target price 

To  ensure  compatibility  between  the revised MGQ and  the  level  of support  in  1992, the 
level of the guide price should henceforth be set at  110.73  ECU/100  kg. This level of target 
price  has  been  calculated  taking  account  of  an  estimated  normal  world  price  of  30 
ECU/100 kg  (the middle  of  the observed  range of  18-42 ECU/100 kg and the average  for 
the years 1986/87 -  1991/92)(*}. Hence under normal world market conditions and  with  the 
continuance  of  recent  average  production  levels, expenditure will equal the budget limit(  ]. 

Equitable management 

The  aid  penalties to be applied  should  the increased MGQ be  exceeded would  be  partly 
applied at a Community level and partly at  a  member state  level. Thus the first  10% of any 
excess (le 5% penalty) could be applied  equally to  producers  in both of the member states 
concerned. Beyond that  any further  penalty  would be shared in proportion to the extent to 
which either  or  both  member  states'production  had  exceeded  their  national guaranteed 
quantity (NGQ) by more than 10%. With the rebased MGQ and with the equitable  sharing of 
any potential penalties, which would enable  each member  state  to  encourage  producers  to 
respect  their  national guaranteed  quantities and thus avoid large aid reductions, a limit  on 
potential  aid  reductions is no longer necessary nor is it  compatible with  the objective of the 
revised system. Similarly it will no  longer be  appropriate to continue the existing provisions 
which provides  for part  of  the aid penalty to be carried forward from one season to  the next. 
Aid  reduction  will,  therefore,  fall  equitably  on  the  producers  in the  year  where  any  excess 
occurs. 

Enhanced control 

Although,  from  the  reasons  explained  above,  an  aid  per  hectare  system  would  not  be 
appropriate  for  cotton,  it  is  nevertheless  desirable  for  control  reasons  to  establish  a link 
between the hectares planted  with cotton  and  the quantity of unginned cotton delivered  to 
the  ginners.This  link,  to  be  established  on the  basis  of  appropriate  yield coefficients  will 
reinforce  existing controls on the volume of  ginned  cotton  produced  by the ginners. This 
additional control will  protect  the  Community  budget  from  the risk of aid being paid on 

(*) respectively 91.7, 25 and 15-35 in "old" green ECU. 
("y  (110.73 ECU - 30.2 ECU)x 10 x 947,000. 

74 

cotton  not actually  produced  by  Community  producers and avoid  the  risk  that genuine 
producers could be penalised because of the MGQ being exceeded  as a  result  of fraudulent 
production. 

Establishment of the world price 

At present the world price for unginned  cotton is fixed on the basis of the  value  of ginned 
cotton  and  cotton  seed,  after  taking  account  of  ginning  costs.  This  system  is,  however, 
subject  to  serious  weaknesses. Ginning  costs  cannot  be  accurately  established  and  reliable 
quotations for the value of cotton seed are lacking. It is, therefore,  proposed to  establish  in 
friture the  price of unginned cotton on  the  basis  of quotations  for  ginned cotton  adjusted 
by a coefficient based  on  the past  relationship  between the ginned cotton price and the  price 
for unginned cotton, as it was calculated by the Commission. 

Marketing year and payment of aid 

In  order  to  establish  forecast  production more  accurately,  it  is proposed to delay the start 
of the marketing year  from  1st  September  to  1st  October,  that  is to  say,  to  a  date  which 
corresponds better  with the  time  when the ginning period begins. The final level  of  payment 
will,  of course, depend in part on whether and to which extent the MGQ has  been exceeded 
which cannot be established until near to the end of the  campaign.  However,  an  advance  of 
not  more  than  40%  will  be  available  to  ginners.  The  level  of  the  advance  within  that 
maximum  will  be  determined  each  year  by 
the 
management  committee,  in the light of provisional  information  on  the level  of production 
and the expected world market price. 

the  Commission  after  consulting 

Conclusion 

The  Commission considers that this system will offer  producers greater security  and  a  better 
basis on which to plan. It  will  ensure  that production will remain within the new MGQ and 
NGQs if the proposed  aid level proves to provide a reasonable level of return by comparison 
with competing  crops.  If  expansion takes place until  an  equilibrium  is reached, this will 
reflect  equitable management  of cotton by comparison with  other  crops.  At the same time 
the division of the  MGQ  between producing  member  states  can be regarded as  equitable 
treatment  of producers in the two Community production zones. 

19 

H 

ANNEX 

;'£.;. GUARANTEED NATIONAL QUANTITY (GNOJ 

Spain  : 

Greece : 

249 000 (1) 

698 000 (2) 

: Spain (1) 

Average 

1990/91 

1991/92 

1992/93 

Quantities eligible for 

281 838 

279^75 

previous standard quality aid 

(14-3) 

Quantities eligible for  _ 

262 835 

260 725  223 932 *  249 164 

current standard quality aid 

(10-3) (*) 

: Greece (1) 

:  Average 

1990/91 

1991/92 

1992/93 

Quantities eligible for  v 

709 871 

719 44* 

previous standard quality aid 

.<i4-3):  •;•' 

Quantities eligible for 

£62 008 

670 940  760 685 :  697 878 

current standard quality aid 

(10-3) (*) 

(.*.) The standard quality for unginned cotton was adjusted during the 3.9.92/93 

<tfr 

marketing year: the conversion of the quantities eligible for the aid 

(relating to marketing years before the abovementioned adjustment in 

standard quality) expressed in terms of the current standard quality is 

obtained using a reduction coefficient of 0.9325748. 

i*\ 

it CALCULATION OF /THE GUIDE PRICE 

assuming a world market price for Unginned cotton of ECU 25/100 kg 

(average 1986/87 - 1991/92) 

Total expenditure (without a change in the system)*  x 106  p 

•'GMQ-

762.9 

x 106  budget ecus 

947 000 tonnes 

= 66.7 green ecus/100 kg  ** 

Guide price for unginned cotton = 

66.7 green ecus/100 kg + 25 green ecus/100 leg 

=91.7 green ecus/100 kg, or ECU 110.73/100 kg *** 

*  : relating to the 1992/93 marketing year and broken down as follows: 

-general system:  742 million budget ecus 

- small producers' scheme: 20.9 million budget ecus. 

**  : converting budget ecus into green ecus is done by dividing by 1.207 

*** : From 1 February 1995 all the prices and amounts expressed in green 

ecus must be converted into financial ecus by multiplying by a factor 

of 1 207509 

.1*,' 

Proposal for à 

COUNCIL I^GULATIÔN (EC) No 

; 
; 

' 

of 

:J9S/:.  0 0 6 1 ( C N S) 

V:;.. 

adjusting, for the fifth  time, the system of aid for  cotton 
introduced by Protocol 4  annexed to the Act of Accession of Greece 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing me European Community, 

Having regard to the Act of Accession of Greece, and in particular paragraph 11 of Protocol 4 
on cotton, as last amended by Regulation (EEC) No  2052/921, 

Having regard to Council Regulation (EEC) No 2052/9? of  30 June  1992 adjusting, for the 

second time,  the  system of  aicj. for  cotton introduced  by  Protocol 4  annexed to  the  Act  of 

Accession of  Greece, and'in particular Article 5 thereof, 

Having regard to the proposal from the Commission, 

Having regard to the opinion of the European Parliament, 

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

OJNo  L 215, ^0.7.1992, p.  10. 

•^ 

Whereas a review  of the operation of the system established by Protocol  4  as referred  to in 

Article  5 of  Regulation (EEC) No  2052/92  has shown that the system needs to be adjusted; 

Whereas a study on the impact of cotton growing in the regions where  it is practised points 

to a potential for increasing production in those areas of the Community most suitable for this 

crop, taking  into account the Community's demand for cotton fibre; whereas the guaranteed 

maximum  quantity  should accordingly  be increased; 

Whereas, on the other hand, to ensure that production of this crop does not expand in those 

regions  less  suited  to  it  and to  avoid  an increase  in  expenditure,  the  guide  price  should  be 

reduced in proportion to the increase in the guaranteed maximum quantity and no limit should 

be  placed  on  the  reduction  in  aid  should  the  guaranteed  maximum  quantity  be  exceeded; 

whereas,  in  fixing  the guide  price, account  must be  taken of  the  adjustment to  the price  in 

ecus  laid  down  in  Council  Regulation  (EC)  No  150/95  of  23  January  1995  amending 

Regulation (EEC) No  3813/92 on the unit of account and the conversion rates to be applied 
for the purposes of  the common agricultural  policy2; 

Whereas, with a view to facilitating  budgetary arithmetic and fairness among operators, any 

deferral  of  the reduction  in aid should be disallowed; 

O J N o L 2 2,  31.1.1995, p. 1. 

Whereas  the  diverging  production  trends  in  the  producer  Member  States  have  produced 

inequitable  effects  in  the  operation  of  the  system  of  stabilizers;  whereas,  with  a  View  to 

establishing  a  fairer  system,  provision  should  be  made  so  that,  where  the  guaranteed 

maximum quantity  is exceeded by no more than  10%, the aid should be reduced equally  in 

the  producer Member  States and, where  the guaranteed maximum quantity  is  exceeded by 

more than  10%, the Member States responsible should be  subjected to  a further reduction; 

whereas,  however,  provision  should  be  made  whereby  Member  States  which  are potential 

cotton producers can start to grow cotton by setting production at a level at which the system 

of  stabilizers does not apply; 

Whereas, to enable operators to run longer production and processing programmes, the; guide 

price  and  the  minimum price  payable  to  the  producer  to  ensure  the  benefits  from  the  aid 

should no longer be fixed annually; 

Whereas  experience  may  show  that  other  adjustments  to  the  system  provided  for  in  the 

abovementioned Protpcol are necessary; whereas a procedure allowing the: Council to adjust 

the system shouldaccordingly be laid down, 

HAS  ADOPTED  THIS REGULATION: 

Article 1 

This  Regulation  provides  for  adjustments to  the  system of  aid  for  the  production  of  cotton 

provided  for  in paragraphs 3, 8,  9 and  11 of Protocol  4 annexed to the Act of  Accession of 
Greece  and  adjusted  by  Council  Regulation  (EEC)  No  1964/873,  as  last  amended  by 
Regulation (EC) No  2760/944. 

Article  2 

Article  2  of  Regulation (EEC) No  1964/87  is replaced by the  following: 

"Article 2 

1.  A guaranteed maximum quantity (GMQ) is hereby established for which the aid referred 

to  in point  3 of  Protocol  4  on cotton shall be granted. 

This  quantity  shall  be  fixed  for  each  marketing  year  at  947  000  tonnes  of  unginned 

cotton. 

2.  The GMQ shall be allocated as follows among the Member States (guaranteed national 

quantity  - GNQ): 

Spain: 

249  000 tonnes 

Greece: 

698  000 tonnes. 

3. 

Paragraph 4 notwithstanding,  if during a marketing year actual production exceeds the 

GMQ, the  guide price for that year shall be adjusted as follows: 

O J N oL  184, 3.7.1987,  p.  14. 
OJ No  L 294,  15.11.1994, p.  17. 

- 

where the GMQ is exceeded by up to  10%, me  g u^ 

be reduced by 

a percentage çquâl to half the percentage excess; 

- 

where t^e GMQIfeexœededby 

reduction shall be* 

made  to  me  ^ i^ 

GNQ plus 10%/The adbUtional reduction shaU 

extent to which the GMQ was exceeded andshall be proportional to me difference 

between the actual quantity produced by each Member State and its GNQ. 

The reductions applicable shall be fixed m accordai  with the procedure laid down in 
Article  12  of  Council Regulation (EEC) No  1308/705,  as  last amended by the Act  of 

Accession of Norway, Austria, Finland and Sweden, to the European Union. 

4. 

Paragraph 3 shall not apply to Member States in which the actual quantity  of unginned 

cotton produced does not exceed  1 500 tonnes in the marketing year." 

Article 3 

\. 

'.;.. • 

Paragraph 8 of Protocol N6 4 is replaced by me  followir^ 

"8.  The guide price shall be set at ECU 110.73/100 kg of unginned cotton. 

OJ No  L  146,  4.7.1970; p.  1. 

This price  shall relate to cotton: 

of  fair,  sound and merchantable  quality, 

having  a  10% moisture content and 3% impurity  content, 

having the necessary characteristics to produce, after ginning, 32% grade 5  fibres 

(white middling) of 28 mm length (1-3/32")." 

Article  4 

The following  paragraph is inserted in Protocol 4: 

"8a.  Production aid shall be granted only to those undertakings which buy unginned cotton 

at  a  price  at  least  equal  to  a  minimum  price.  The  minimum  price  shall  be  set  at 

ECU  105.19/100 kg of unginned cotton for the quality  selected for the guide price at 

the farm gate." 

Article 5 

Point  (a) in the second subparagraph of paragraph 9 of Protocol  4  is deleted. 

['••: 

Article 6 

Paragraph  11 of  Protocol No 4  is replaced by the following: 

'"11..  Before  the  start of  the1999/2000  marketing  year  at the  latest, the  Commission shall 

send the Council a report on the operation of the system of aid for cotton. 

If the report shows it to be  neeessarVj the Council,  acting  by qualified  majority on a 

proposal from the  Commission and having  consulted  Parliament,  shall  decide  on any 

adjustments to the system, account being taken of the experience acquired in operating 

both this system and the system of support for arable crops." 

; Article 7  '."',. 

This Regulation shall enter into force on the third day folio wing its publication in the  Official 

Journal of the European Communities. 

It shaU apply from the  1995/96 marketing year. 

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

Done at 

.'•*  For the Council 

Proposal for a 

COUNCIL REGULATION (EC) No 

• :•-;'"•' 

' '  •;'."••'•••;.. 

•  of 

; 

;""V\: 

laying down the general rules for the system of aid for cotton 
and repealing Regulation (EEC) No 2169/81 

THE COUNCIL OF THE EUROPEAN COMMUNITIES, 

Having regard to the Treaty establishing the European Union, 

Having regard to the Act of Accession of Greece,and in particular paragraph 9-of Protocol 4 

on cotton, as last amended by Regulation (EC) No 

/951, 

Having regard to the proposal by the Commission, 

Whereas  Potocol  4  of  the  Act  of  Accession  of  <3reece  and  Council  Regulation  (EEC) 
No  1964Z872 have been amended by Regulation (EC) No 
/95; whereas Council Regulation 
(EEC) No 2169/813, as last amended by Regulation (EEC) No  1554/934, should accordingly 

be amended; whereas the significance of the adjustments that need to be made to Regulation 

(EEC)  No  2169/81  and  the  large  number  of  amendments  already  made  to  it  make  it 

appropriate  to  recast this Regulation for  the purposes of clarity  and transparence; whereas 

Regulation (EEC) No 2169/81 should therefore be repealed; 

Whereas, pursuant to paragraph 9 of the Protocolitis necessary to lay down the rules ofi 

procedure  and  sound  management  for  its  application,  the  general  rules  of the  system of 

production aid, me criteria for determining the world market price and the rules concerning 

the financing of me measures envisaged; 

of this Official  Journal 

See page 
OJNoL  184, 3.7.1987, p. 14. 
OJ No L 211, 31.7.1981, p. 2. 
OJ No L  154, 25.6.1993, p. 23. 

Whereas, in order to facilitate the management and control of the aid system, provision should 

be made for  a procedure establishing  close  cooperation between the Member States and the 

Commission within a Management Committee; whereas it is advisable to use the Management 

Committee  for  Flax  and  Hemp  as  provided  for  in  Regulation  (EEC)  No  1308/70  on  the 
common organization of the market in flax  and hemp5; 

Whereas,  in  accordance  with  Article  2  of  Regulation  (EEC)  No  1964/87,  the  aid  shall  be 

reduced  by  a  coefficient  yet  to  be  determined  where  Community  production  exceeds  a 

quantity fixed in advance; whereas, in consequence,  the amount of aid to be granted cannot 

be determined until the actual quantity produced is itself known; whereas, to offset the adverse 

effects  of late payment of aid for the parties involved, provision should be made for the part 

of the aid to be paid in advance; 

Whereas,  pursuant  to  the  third  subparagraph  of  paragraph  3  of  the  Protocol,  the  aid  is 

determined on the basis of the difference  between a guide price for unginned cotton and the 

world market price; whereas, since there is no international trade in unginned cotton, and there 

are therefore no offers or quotations, provision should be made to enable a world market price 

for this product to be determined; whereas this price may be established  on the basis of the 

historical  relationship  between  the  price  agreed  for  ginned  cotton  and  that  calculated  for 

unginned cotton; 

WTiereas, when calculating the price of ginned cotton, account should be taken of the  offers 

made  on the  world  market and of the  quotations  on those  exchanges  that are important  for 

international trade; whereas the price on the world market must be calculated using the lowest 

offers and quotations on that market among those that are considered representative of the real 

market trend; 

OJNo  L  146, 4.7.1970,  p. 1. 

Whereas, for the aid system to operate correctly,-the world market price must be recorded for 

à Community frontier crossing point; whereas, in fixing this point, account  should be taken 

of the extent  to  which it is representative  for  imports of the products  in question; whereas, 

therefore,  in the case of multiple origins the ports of Northern Europe should be chosen and 

in the  case  of  a  limited  number  of  origins,  offers  or quotations  recorded  on  an exchange 

outside Europe the port of Piraeus should be chosen; whereas, in the latter case the offers and 

quotations adopted will need to be adjured if they relate to some other frontier crossing point; 

Whereas such adjustments should also be made to the offers and quotations adopted in order 

to compensate for any variation from the presentation and quality taken as a basis for fixing 

the guide, price; 

Whereas me producer Member States should be required to set up the control  arrangements 

necessary to  ensure that the aid system operates correctly; 

Whereas,  with  a  view  to  subjecting  the  Community  expenditure  on  applying  me  planned 

measure  to  financial  and  monetary  rules  and  appropriate  procedures,  Council  Regulation 

(EEC) No  729/70  of 21  April  1970 on the financing of the common agricultural policy*, as 
last amended by Regulation (EEC) No  2048/887, should apply mutatis mutandis to the matters 

dealt with herein,  as should the Regulations relating to the value of the unit of  account and 

the exchange  rates to be applied within the framework of me common agricultural policy; 

Whereas the adjustments to me system as laid down in this Regulation must be implemented 

«as smoothly as possible; whereas provisional measures may therefore be  necessary, 

HAS ADOPTED  THIS REGULATION: 

6 
7 

OJNoL  94, 28.4.1970, p.  13. 
OJ No  L  185,  15.7.1988, p.  1. 

Article 1 

For the purposes  of  this Regulation: 

(a)  "unginned cotton" means the fruit of the cotton plant (Gossypium)  which has reached 

maturity  and  has  been  harvested,  and  which  contains  pod  waste,  leaves  and  earthy 

matter; 

(b)  "ginned cotton" means the cotton fibres (other than linters and waste), neither carded nor 

combed, from which the seeds and most of the pod waste, leaves and earthy matter have 

been removed. 

Article  2 

The guide price for unginned cotton of a specified quality shall remain applicable throughout 

a given  marketing  year; the marketing year shall run from 1 October to  30  September. 

Article 3 

1.  The world market price for unginned  cotton shall  be determined  by taking account  of 

the  historical  relationship  between  the  world  market price  for  ginned  cotton  and that 

calculated  for  unginned  cotton. It shall  be determined periodically  on the basis of the 

world  market price recorded for  ginned cotton. 

2. 

If the world market price for unginned cotton cannot be determined in accordance with 

paragraph  1,  this  price  shall  be  established  on  the  basis  of  the  most  recent  price 

determined. 

Article 4  v. 

1.  The world market price for ginned cotton shall  be determined  on the  basis of  a jgràde 

5 (white middling) productwith a fibre length of 28 mm ( 1-3/32"),  acçou^ 

of  the  offers  made  on  this  market  and  of  the  quotations  on  one  or  more  European 

exchanges that are important for international trade. The price shall be determined using 

the lowest offers  and quotations among those that are considered  representative of the 

red  market trend. 

2. 

For the purposes of the above calculation, an average shall be established of the offers 

and quotations on one or more European exchanges for a product delivered cif at a port 

in Northern Europe and corning from the various supplier countries considered the most 

representive  in terms of international trade. 

However,  where the wdrîd market price cannot be détermmed m 

preceding  subparagraph; it shall be determined: 

on the basis of a limited number of the most representative offers  and quotations 

for a product delivered cif at Piraeus recorded on the Liverpool  exchange, or on 

another European exchange, or 

- 

on the basis of the offers  and quotations on a non-European exchange either by 

calculating  an average of the offers and quotations for a product delivered cif at 

Piraeus  coming  from  various  supplier  countries  that  are^^ considered  the  most 

representative in terms of mternationaltradej orby usmgalimited 

most represehtauve? offers  and quotations for a product delivered  cif at Pfraeus. 

3.  Where the offers  and quotations recorded do not satisfy the requirements referred to in 

the preceding  paragraphs, the necessary  adjustments shall be made. 

Article 5 

1.  Without  prejudice  to  Article  2(3)  of  Regulation  (EEC)  No  1964/87,  when  the  world 

market price determined in accordance with Article 3 is below the guide price, aid equal 

to the difference between these two prices shall be granted for unginned cotton harvested 

in the  Community. 

2. 

The  amount  of  the  aid  to  be  paid  shall  be  the  amount  applicable  on  the  day  the 

application  for aid is made. However, the amount of the aid applicable on the day the 

application  is made shall  be adjusted on the basis of  the difference  between the guide 

price applying on that day and that applying on the day when the cotton is placed under 

control. 

Should  the application for aid be  lodged before  the application for  supervised storage, 

the  application  for  aid  shall  not  be  valid  unless  an  adequate  security  is  lodged  to 

guarantee submission of the application for supervised storage within the time limit set. 

3. 

Entitlement  to the aid shall  be acquired when the cotton is ginned.  However,  aid may 

be paid in advance from 16 October following the start of the marketing year when the 

unginned  cotton  enters  the  cotton  ginning  undertaking,  provided  that  an  adequate 

security  has  been  lodged.  The  amount  of  the  advance  shall  be  calculated  using 'the 

procedure  laid down in Article  10(1), account being taken of the estimated production 

of  unginned  cotton  and  of  the  anticipated  amount  of  the  aid.  The  advance  may  not 

exceed  40% of  the  guide  price.  Any  aid  balance  outstanding  shall  be  paid  once  the 

actual  quantity  produced  has  been  determined  and  the  amount  of  the  aid  has  been 

revised downwards, where appropriate. It shall be paid before the end of the marketing 

year,  at the latest. 

4. 

The  aid  shall  be paid by the producer Member State  on whose territory  ginning takes 

place. 

5.  The aid shall only be paid for a product of sound, fair and merchantable quality. 

6.  The  aid  shall  be paid  for the quantity  of  unginned  cotton that has  entered the cotton 

ginning undertaking. 

However,  if the quantity of  ginned cotton is less than or equal to 33% of the quantity 

of unginned cotton that has entered the cotton ginning undertaking, aid shall be granted 

for the quantity of cotton ginned, multiplied by  100 and divided by 32. 

The quantity of ginned cotton eligible for the aid shall be calculated on the basis of its 

weight,  reduced where necessary  for any difference  between: 

the representative percentage of recorded impurities compared to the representative 

percentage for grade 5, and 

the  percentage  moisture  content  recorded  compared  to  that  representative  of 

- 

, 

Community  ginning. 

The representative percentages referred to in the above indents shall be determined  in 

accordance with the procedure referred to in Article  11(1). 

Article 6 

The additional reduction in the guide price referred to in the second indent of Article 2(3) of 

Regulation (EEC) No  1964/87 shall be established as follows: 

(a) 

if the  actual  production  in  Spain  or  Greece exceeds  the  guaranteed  national  quantity 

(GNQ)  plus  10%, the excess in each Member State shall be calculated as a percentage 

of  the  GNQ  and the  guide  price  shall  be  reduced by  a  percentage  equal  to  half  the 

percentage excess; 

(b) 

in  other  cases,  the  actual  production  in  excess  of  the  guaranteed  maximum  quantity 

(GMQ)  plus  10% shall be calculated as a percentage of the GNQ of the Member State 

concerned,  and  the  guide  price  shall  be  reduced  by  a  percentage  equal  to  half  the 

percentage  excess. 

Article 7 

Aid shall be granted only to those cotton ginning undertakings which apply for it and which 

1. 

have  submitted either: 

(a) 

a  contract  stipulating  payment  to  the  producer  of  a  price  at  least  equal  to  the 

minimum  price  referred  to  in Article  8a  of  Protocol  4  and  containing  a  clause 

specifying  that: 

in the event of application of Article 2(3) of Regulation (EEC) No  1964/87, 

the agreed price shall be reduced by the amount by which the aid is reduced 

following  application of that Article, 

in the event of a difference  between the quality of the cotton delivered and 

the  standard  quality,  the  price  agreed  will  be  adjusted  proportionally  by 

common consent between the contracting parties; or 

(b) 

a statement giving details of the conditions under which the ginning is carried out 

and how the aid is passed on to the producers where the undertaking  gins cotton 

on behalf of an individual producer or a producer associated with that undertaking. 

2. 

keep stock accounts on ginned and unginned cotton that satisfy  requirements to be laid 

down,  with a view to enabling  entitlement to the aid to be checked. 

3. 

provide  the other supporting documents needed for checking  entitlement to the aid. 

4.,  ftirnish  proof that the cotton delivered under the contra^ or under the statement referred 

to  in  point  1(b)  has been  the  subject  of  the  decjaratibn^of  area  sown  referred  to  in, 

Article  8. 

'  x 

Article  8  _ 

* 

Before  the  start  of  each  marketing  year,  the  estimated production  of  cotton  referred  to  in 

Article 5(3) shall be drawn up using the procedure referred to in Article  11(1), account being 

taken of  crop estimates. 

^ 

> 

In  order  to  draw  up  these  estimates,  a  system  of  declarations  of  the  areas  sown shall  be 

established. 

\ 

V 

Article  9 

Actual production in each marketing year shall be determined before the end of June pf that 

same year using the procedure referred to in Article  11(1), account being taken in particular 

of the quantities  for which aid has been requested. 

.  v  . 

Article  10 

The producer Member  States shall  set up a system of c6ritrols,to: 

ascertain  the  quantity  of  unginned  Community  cotton  which  has entered  each cotton 

ginning undertaking, 

; 

- 

~ 

ascertain the quantity of unginned Community  cotton which has .been ginned, 

.  9 

ascertain the quantity of ginned cotton obtained in each cotton ginning undertaking from 

the quantity referred to in the first indent, 

ensure that the minimum price  is complied with. 

Article  11 

1.  Detailed  rules for the application of this Regulation shall be determined  in accordance 

with the procedure  laid down  in Article  12 of Regulation (EEC) No  1308/70. 

2. 

If  it  proves  necessary  to  introduce  transitional  mesures  in  order  to  facilitate 

implementation of the adjustments to the system as laid down by this Regulation, such 

measures shall be adopted in accordance with the procedure provided  for  in paragraph 

1. They shall  apply until the end of the  1995/96 marketing year at the latest. 

Article  12 

1.  Regulation  (EEC) No  2169/81  is hereby repealed. 

2.  References made to the repealed Regulation or to any Articles thereof shall be constued 

as being made to this Regulation or to the corresponding  Articles  hereof. 

10 

Article  13 

The  provisions  of  the  Regulations  relating  to  the  value  of  the  unit  of  account  and  the 

exchange rates to be applied in connection with the common agricultural policy, and those of 

Regulation  (EEC)  No  729/70  shall apply  mutatis mutandis to  the matters dealt with in this 

Regulation. 

Article  14 

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 the  1995/96 marketing year. 

^ 

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

Done at, 

For the Council 

^M. 

'•.V-.v#!>V?.'':£r"'.;'j£' 

FINANCIAL  STATEMENT 

;PGRA\EN\0017.wpd) 

Date: 26 January  1995 

BUDGET  HEADING:  141 aid for cotton  production 

APPROPRIATIONS: ECU 723 million 

TITLE: 
Proposals to adapt the  aid scheme  for cotton 

LEGAL BASIS: 
Protocol  No 4  annexed to the Act of Accession  of Greece 

AIMS: 
To ensure  fair  administration  in the cotton  sector, taking  account of the differences  in the development  of cotton 
production  in Greece  and Spain 

5. 

FINANCIAL  IMPLICATIONS: 

5.0. 

EXPENDITURE 
-  CHARGED  TO THE  EC BUDGET 

(REFUNDS/INTERVENTION) 

-  NATIONAL  AUTHORITIES 
-OTHER 

5.1. 

REVENUE 
-  OWN RESOURCES  OF THE EC 
(LEVIES/CUSTOMS  DUTIES) 

-  NATIONAL 

5.0.1. 
5.1.1. 

ESTIMATED  EXPENDITURE 
ESTIMATED  REVENUE 

5.2. 

METHOD OF CALCULATION: 

See Annex 

PERIOD OF  12 
MONTHS 

(ECU  million) 

CURRENT 
FINANCIAL 
YEAR 
(95) 
(ECU million) 

FOLLOWING 
FINANCIAL 
YEAR 
(96) 
(ECU million) 

ECU 5 million 

1997 

1998 

1999 

2000 

CAN THE  PROJECT  BE FINANCED FROM APPROPRIATIONS  ENTERED IN THE  RELEVANT 
CHAPTER  OF THE CURRENT BUDGET? 

VSSMG 

CAN THE  PROJECT  BE FINANCED BY TRANSFER  BETWEEN  CHAPTERS  OF THE  CURRENT 
BUDGET? 

WILL A SUPPLEMENTARY  BUDGET BE NECESSARY? 

WILL FUTURE  BUDGET APPROPRIATIONS  BE NECESSARY? 

6.0. 

6.1. 

6.2. 

6.3. 

OBSERVATIONS 

1  JL»wW-J-4V 

NO 

YES 

M 

'•"•',,  • 

' 

-

'

;

'

.' 

•  •'•  ANNEX-' 

.v.. 

. 

.,,  \. 

I.  Costs for  the  1995/96 marketing  year under the old scheme (1996 budget) 

VI/i516/95F (PGRA\EN\0017.wpd) 

, 

1.  Assumptions  - 
-  production 

v 

210 000 tonnes 
: Spain 
Greece 
1 050 000 tonnes 
EUR  15  1 260 OOfrtonnes 

-  overrun 

: \  260 000 t - 701000  t = 559 000 tonnes 

559 0001:  701 000 t = 80% 

-  world price 
-  guide price 
-  aid reduction 

: ECU 303/t (77 cts/lb and $/ECU rate ôf  0.82) 
.:  ECU  1  225.1/t 
: 20% of the target price, plus 7% carried forward  from  1994/95 

-  aid granted 

: ECU (1 225.1 - 303 -  330.8)/t -  ECU 591.3/t 

. 

27% x ECU  1 225.1/t  -  ECU 330.8/t 

, 

N 

2.  Calculation  of expenditure excluding aid for small producers f 

126  million  t  x ECU 591.3/t  x 0.993  (DR) = ECU 739 million 

3.  Cost  of aid to small  producers 

73  000 ha x  ECU 298/ha.x 0.993  (DR) = ECU 22  million 

4.  Total  cost of  former scheme 

ECU  739 million  + ECU 22 million  = ECU 761 million 

II.  Cost of scheme proposed for the  1995/96 marketing year (1996 budget) ' 

1.  Assumptions 

-  Production  ) 
-  World price )  same as for I 
-  Community  overrun: 

"' 

1 260 000 t - 947 000 t = 313 000 tonnes 

313 OOOt: 947 OOOt =  33.1% 

10% of Community  overrun: 94 700 tonnes 

- 
-  guide price: ECU  1 107.3/t 
-  Reduction  of 5% in aid, both  in Greece and Spain: 

-  Overrun  in Greece:  1 050 000 t  : 698 000 t = 352 000 t 

5% x ECU  1 107.3/t = ECU 55.4/t 

352 000 t  : 698 000 t = 50.4% 

_ 

-  Overrun  in  Spain: 0 t 
-  Overrun  per country: 

^ 

313 OOOt-94  700 t = 218 300 t 
of which  Spain 
of which  Greece 

0 t 
218 300 t = 31.2% 

-  Additional  reduction: 

Spain  =0 
Greece =  31.2% x 0.5 =  15.6%  > 

15.6% x ECU  1 107.3/t = ECU  172.7/t 

-  Total  aid reduction: 

-  Aid granted: 

Spain =  ECU55.4/t 
Greece =  ECU 55.4/t  + ECU  172.7/t = ECU 288.1/t 
Spain 
Greece  ECU (1  107.3 - 303 - 228.1)/t = ECU  576.2/t 

ECU (1  107.3 -  303-55.4)/t  = ECU  748.9/t 

2.  Calculation  of  expenditure 

-  Spain: 
-  Greece  : 

0.21  million  t x ECU 748.9/t  x 0.991  (DR) = ECU  156 million 
1.05  million  t x ECU  576.2/t x 0,993 (DR) =  ECU  600 million 
ECU  756 million 

III.  Impact  of proposal 

- 

•  - 

'. 

* 

ECU 756 million-ECU  76rmillion=  -ECU 5 mUHoji 

'\< ^  ,- '-.•/ 

x  ' 

. 

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<r-

ISSN 0254-1475 

COM(95) 35  final 

DOCUMENTS 

EN 

03 

Catalogue number  :  CB-CO-95-080-EN-C 

ISBN 92-77-86274-2 

Office for Official Publications of the European Cammunittes 

L-2985 Luxembourg