Proposal for a COUNCIL REGULATION (EC) determining the standard quality of rice
Date: 1995-07-19
Institutions: European Commission
Subjects: intervention price, product quality, rice

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

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Brussels,  19.07.1995 
COM(95)  405  final 

Proposal  for  a 

COUNCIL  REGULATION  (EC) 

determining the standard quality of rice 

(presented  by the  Commission) 

Explanatory  Memorandum 

1. 

Introduction 

The Community  market in rice is structured around two main types of rice, japonica and 
indica,  corresponding  to two separate consumption  traditions. 

The outlook for the development of rice-growing depended to a large extent on this dual 
structure. 

Present market equilibria are satisfactory  on the whole. The moderate increase in area in 
certain Member States has been offset  by a decline in output due to increasingly  frequent 
drought. 

The structural  surplus in japonica rice either finds  outlets in the traditional  neighbouring 
markets  around  the  Mediterranean,  or  is  used  to  meet  the  Community's  food  aid 
commitments.  Community  production  of indica rice has enabled the processing  industry 
to take advantage  of  having  different  supply  sources for  raw materials. 

The  obligations  resulting  from  the  GATT  Agreement  imply, first of  all,  changing  from 
a  system  of  floor  prices  based  on  the  threshold  price  to  a  system  of  ceiling  prices 
superimposed  on the  system  of  customs  duties resulting  from  tarification  of  the  former 
system of variable levies. Moreover, these duties will be gradually cut by 36% from  1995 
to 2000. 

The GATT Agreement raises a new challenge for European rice-growing, brought directly 
face to face with competition  and the uncertainties of the world market, both  at the level 
of agricultural production and at that of the industrial processing of paddy rice into milled 
rice. 

The  Commission  believes  that,  in  view  of  the  further  need  to  avoid  any  distortion  of 
competition  as a result of the new system for  cereals introduced  in  1992, the response to 
this new situation  should be sought mainly through  a substantial  drop in producer prices, 
which should be accompanied by measures to restore competitiveness, in terms of quality, 
in relation  to the imported  product. Moreover,  the Community  market will  have to  face 
wider cyclical variations in price; consequently, the intervention mechanism, in its present 
form,  is no longer  compatible with the probable new scenarios. It should be reformed  to 
provide more flexible  management tools and  ensure increased market  fluidity. 

2. 

Fall  in producer  prices 

The  outlook  for  new  market  equilibria,  in  terms  of  prices, gives rise to  a  multitude  of 
possible scenarios, which make it impossible to evaluate the extent of the price reduction 
needed to meet  competition from  the imported  product  as duties are cut pursuant to the 
GATT  Agreement.  The  Commission  estimates  that  prices will  have to  fall  by  between 
15% (ECU  53/t)  and  34% (ECU  119/t). At this stage, it is pointless and  unnecessary  to 
determine a priori  the  level  of the  eventual  price  cut.  Consequently,  the best  approach 
is to choose  to  keep  to  a minimum  target  of  15%, subject  to market  developments  and 
trends,  especially  in  terms  of prices and  sales into intervention  if any. 

I 

3. 

Compensatory  aid 

The  reduction  in  producer  prices  will  alter  the  profitability  of  the  crop.  Arrangements 
should  therefore  be  introduced  for  compensatory  production  aid  with  a  view  to 
maintaining present income levels. The amount of aid is fixed  on the basis of agricultural 
yields  observed  in the various Member  States  and the  size of the price reduction. 

For the establishment of basic yields, it is proposed that reference  should be made to the 
three-year  period  1992-94, except in the cases of  Spain and Portugal  for which the more 
representative period  of the last three years preceding the drought (1989-91 for  Portugal 
and  1990-92 for  Spain)  should  be used. 

Average yields in tonnes/ha: 

Italy 

Portugal 

Spain 

Greece 

France 

5.82 

4.74 

6.35 

7.48 

5.29 

French 
Guiana 

7.41 

4. 

Maximum  guaranteed  area 

In  view  of  the  introduction  of  this  area-linked  compensatory  aid  scheme,  a  maximum 
guaranteed area should be fixed to maintain production targets compatible with the needs 
of the market and to comply with the commitments undertaken  in the framework  of the 
GATT Agreement  regarding trade exports. 

It  is  proposed  to  set the  maximum  area  on  the basis  of  the three-year  period  1992-94, 
except in the cases of Spain and Portugal for which the more representative period of the 
last  three  years  preceding  the  drought  (1989-91  for  Portugal  and  1990-92  for  Spain) 
should  be used. 

Average area in ha: 

EU 

Italy 

Portugal 

Spain 

Greece 

France 

French 
Guiana 

396 607 

228 034 

32 884 

89 711 

18 731 

23 500 

3  747 

Compliance  with  the  maximum  area  should  be  ensured  by  reducing  the  aid  sharply 
enough  to  obtain  a  disincentive  effect  upon  producers.  If  the  Community  maximum 
guaranteed  area (CMGA)  is exceeded  by  up  to  5% in a given crop year, the amount of 
compensatory  aid  for  the current  crop year  will  be  cut by  6 points for  each  percentage 
point of  overshooting. 

3 

If  the  area  given  over  to  rice  exceeds  105% of  the  CMGA,  aid  will  be  cut  further  in 
the  Member  States  responsible  for  exceeding  their  national  maximum  guaranteed  area 
(NMGA) by more than 5%. 

5. 

Quality  policy 

The market mechanisms devised when the common organization of the market in rice was 
set up have not been  substantially  modified  since their  adoption. 

Innovations in the arrangements for trade with third countries introduced  pursuant to the 
GATT  Agreement  have  led  the  Commission  to  give  serious  consideration  to  the 
compatibility  of  certain  market  management  measures,  in  particular  intervention,  with 
trade arrangements that are no longer based on a system of levies, but on a fixed  customs 
duty,  which  by  its  nature  cannot  absorb  changes  in  world  prices  or  fluctuations  in 
currency  exchange  rates  as the levy  could. 

Account  must  also  be  taken  of 
the  need  to  reform  the  common  organization  of  the 
market on the basis of stricter quality  criteria.  In other words, the Commission  takes the 
view that Community rice growing  must adopt a strategy  for  a gradual  improvement in 
the quality  of  output.  As demand  is moving towards products with a very  high  level  of 
quality and an advanced technology content, and as imported products compete primarily 
at  the  top  of  the  range,  the  competitiveness  of  the  Community  product  needs  to  be 
restored. The entire rice production sector, from the farmer to the processor, is concerned 
by  this challenge. 

From this point of view, the Commission feels that it is necessary to make proposals that 
can  result  in  production  of  paddy  rice  of  a  quality  matching  the  supply  needs  of  a 
processing industry  which  now has direct  access to third  country  products. 

The parameters for defining the standard intervention quality should be reinforced to align 
them  on  the  production  standards  of  the  third  countries  that  export  to  the  Community 
market. 

Premiums and penalties applied to the intervention price when the product is taken over 
should play a greater role in market regulation, reflecting and even accentuating the price 
differentials  for  different  qualities  and  varieties of rice. 

Demand  for  rice  on  the  Community  market  is  structured  by  variety.  However,  mainly 
because there is no differentiated  support for  different  varieties, Community  production 
has  concentrated  on  the  most  productive  varieties  rather  than  the  varieties  for  which 
market  demand  is  strongest.  The  Commission  believes  that  certain  varieties  should  be 
encouraged;  to this end,  it proposes  correction factors  based  on the yield  of the various 
varieties  compared  with the most  productive variety. 

The  Commission  also  feels  that  the  compensatory  aid  scheme  should  be  used  as  an 
incentive  to  the  production  of  certain  varieties,  in  a  manner  consistent  with  a  quality 
strategy  more closely  tailored  to  market  demand. 

V 

6. 

Precautionary  intervention 

Since the common organization of the market was introduced, intervention has been used 
only  in exceptional  cases and for  small  quantities, in  1990,  1991 and  1992. Intervention 
should  remain  an  exceptional  event,  what  has  been  called  a  "safety  net."  In  the  rice 
sector,  it is very  expensive to take  over  intervention  stocks and,  as the product  is liable 
to rapid  deterioration,  storage may  be  difficult. 

As  already  pointed  out,  the  market  will  be  exposed  to  the  uncertainties  of  the  world 
market;  it  is  to  be  expected  that  massive  intervention  will  be  needed,  in  view  of  the 
volatility  not  only  of  the  world  market,  but  also,  and  especially,  of  the  Community 
market. 

The  Commission  does  not think that the  intervention  mechanism  as at present  designed 
is  compatible  with  the  new  arrangements  for  trade  with  third  countries:  short-term 
developments  on the world  market  could  have repercussions  on the internal  market that 
would  lead  to the buying  in  of  a considerable  volume  of rice. 

To  avoid  having  to  take  large  quantities  into  intervention  in  this  type  of  situation,  the 
Commission  proposes  the  introduction  of  a  precautionary  intervention  scheme,  under 
which the producer stores the product for  four  months, at his own expense, subject to an 
advance  payment  equal  to  60%  of  the  price.  During  this  period  the  producer  may  seek 
a  more  advantageous  outlet  on  the  market,  and  sell  the  product  after  informing  the 
intervention  agency. During the same period, the Commission  may, for  its part, offer  the 
product  in  precautionary  intervention  for  sale,  according  to the  rules  already  laid  down 
for  sale  under  an  intervention  scheme.  Actual  removal  to  the  warehouses  of  the 
intervention  agency,  taking  over  and,  obviously,  payment  of  the  balance,  would  be 
possible only  where the rice had  already  been  in  precautionary  intervention. 

This scheme would make for compatibility between the intervention arrangements and the 
cyclical  and  short-term  development  of the world  market. 

7. 

Changes to intervention  arrangements 

The Commission  reserves the  right to propose other  measures, pursuant  to the so-called 
management  committee  procedure,  with  a view to restoring  intervention  as a safety  net 
and an exceptional  occurrence. These measures intended as disincentives  to intervention 
would  also aim  at improving  the fluidity  of the market. 

It would  be  proposed: 

that where products were brought  under precautionary  intervention  arrangements 
or removed to the warehouses of the intervention  agency a period of four  months 
should  be  allowed  for  payment; 
that the  intervention  period  should  be limited  to four  months  (May  to August). 

r 

When  reforming  the common  organization  of the market in  rice,  it is  appropriate 
to  adjust  the  Community  rules  and  remove  certain  obsolete  arrangements  that in 
some  cases  have  never been  applied. 

ê 

(//&  proposal  for  a 

COUNCIL  REGULATION  (1ÏC) 

determining  the standard  quality  of  rice 

THE  COUNCIL OF THE EUROPEAN  COMMUNITIES, 

Having regard to the Treaty  establishing the European  Community, 

Having  regard  to  Council  Regulation  (EEC) No  1418/76  of  21 June  1976 on  the  common 

organization  of the market  in rice, and in particular  Article  3(1) thereof, 

I laving  regard  to the  proposal  from  the  Commission, 

Whereas the intervention price for paddy rice should correspond to a specific standard quality; 

whereas that quality is determined by Council Regulation (EEC) No 1423/76 of 21 June  1976 

determining  standard  qualities  for  rice and  broken  rice ; 

Whereas, with regard to quality, trends in demand for rice on the Community market as well 

as the guidelines  followed  in the  reform  of the common organization  of the market make it 

appropriate  to  re-determine  the  standard  quality  taking  account  of  both  the  quality 

characteristics  of  Community  production  and  the  most  representative  qualities  of  imported 

rice;  whereas  it  follows  from  those  factors  as  well  as  other  factors  in  the  reform  of  the 

common organization of the market that requirements should be made more stringent and the 

system  provided  for  by  the above-mentioned  Regulation  should  be  replaced; 

HAS ADOPTED  THIS  REGULATION: 

OJNoL  166, 25.6.1976, p. 20. 

Article  1 

The  standard  quality  of  paddy  rice  for  which  the  intervention  price  is  fixed  shall  be  defined 

as  follows: 

(a) 

rice  of  a  sound  and  fair  marketable  quality,  free  of  odour; 

(b)  moisture  content:  15%; 

(c)  yield  of  wholly  milled  rice: 

72%  by  weight  of  the  total  yield; 

63%  by  weight  in whole  grains (with  a tolerance  of  3% of clipped  grains)  of  which 

a  percentage  by  weight  of  wholly  milled  rice  grains  which  are  not  of  unimpaired 

quality: 

- 

chalky  grains: 

1.5% 

-  grains  striated  with  red: 

3% 

- 

- 

spotted  grains: 

stained  grains: 

-  yellow  grains: 

- 

amber  grains: 

0.5% 

0.25% 

0.02% 

0.05%. 

Article  2 

For  the  purposes  of  this  Regulation,  the  definition  of  grains  which  are  not  of  unimpaired 

quality  shall  be  as  shown  in  the  Annex. 

J 

Article  3 

Regulation  (EEC)  No  1423/76  is  hereby  repealed.  References  to  Regulation  (EEC)  No 

1423/76  should  be  taken  as  references  to  this  Regulation. 

Article  4 

This  Regulation  shall  enter  into  force  on  1 September  1996. 

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

°) 

ANNEX 

Definition  of  nrain.  and  broken  grains  which  are  not  of  unimpaired  quality 

A.  Whole  grains: 

Grains  from  which  only  part  of  the  end  has  been  removed,  irrespective  of  characteristics 

.  produced  at each  stage  of  milting. 

B.  Clipped  grains 

':' 

Grains from  which  the  entire end  has  been  removed. 

C  proken grains or broken  rice: 

'  Grains from which a part of  the volume greater than the end has been removed ; broken grains 

include: 

—  large broken grains  (pieces of  grain of  a length not less than half  chat of  a grain, but  not 

constituting  a  complete  grain); '. 

—  medium  broken  grains  (pieces of  grain of  a  length  not  less than  a  quarter of  theiength 

of  a  grain but which  are smaller than the minimum she of large broken grains*); 

—  fine  broken grains (pieces of  grain less dun  a quarter of  the size of  a  grain  but too large 

to pass through a sieve with a mesh of  1*4 mm); 

—  fragments (small pieces or panicles of  grain which can pass through a  sieve with a  mesh 
of  1*4 mm); split grains (pieces produced by « longitudinal splk in the grain) come under 
this definition. 

O.  Green  grains: 

Grains which  are not  fully  ripened. 

' E.  Grains showing natural  malformation: 

Natural malformation means malformation, whether or not of hereditary origin, as compxrrd 
with the morphological  characteristics typical of  the  variety. 

F.  Chalky  grains: 

Grains at least three-quarters of  thé surface of  which looks opaque and chalky. 

G.  Grains striated with  red:' 

Grain* showing  longitudinal  red  srriarions  of  differing  intensity-and  shades, due  to  residues 
from  the  pericarp. 

H. Spotted  grains: 

Grains  showing  a  well-defined  small  circle  of  dark  colour  of  more  or  less  regular  shape: 
spotted  grains  also  mdude  those  which  show  slight  bled:  «mations  on  the  surface  only; 
the ttriatiofu and spot* must  not show  * yellow or dark  aureole. 

'X  Stained  grains: 

Grains which have  undergone, on  a small  area  of  their surface,  an  obvious casings ira'thar 
natural colour; the stains  may he of  different  colours (blackish; seddish» brown); deep black 
.  striations m  also to  bs  regarded  as stains. If the* colour  of  the stains -is_ Wnoemiy  marked/ 
(black, pin's, geddish-orown) f$ be immediately visible and if they cover an area $m  I©»  thm 
half that of the orsin, the grains must he ccoskWd to be yellow grains 

J„.  Yellow  grains: 

Ydlow grains are those which have undergone, totally or partially,, otherwise than by  ftying 
a change in their natural colour and havetaken on  a lemon or change-yellow tone. 

K.  Amber  grains: 

Amber gr«ns  are those which  have  ot«Jergo«e, otn«rwse  d un  by Aying,  a d i ck  US^-^CT 
chans£ m colour over the whole surface; this chatige sJcen rfe cokra of the grains to a  1^ 
' amber^yeuow. 

10 

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COM(95) 405  final 

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