Proposal for a COUNCIL REGULATION (EC) derogating from Regulation (EEC) No 1765/92 establishing a support system for producers of certain arable crops as regards the set-aside requirement for the 1996/97 marketing year
Date: 1995-07-26
Institutions: European Commission
Subjects: agricultural situation, aid to agriculture, arable land, cereals, fallow, set-aside

COMMISSION OF THE EUROPEAN  COMMUNITIES 

Brussels,  26.07.1995 
COM(95)4()l  final 

95/0211 (CNS) 
95/0212  (CNS) 

Proposal  for a 

COUNCIL  REGULATION  (EC) 

derogating  from  Regulation  (EEC) No  1765/92 establishing  a support  system 
for  producers  of certain  arable  crops  as  regards  the set-aside  requirement 
for  the  1996/97  marketing  year 

Proposal  for  a 

COUNCIL  REGULATION  (EC) 

amending  Regulation  (EEC) No  1765/92 establishing a support  system 
for  producers  of certain  arable crops 

(presented  by the Commission) 

Explanatory  memorandum 

In order to qualify  for the compensatory payments introduced for  arable crops under the 
reform  of the common agricultural policy, producers participating in the general  scheme 
are required  to  set aside a percentage  of their  arable  land  so as to  improve  the balance 
between Community production and the foreseeable outlets. By contrast, small producers 
may  opt  for  a  simplified  scheme with no  set-aside requirements. Initially,  the  set-aside 
rate  was  fixed  at  15%  for  rotational  set-aside.  For  the  other  forms  of  set-aside  it  was 
fixed  at  18% and 20% respectively. 

Set-aside  is  designed  to be a market  management  instrument.  Under  Regulation  (EEC) 
No  1765/92, the set-aside rate may be reviewed, upwards or downwards, on the basis of 
production  and market  developments. Thus Regulation  (EC) No 2990/94  decreased the 
rate  for  compulsory rotational  set-aside for  the  1995/96 marketing year to  12%. 

Under the compromise on the 1995/96 price package, the Commission undertook to draw 
up, by 31 July 1995, a forecast balance for the cereals market for the next marketing year 
and to propose an adjusted  compulsory rate of set-aside for the  1996/97 marketing  year. 

Based on  the  information  currently  available,  the  forecast  balance  for  the  15 Member 
States for  the  1995/96 marketing year may be summarized as follows: 

Production: 
Stocks carried  forward: 
Imports: 
Available: 

175 million tonnes 
26 million tonnes 
7 million  tonnes 
208 million tonnes 

Community  consumption: 

156 million tonnes 

Available  for  export 
and stocks at the end of the 
marketing  year: 

52 million tonnes 

The  1995/96 marketing year is the first year of application of the measures adopted under 
the Uruguay Round in which the Community undertook to gradually reduce its subsidized 
exports vis-à-vis its partners. 

As  a  reminder,  under  the  GATT,  31.3 million  tonnes  of  cereals  may  be  exported  in 
1995/96 by the Community  of Twelve as subsidized exports. 

Taking account of the quantities traditionally exported as food aid, of around  1.5  million 
tonnes, the  Community  of Fifteen  may export  32.8 million tonnes* during  the  1995/96 
marketing  year. 

This figure is subject to modification  as a result of the accession of the three new 
Member  States. 

I 

Under these conditions, total outlets for cereals in  1995/96 will be just over  189 million 
tonnes. This will result in a further  reduction  in end-of-year  stocks in  1995/96 to leave 
only  a working stock, i.e.  around  19 million tonnes. 

For the  1996/97 marketing  year, no major  changes over  1995/96 must be made, neither 
in terms  of  quantities  imported  nor  in  terms  of  use on the  Community  market  (human 
consumption,  seeds,  animal  consumption  or  industrial  use),  nor  as  regards  food  aid. 
However,  subsidized  export  possibilities  will  fall  in  line  with  the  rate  of  reduction 
imposed by  GATT constraints, leading to a fall  of approximately  1.6  million tonnes. 

Thus the quantities that can be disposed of in  1996/97, either on the Community market 
or on third-country markets, can be estimated  at  187 million tonnes. 

Given the lower initial stocks lower than usual and, taking into account the need to bring 
them up to a more adequate level, and to ensure stable prices on the Community market 
as  well  as  full  use  of  export  possibilities,  it  should  be  guaranteed  that  Community 
production in  1996/97 will reach a level of around  182 million tonnes, assuming imports 
of  7 million tonnes. 

On the basis of an average  Community yield  of around  5.00 t/ha  (as against  4.9 t/ha  in 
1995/96  as  a  result  of  the  drought  in  the  south  of  the  Community),  that  volume  of 
production represents an area under cereals of 36.4 million hectares, i.e.  700 000 ha more 
than the cereals  area estimated  for  1995/96. 

Based on the results of the  1994/95 marketing year, which indicate that  one percentage 
point  of  compulsory  set-aside  corresponds  to  about  360 000 ha,  including  55 000 ha 
under oilseeds, and taking account of the fact that the extraordinary set-aside carried out 
in several Member States for the  1995 harvest will probably not be repeated to the same 
extent  for  the  1996 harvest,  there  should  be an additional  2% reduction  in  compulsory 
set-aside over  1994/95. 

Such a reduction must be considered to be a maximum because if the average Community 
yield  were  to  return  to  a  level  closer  to  the  trend  level  (5.1 t/ha),  the  result  would  be 
additional production of 3.6 million tonnes, which could lead to intervention stocks being 
built  up again. 

3 

Proposal  for a 

Council  Regulation  (EC) No 

^ ^ O Z I^ 

(CfO S 

\ 

of 

1995 

derogating  from  Regulation  (EEC) No  1765/92  establishing  a support  system 
for  producers  of certain  arable crops  as regards the set-aside  requirement 
for the  1996/97  marketing year 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard  to the  Treaty  establishing the  European  Community, and in particular  Articles 42 and 

43 thereof, 

Having regard to the proposal from the Commission1, 

Having regard to the opinion of the European Parliament, 

Whereas  the  support  system  for  producers  of  certain  arable  crops  introduced  by  Regulation  (EEC) 
No  1765/923,  as  last  amended  by  Regulation  (EC)  No  ..../..4,  provides  that,  in  order  to  qualify  for 

compensatory payments under the general scheme, producers must set aside a predetermined percentage 

of their  arable land; whereas this percentage should be re-examined to take account of production and 

market  developments; 

Whereas,  since  the  introduction  of  the  system, the cereals  market  has achieved  a better  balance  as a 

result of a reduction in production and an increase in Community consumption; whereas this situation, 

together  with  the  favourable  world  market  situation,  has  resulted  in  a  significant  reduction  in 

intervention  cereal  stocks; 

1 OJ No C 

2 

3 
4 

O J N oL  181, 1.7.1992, p. 12. 
OJ No L 

, p.  . 

, 

1 

Whereas, on the basis of a forecast  balance for  1995/96, the equilibrium  sought between  Community 

and  external  production  and  outlets  can  be  achieved  with  a  production  in  1996  of  approximately 

182 million tonnes; whereas that objective may be attained by returning approximately 700 000 hectares 

to cultivation; whereas the rate for set-aside beginning not later than  15 January  1996 should  therefore 

be  set  temporarily  for  the  1996/97  marketing  year  at  a  level  lower  than  that  resulting  from  the 

provisions in  force; 

HAS ADOPTED THIS  REGULATION: 

Article 1 

Notwithstanding the second subparagraph of Article  7(1) of Regulation (EEC) No  1765/92, the set-aside 

requirement based on rotation is hereby  fixed  for  the  1996/97 marketing year  at  10%. 

Article 2 

This  Regulation  shall  enter  into  force  on  the  seventh  day  following  its  publication  in  the  Official 

Journal of the European  Communities. 

It shall apply to set-aside for  the  1996/97 marketing year only. 

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

Done at Brussels, 

For the  Council 

s~ 

FINANCIAL  STATEMENT 

BUDGET  HEADING: 

Bl-IO 
Bl-301 

Date: 

APPROPRIATIONS: 
ECU  14 574  million 
ECU  560.5  million 

TITLE:  Proposal  for  Council  Regulation  (EC)  No  ...795 derogating from  Regulation  (EEC) No  1765/92  establishing 
a  support  system  for  producers  of certain  arable  crops as regards the  set-aside  requirement  for  the  1996/97 
marketing  year. 

LEGAL  BASIS: Articles 42 and 43 of the  Treaty 

AIMS: 
To reduce the  rotational  set-aside  rate  for the  1995/96 marketing  year from  15% to  10%. 

PERIOD OF  12 
MONTHS 

(ECU million) 

CURRENT 
FINANCIAL 
YEAR 
(95) 
(ECU  million) 

FOLLOWING 
FINANCIAL 
YEAR 
(96) 
(ECU  million) 

0 

55.3 

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 

1997 
(ECU 
million) 

28.6 

1998 
(ECU million) 

1999 
(ECU  million) 

2000 
(ECU 
million) 

27.8 

ESTIMATED  EXPENDITURE 
ESTIMATED  REVENUE 

METHOD  OF  CALCULATION: 
See  Annex to  Financial  Statement 

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

YES 

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? 

YES 

NO 

YES 

5.0.1. 
5.1.1. 

5.2. 

6.0. 

6.1. 

6.2. 

6.3. 

OBSERVATIONS  For  1996, the  additional  cost is not provided  for  in the  letter  amending the preliminary  draft  budget. 

G 

Production refund  for  starch 

For  calculating  the  aid,  the  ceiling  for  the  Community  market  price  is  set  at  106%  of  the 
intervention price. The aid is the same for  all types of starch and is multiplied  by a  coefficient 
for  processing maize into starch of  1.6. 
The saving is  therefore: 
2.86m  t x ECU  122.35/t x 6% x  1.60  x  1.013  (DR) = ECU 34.0m 
The saving is divided up as follows: 90% (ECU 30.6m) in  1997 and  10% (ECU  3.4m)  in 1998. 

Export refund  for  products processed from  maize 

The  quantities  involved  are  estimated  at  1.8m  t  for  Annex  II  products  and  1.1m  t  for  non-
Annex  II products to which must be added 0.5m  t of potato  starch (in maize equivalent). 
The  saving is: 
3.4m  t x ECU  122.35/t x  15% x  1.014  (DR) = ECU 63.3m 
The saving is divided up as follows: 85% (ECU 53.8m) in  1997 and  15% (ECU  9.5m) in 1998. 

Summary of financial consequences 

Aid 
Set-aside 

Aid 
Oilseeds 

Aid 
Cereals 

TOTAL  AID 

Refunds 
Cereals 

Production  refund 
starch 

Refunds 
processed  products 

TOTAL 
REFUNDS 

OVERALL 
TOTAL 

1996 

0 

55.3 

0 

55.3 

0 

0 

0 

0 

55.3 

1998 

0 

0 

0 

0 

38.2 

-  3.4 

- 9 .5 

25.3 

25.3 

TOTAL 

-  618.2 

138.3 

423.8 

-  56.1 

254.9 

-  34.0 

-  63.3 

157.6 

101.5 

1997 

-  618.2 

83.0 

423.8 

-  111.4 

216.7 

-30.6 

-  53.8 

132.3 

20.9 

1 

ANNEX TO FINANCIAL  STATEMENT 

A one-point reduction in set-aside frees 360 000 ha, 55 000 ha of which under oilseeds and 305 000 ha 
under cereals. 

Saving on set-aside aid 

Average  Community  aid per hectare of set-aside is ECU 335.7. The saving will therefore  be: 
360 000 ha x 5 x ECU 335.7/ha x  1.023  (DR) = ECU 618.2m. 
This saving falls  entirely within the  1997 financial  year. 

2. 

Expenditure  on aid  for  oilseeds 

Average Community  aid per hectare of oilseeds is ECU 495. Expenditure  will  therefore  be: 
55 000 ha x 5 x ECU 495/ha x  1.016  (DR) = ECU  138.3m. 
40%o of the aid (i.e. ECU 55.3m) will be paid in advance in 1996, and the balance (ECU  83.0m) 
will be paid in  1997. 

Expenditure  on aid for  cereals 

Average Community aid per hectare of cereals in the general scheme is ECU 272.7. Expenditure 
will  therefore  be: 
305 000 ha x 5 x ECU 272.7/ha x  1.019  (DR) = ECU 423.8m. 
This expenditure  is chargeable  in full  to the  1997 financial  year. 

Expenditure  on exports for  the additional cereals production 

The cereals produced on the freed land could be exported within the maximum export quantity 
allowed under the Uruguay  Round agreements. 
The  average  Community  yield  is  5.0 t/ha  and  the  average  export  refund  is  ECU 33/t. 
Expenditure  will be: 
305 000 ha x 5 x ECU 5.0 t/ha x ECU 33/t x  1.013  (DR) = ECU 254.9m. 
85% of this expenditure (ECU 216.7m) is chargeable to the  1997 financial  year and the balance 
(ECU  38.2m) to  1998. 

5. 

Saving on aid for  processed products 

This measure will also reduce the pressure on Community prices (15%  above the  intervention 
price on average for the  1994/95 marketing year), especially in the case of maize. Therefore the 
measure will make it possible to reduce aid and refunds  on maize-based products  considerably. 

EXPLANATORY MEMORANDUM 

At the December 1994 Agriculture Council, the Commission undertook to carry out 
a  study  on  the purpose  and methods  of application  of  extraordinary  set-aside 
under the arable  support  system  (Council Regulation  (EEC) No  1765/92).  It has 
done so in the light, in particular, of the introduction of voluntary set-aside, 
an option which did not exist when extraordinary set-aside was first introduced, 
and of problems which have arisen in the application of extraordinary set-aside. 

In  its  report  the  Commission  put  forward  two  suggestions  for  improving  the 
application of extraordinary set-aside: not to count voluntary set-aside in the 
calculation  of  the  overshoot  of  a  base  area  or  to  set  a  maximum  rate  for 
extraordinary set-aside. 

In the event of an overshoot of a base area, producers in the general scheme of 
the arable support system are required, in the following marketing year, i.o set-
aside,  without  compensation,  an  area  equal  to  the  percentage  by  which  the 
regional base area was exceeded. This uncompensated set-aside is in addition to 
their obligation. The system of extraordinary set-aside was introduced to contain 
the expansion of the area planted with cereals, oilseeds and protein crops and 
the associated increase in the level of cereals production. 

Voluntary  set-aside  was  introduced  from  the  1994/95  marketing  year  as  an 
additional method of controlling production. However the  Council recognised that 
its introduction involved certain risks. The most important one is that producers 
may  be  tempted  to  use  marginal  eligible  land,  which  would  not  normally  be 
cultivated,  for  their  voluntary  set-aside.  As  a  consequence,  the  Council 
stipulated that voluntary set-aside must help to reduce production. 

In the  set-aside  implementing  rules Member  States are required  to ensure that 
voluntary  set-aside  reduces  cultivated  land  and  does  not  contribute  to  any 
overshoot. In reality this has been difficult to apply. 
For the 1994/95 marketing year, base areas were overshot in four Member States. 
This may, in part, have been due to voluntary set-aside. It would be politically 
difficult  to  explain  to producers  that  the  success  of  one  form  of  set-aside 
resulted in t-he application of supplementary set-aside. Therefore, the Commission 
proposes the introduction of the first option of the report, which is also the 
one most favoured by Member States. 

As voluntary set-aside is predominantly carried out on marginal land, it does not 
have  the  same  efficiency  on  reducing  production  as  obligatory  set-aside. 
Therefore,  a  percentage  of  the  area  set-aside  on  a  voluntary  basis  will  be 
excluded from the calculation of the rate of extraordinary set-aside. 
To make possible the calculation of the above overshoot, certain amendments must 
be introduced  concerning  the information which must be transmitted by  Member 
States. 

In accordance with the report it is proposed that this modification apply to any 
extraordinary set-aside to be carried out in view of any overshoot of the base 
area planted in 1995/96  (ie with respect to the crop which is sold in the 1996/97 
marketing  year). 

Following  the decisions on the  1995/96  Price Fixing  Package, it was agreed to 
grant Austria the special aid of 138,86 Ecu/ha for durum wheat production in non-
traditional regions up to a limit of 5 000 ha. 

3 

Proposal  for  a 

COUNCIL REGULATION  (EC) Nr. 

' °2 

2'  Cf^  $ 

) 

of 

amending  Regulation (EEC) No  1765/92 establishing a support  system 
for  producers of certain  arable crops 

THE  COUNCIL  OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Articles 42 

and 43 thereof, 

Having regard to the proposal  from  the  Commission1, 

Having regard  to the opinion  of the European  Parliament, 

Having regard to the opinion  of the Economic and  Social  Committee3, 

Whereas  Regulation  (EEC)  No  1765/924,  as  last  amended  by  Regulation  (EC)  No  1460/955, 

provides  for  the application  of extraordinary  set-aside by producers benefiting  from  the general 

scheme of compensation in order to bring the production  of arable crops down to a level  in line 

with the  outlets  for  those products, taking account  of a basic  set-aside requirement; 

Whereas  areas  voluntarily  set  aside  over  and  above  the  requirement  for  compulsory  set-aside 

contribute  the  control  of  arable  crop production;  whereas, however,  areas  voluntarily  set aside 

do not  ensure a reduction in production  comparable to the reduction resulting from  compulsory 

set-aside; whereas, therefore,  account should be taken of this fact by deducting, for the purposes 

of calculating  extraordinary  set-aside, only part  of the areas voluntarily  set-aside; 

Whereas  voluntarily  set-aside  is  not  always  distinguished  from  compulsory  set-aside  in  aid 

application  forms;  whereas the Member  States must take the necessary measures to ensure that 

this distinction  is made; whereas time should be allowed  for  this  adjustment; 

O J N oL 
O J N oL 
OJNo  L 
O J N oL  181, 1.7.1992, p. 12. 
O J N oL  144, 28.6.1995, p. 1. 

Whereas  in Austria before  accession  durum  wheat  was cultivated  over  relatively  limited  areas; 

whereas that production, which is well established in certain regions, represents an important part 

of  the  cereal  economy  of  those  regions;  whereas  it  is  therefore  desirable  to  protect  that 

production  by paying  a  supplement, 

HAS ADOPTED  THIS  REGULATION: 

Article 1 

Regulation  (EEC) No  1765/92 is hereby amended as  follows: 

1. 

The  penultimate  sentence  of  the  second  indent  of  Article  2(6)  is  replaced  by  the 

following: 

"The percentage rate for extraordinary set-aside shall be equal to the percentage by which 

the  regional  base  area  is exceeded,  established  by  deducting  75% of  the  area  set  aside 

under  voluntary  set-aside in accordance with Article 7(6)". 

2. 

The following  subparagraph  is added to Article 4(5): 

"In  Austria,  the  aid  referred  to  in  the  previous  subparagraph  shall  be  granted  up  to  a 

maximum  of  5 000 ha in regions where production  of that  crop  is well  established." 

Article 2 

This Regulation shall enter into force on the seventh day following  its publication in the  Official 

Journal of the  European  Communities. 

It  shall  apply  for  the  calculation  of  extraordinary  set-aside to be  carried  out  as  a result  of  the 

application  for  compensation  submitted  from  the  1996/97 marketing year. 

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

Done at Brussels, 

For the Council 

FINANCIAL STATEMENT 

Date: 

BUDGET  HEADING:  10 

TITLE: 

APPROPRIATIONS: 
ECU  14 574 million  (SAB 95) 

Council  Regulation  amending  Regulation  (EEC) No  1765/92 establishing  a support  system  for  producers  of certain 
arable crops. 

LEGAL  BASIS: Articles 42 and 43 of the Treaty. 

4. 

AIMS: 

To  amend the  method  of calculating  the rate  of extraordinary  set-aside  for  arable  crops. 

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: 

PERIOD OF  12 
MONTHS 

(ECU  million) 

0 

CURRENT 
FINANCIAL 
YEAR 
(95) 
(ECU  million) 

FOLLOWING 
FINANCIAL 
YEAR 
(96) 
( ECU million) 

0 

1997 

1998 

1999 

2000 

6.0. 

6.1. 

6.: 

6.3. 

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

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? 

YES 

YES 

NO 

NO 

OBSERVATIONS 

The  measure  does not  lead to  any  change  in the amount  of aid  or a change  in the  areas  benefiting  from  aid. 

14 

ISSN 0254-1475 

COM(95) 401 final 

DOCUMENTS 

EN 

03 

Catalogue number  : CB-CO-95-437-EN-C 

ISBN 92-77-92789-5 

Office for Official Publications of the European Communities 

L-2985 Luxembourg 

1J